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Bill C-38

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First Reading

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	DIVISION 3
	INCORPORATION AND CONTINUANCE
	Formalities of Incorporation
Incorporation of bank holding company	671. On the application of one or more persons made in accordance with this Part, the Minister may, subject to this Division, issue letters patent incorporating a bank holding company.
Restrictions on incorporation	672. Letters patent incorporating a bank holding company may not be issued if the application therefor is made by or on behalf of
	(a) Her Majesty in right of Canada or in right of a province, an agency of Her Majesty in either of those rights, or an entity controlled by Her Majesty in either of those rights;
	(b) the government of a foreign country or any political subdivision thereof;
	(c) an agency of the government of a foreign country or any political subdivision thereof; or
	(d) an entity, other than a foreign institution or any subsidiary of a foreign institution, that is controlled by the government of a foreign country or any political subdivision thereof.
National treatment	673. If a proposed bank holding company would be a subsidiary of a foreign bank, within the meaning of any of paragraphs (a) to (f) of the definition ``foreign bank'' in section 2, letters patent to incorporate the bank holding company may not be issued unless the Minister is satisfied that, if the application is made by a non-WTO Member foreign bank, treatment as favourable for bank holding companies to which this Act applies exists or will be provided in the jurisdiction in which the foreign bank principally carries on business, either directly or through a subsidiary.
Application for incorporation	674. An application for letters patent to incorporate a bank holding company setting out the names of the first directors of the bank holding company shall be filed with the Superintendent, together with such other information, material and evidence as the Superintendent may require.
Matters for consideration	675. Before issuing letters patent to incorporate a bank holding company, the Minister shall take into account all matters that the Minister considers relevant to the application, including
	(a) the nature and sufficiency of the financial resources of the applicant or applicants as a source of continuing financial support for the bank that is proposed to be its subsidiary;
	(b) the soundness and feasibility of the plans of the applicant or applicants for the future conduct and development of the business of the bank that is proposed to be its subsidiary;
	(c) the business record and experience of the applicant or applicants;
	(d) the character and integrity of the applicant or applicants or, if the applicant or any of the applicants is a body corporate, its reputation for being operated in a manner that is consistent with the standards of good character and integrity;
	(e) whether the bank holding company will be operated responsibly by persons with the competence and experience suitable for involvement in the operation of a financial institution;
	(f) the impact of any integration of the businesses and operations of the applicant or applicants with those of the bank holding company and its affiliates on the conduct of those businesses and operations; and
	(g) the best interests of the financial system in Canada.
Contents of letters patent	676. (1) There shall be set out in the letters patent incorporating a bank holding company
	(a) the name of the bank holding company;
	(b) the place in Canada where the head office of the bank holding company is to be situated; and
	(c) the date that the bank holding company came, or is to come, into existence.
Provisions in letters patent	(2) The Minister may set out in the letters patent incorporating a bank holding company any provision not contrary to this Act that the Minister considers advisable in order to take into account the particular circumstances of the proposed bank holding company.
Terms and conditions	(3) The Minister may impose such terms and conditions in respect of the issuance of letters patent incorporating a bank holding company as the Minister considers necessary or appropriate.
Letters patent of incorporation on application of banks	677. (1) If, under section 671, the Minister issues letters patent incorporating a bank holding company on the application of a bank, there may, on the request of the bank, and with the approval of the Minister, be included in the letters patent of incorporation of the bank holding company a provision deeming shares of the bank holding company to be issued, on a share for share basis, to all shareholders of the bank in exchange for all the issued and outstanding shares of the bank.
Effect of provision	(2) Shares of a bank holding company deemed to be issued under subsection (1) are subject to the same designation, rights, privileges and restrictions or conditions and, subject to any agreement to the contrary, to the same charges, encumbrances and other restrictions as the shares of the bank for which they are exchanged and the shares of the bank, on the issuance of the letters patent, become the property of the bank holding company free and clear of any charge, encumbrance or other restriction.
Effect of provision	(3) An exchange of shares of a bank referred to in subsection (1) under a provision included in the letters patent incorporating a bank holding company does not deprive a person who was a holder of shares of the bank immediately before the exchange of any right or privilege with respect to the shares or relieve the person of any liability in respect of the shares, but that right or privilege must be exercised in accordance with this Act.
Transfer and voting of shares	(4) Despite subsection (3), no share of a bank holding company that is deemed to be issued under a provision included in the letters patent incorporating a bank holding company may subsequently be transferred or voted contrary to this Act.
Shareholder approval	(5) No provision described in subsection (1) may be included in letters patent issued under section 671 unless the application for the letters patent is accompanied by evidence that the request for the provision was approved by a special resolution of the shareholders of the bank at a shareholders' meeting called to consider the application.
Exchange of share certificates	(6) If, under a provision included in the letters patent incorporating a bank holding company, a share exchange is deemed to have taken place, the bank holding company shall, within ninety days after the issuance of the letters patent, make provision for the issue of share certificates representing shares of the bank holding company and for the exchange of those certificates for share certificates representing the shares of the bank that were outstanding on the effective date of the letters patent.
Proposal involving fundamental change	678. (1) On application, made in accordance with the regulations, by a bank to give effect to a proposal to incorporate a bank holding company as the holding body corporate of the bank and to make any other fundamental change to the bank, including an exchange of any or all of the shares of the bank for shares of the bank holding company, the Minister may, to give effect to the proposal, include in the letters patent of incorporation of the bank holding company issued under section 671 any provision the Minister considers necessary and give any approval that the Minister considers necessary.
Regulations	(2) The Governor in Council may make regulations
	(a) respecting applications referred to in subsection (1), including their form and the information to be contained in them, and authorizing the Superintendent to require additional information in respect of such applications;
	(b) respecting proposals to which subsection (1) applies, including the information to be contained in the proposals and the times within which the transactions involved in them must occur;
	(c) respecting the procedures to be followed by a bank that makes an application under subsection (1); and
	(d) respecting the approval, confirmation or authorization, if any, required by the shareholders of the bank and the effect thereof.
Notice of issue of letters patent	679. The Superintendent shall cause to be published in the Canada Gazette a notice of the issuance of letters patent incorporating a bank holding company.
First directors	680. The first directors of a bank holding company are the directors named in the application for letters patent to incorporate the bank holding company.
Effect of letters patent	681. A bank holding company comes into existence on the date provided therefor in its letters patent.
	Continuance
Federal corporations	682. (1) A body corporate incorporated under the Canada Business Corporations Act or any other Act of Parliament, including a bank, may apply to the Minister for letters patent continuing the body corporate as a bank holding company under this Part.
Other corporations	(2) A body corporate incorporated otherwise than by or under an Act of Parliament may, if so authorized by the laws of the jurisdiction where it is incorporated, apply to the Minister for letters patent continuing the body corporate as a bank holding company under this Part.
Application for continuance	683. (1) Where a body corporate applies for letters patent under subsection 682(1) or (2), sections 672 to 675 apply in respect of the application, with such modifications as the circumstances require.
Special resolution approval	(2) Where a body corporate applies for letters patent under subsection 682(1) or (2), the application must be duly authorized by a special resolution.
Copy of special resolution	(3) A copy of the special resolution referred to in subsection (2) shall be filed with the application.
Power to issue letters patent	684. (1) On the application of a body corporate under subsection 682(1) or (2), the Minister may, subject to this Division, issue letters patent continuing the body corporate as a bank holding company under this Part.
Issue of letters patent	(2) Where letters patent are issued to a body corporate under subsection (1), section 676 applies in respect of the issue of letters patent, with such modifications as the circumstances require.
Effect of letters patent	685. On the day set out in the letters patent continuing a body corporate as a bank holding company under subsection 684(1),
	(a) the body corporate becomes a bank holding company as if it had been incorporated under this Part; and
	(b) the letters patent are deemed to be the incorporating instrument of the continued bank holding company.
Copy of letters patent	686. (1) Where a body corporate is continued as a bank holding company under this Part, the Superintendent shall without delay send a copy of the letters patent to the appropriate official or public body in the jurisdiction in which the body corporate was authorized to apply to be continued under this Part.
Notice of issuance of letters patent	(2) The Superintendent shall cause to be published in the Canada Gazette a notice of the issuance of letters patent continuing a body corporate as a bank holding company under this Part.
Effects of continuance	687. Where a body corporate is continued as a bank holding company under this Part,
	(a) the property of the body corporate continues to be the property of the bank holding company;
	(b) the bank holding company continues to be liable for the obligations of the body corporate;
	(c) an existing cause of action or claim by or against the body corporate or any liability of the body corporate to prosecution is unaffected;
	(d) a civil, criminal or administrative action or proceeding pending by or against the body corporate may continue to be prosecuted by or against the bank holding company;
	(e) a conviction against, or any ruling, order or judgment in favour of or against the body corporate may be enforced by or against the bank holding company;
	(f) a person who, on the day the body corporate becomes a bank holding company, was the holder of a security issued by the body corporate is not deprived of any right or privilege available to the person at that time in respect of the security or relieved of any liability in respect thereof, but any such right or privilege may be exercised only in accordance with this Act; and
	(g) the by-laws of the body corporate, except those that are in conflict with this Act, continue as the by-laws of the bank holding company.
Transitional	688. (1) Notwithstanding any other provision of this Act or the regulations, the Minister may, on the recommendation of the Superintendent, by order, grant to a bank holding company in respect of which letters patent were issued under subsection 684(1) permission to
	(a) engage in a business activity specified in the order that a bank holding company is not otherwise permitted by this Act to engage in and that the body corporate continued as the bank holding company was engaging in at the time the application for the letters patent was made;
	(b) continue to have issued and outstanding debt obligations the issue of which is not authorized by this Act if the debt obligations were outstanding at the time the application for the letters patent was made;
	(c) hold assets that a bank holding company is not otherwise permitted by this Act to hold if the assets were held by the body corporate continued as the bank holding company at the time the application for the letters patent was made;
	(d) acquire and hold assets that a bank holding company is not otherwise permitted by this Act to acquire or hold if the body corporate continued as the bank holding company was obliged, at the time the application for the letters patent was made, to acquire those assets; and
	(e) maintain outside Canada any records or registers required by this Act to be maintained in Canada and maintain and process outside Canada information and data relating to the preparation and maintenance of such records or registers.
Duration	(2) The permission granted under subsection (1) shall be expressed to be granted for a period specified in the order not exceeding
	(a) with respect to any activity described in paragraph (1)(a), thirty days after the effective date of the letters patent or, where the activity is conducted pursuant to an agreement existing on the effective date of the letters patent, the expiration of the agreement;
	(b) with respect to any matter described in paragraph (1)(b), ten years; and
	(c) with respect to any matter described in any of paragraphs (1)(c) to (e), two years.
Renewal	(3) Subject to subsection (4), the Minister may, on the recommendation of the Superintendent, by order, renew a permission granted by order under subsection (1) with respect to any matter described in paragraphs (1)(b) to (d) for such further period or periods as the Minister considers necessary.
Limitation	(4) The Minister shall not grant to a bank holding company any permission
	(a) with respect to matters described in paragraph (1)(b), that purports to be effective more than ten years after the effective date of the letters patent, unless the Minister is satisfied on the basis of evidence on oath provided by an officer of the bank holding company that the bank holding company will not be able at law to redeem at the end of the ten years the outstanding debt obligations to which the permission relates; and
	(b) with respect to matters described in paragraphs (1)(c) and (d), that purports to be effective more than ten years after the effective date of the letters patent.
	Discontinuance
Transferring to other Acts	689. (1) A bank holding company may, with the approval in writing of the Minister, apply to be continued as a body corporate under any other Act of Parliament or any Act of the legislature of a province.
Conditions for approval	(2) No approval referred to in subsection (1) may be given to a bank holding company unless the Minister is satisfied that the application of the bank holding company has been authorized by a special resolution.
Meaning of ``bank holding company without a bank subsidiary''	690. (1) For the purpose of this section, ``bank holding company without a bank subsidiary'' means a bank holding company that does not, at any time within one year after it came into existence, have a subsidiary that is a bank or that does not, for a period of one year, have a subsidiary that is a bank.
Obligation to apply	(2) A bank holding company without a bank subsidiary must, within 30 days after becoming a bank holding company without a bank subsidiary, apply to be continued under subsection 689(1).
Cessation of existence	(3) Except for the sole purpose of winding up its affairs, a bank holding company without a bank subsidiary that has no other subsidiary that fails to make an application under subsection (2) within the time provided for in that subsection ceases to exist on the expiration of that period.
Act ceases to apply	691. On the day specified by the Minister, this Act ceases to apply to the body corporate continued under the other Act of Parliament or under the Act of the legislature of a province.
Withdrawing application	692. Where a special resolution authorizing the application under subsection 689(1) so states, the directors of a bank holding company may, without further approval of the shareholders, withdraw the application before it is acted on.

Bill C-38

DIVISION 3

INCORPORATION AND CONTINUANCE