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Bill C-38

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First Reading

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	DIVISION 7
	OWNERSHIP
Section 406.1 applies	926. Section 406.1 applies in respect of insurance holding companies.
Constraining acquisition	927. (1) No person, or entity controlled by a person, shall, without the approval of the Minister, purchase or otherwise acquire any share of an insurance holding company or purchase or otherwise acquire control of any entity that holds any share of an insurance holding company if
	(a) the acquisition would cause the person to have a significant interest in any class of shares of the insurance holding company; or
	(b) where the person has a significant interest in a class of shares of the insurance holding company, the acquisition would increase the significant interest of the person in that class of shares.
Amalgama- tion, etc., constitutes acquisition	(2) Where, as a result of an amalgamation, merger or reorganization, the entity that results therefrom would have a significant interest in a class of shares of an insurance holding company, that entity shall be deemed to be acquiring a significant interest in that class of shares of the insurance holding company through an acquisition for which the approval of the Minister is required pursuant to subsection (1).
Exemption	(3) On application by an insurance holding company, other than an insurance holding company in respect of which subsection (4) or (6) applies, the Superintendent may exempt from the application of subsection (1) and section 934 any class of non-voting shares of the insurance holding company if the aggregate book value of the shares of the class is not more than 30 per cent of the aggregate book value of all the outstanding shares of the insurance holding company.
Limitations on share holdings	(4) Despite subsection (1), no person may be a major shareholder of an insurance holding company to which subsection 407(6) applies.
Exception	(5) Subsection (4) no longer applies in respect of any particular insurance holding company if the Minister determines under subsection 407(8) that subsection 407(4) no longer applies in respect of a converted company controlled by the insurance holding company.
Limitations on share holdings	(6) Despite subsection (1), until a day that is two years after December 31, 1999, no person may have a significant interest in any class of shares of an insurance holding company to which subsection 407(13) applies.
Major shareholder	928. (1) If an insurance holding company in respect of which subsection 927(4) applies controls a life company and a person becomes a major shareholder of the life company or of any entity that also controls the life company, the insurance holding company must to do all things necessary to ensure that, on the day that is one year after the person became a major shareholder of the life company or entity that controls the life company,
	(a) the insurance holding company no longer controls the life company; or
	(b) the life company or the entity that controls the life company does not have any major shareholder other than the insurance holding company or any entity that the insurance holding company controls.
Exemption	(2) Subsection (1) does not apply in respect of a life company with equity of less than two hundred and fifty million dollars, or any other amount that may be prescribed.
Extension	(3) If general market conditions so warrant and the Minister is satisfied that the insurance holding company has used its best efforts to be in compliance with subsection (1) on the required day, the Minister may specify a later day as the day from and after which it must comply with that subsection.
Significant interest	929. (1) If an insurance holding company in respect of which subsection 927(6) applies controls a life company and a person acquires a significant interest in any class of shares of the life company or of any entity that also controls the life company, the insurance holding company must to do all things necessary to ensure that, on the day that is one year after the person acquired the significant interest in the class of shares of the life company or entity that controls the life company,
	(a) the insurance holding company no longer controls the life company; or
	(b) no person has a significant interest in any class of shares of the life company or the entity that controls the life company, other than the insurance holding company or any entity that the insurance holding company controls.
Exemption	(2) Subsection (1) does not apply in respect of a life company with equity of less than two hundred and fifty million dollars, or any other amount that may be prescribed.
Extension	(3) If general market conditions so warrant and the Minister is satisfied that the insurance holding company has used its best efforts to be in compliance with subsection (1) on the required day, the Minister may specify a later day as the day from and after which it must comply with that subsection.
Prohibition against significant interest	930. No person who has a significant interest in any class of shares of an insurance holding company in respect of which subsection 927(4) applies may have a significant interest in any class of shares of a subsidiary of the insurance holding company that is a life company or an insurance holding company.
Prohibition against significant interest	931. No person who has a significant interest in any class of shares of an insurance holding company may have a significant interest in any class of shares of any of the following that controls the insurance holding company, namely,
	(a) a converted company in respect of which subsection 407(4) applies;
	(b) a company to which subsection 407(5) applies; or
	(c) an insurance holding company in respect of which subsection 927(4) applies.
No acquisition of control without approval	932. No person shall acquire control, within the meaning of paragraph 3(1)(d), of an insurance holding company without the prior approval of the Minister.
Prohibition against control	933. Despite section 932, no person shall control, within the meaning of paragraph 3(1)(d), an insurance holding company in respect of which subsection 927(4) or (6) applies.
Constraining registration	934. No insurance holding company shall, unless the acquisition of the share has been approved by the Minister, record in its securities register a transfer or issue of any share of the insurance holding company to any person or to any entity controlled by a person if
	(a) the transfer or issue of the share would cause the person to have a significant interest in any class of shares of the insurance holding company; or
	(b) where the person has a significant interest in a class of shares of the insurance holding company, the transfer or issue of the share would increase the significant interest of the person in that class of shares of the insurance holding company.
Exception for small holdings	935. Despite section 934, if, as a result of a transfer or issue of shares of a class of shares of an insurance holding company to a person, the total number of shares of that class registered in the securities register of the insurance holding company in the name of that person
	(a) would not exceed five thousand, and
	(b) would not exceed 0.1 per cent of the outstanding shares of that class,
	the insurance holding company is entitled to assume that no person is acquiring or increasing a significant interest in that class of shares of the insurance holding company as a result of that issue or transfer of shares.
Where approval not required	936. (1) Despite subsections 927(1) and (2) and section 934, the approval of the Minister is not required in respect of an insurance holding company, other than an insurance holding company in respect of which subsection 927(4) applies, if a person with a significant interest in a class of shares of the insurance holding company or an entity controlled by a person with a significant interest in a class of shares of the insurance holding company purchases or otherwise acquires shares of that class, or acquires control of any entity that holds any share of that class, and the number of shares of that class purchased or otherwise acquired, or the acquisition of control of the entity, as the case may be, would not increase the significant interest of the person in that class of shares of the insurance holding company to a percentage that is greater than the percentage referred to in subsection (2) or (3), whichever is applicable.
Percentage	(2) Subject to subsection (3), for the purposes of subsection (1), the percentage is 5 percentage points in excess of the significant interest of the person in that class of shares of the insurance holding company on the day of the most recent purchase or acquisition by the person or any entity controlled by the person, other than the entity referred to in subsection (1), of shares of that class of shares of the insurance holding company, or of control of an entity that held shares of that class of shares of the insurance holding company, for which approval was given by the Minister.
When approval not required	(3) If a person has a significant interest in a class of shares of an insurance holding company and the person's percentage of that class has decreased after the date of the most recent purchase or other acquisition by the person or any entity controlled by the person, other than the entity referred to in subsection (1), of shares of that class of shares of the insurance holding company, or of control of an entity that held shares of that class of shares of the insurance holding company, for which approval was given by the Minister, the percentage for the purposes of subsection (1) is the percentage that is the lesser of
	(a) 5 percentage points in excess of the significant interest of the person in that class of shares of the insurance holding company on the day of the most recent purchase or other acquisition by the person or any entity controlled by the person, other than the entity referred to in subsection (1), of shares of that class of shares of the insurance holding company, or of control of an entity that held shares of that class of shares of the insurance holding company, for which approval was given by the Minister, and
	(b) 10 percentage points in excess of the lowest significant interest of the person in that class of shares of the insurance holding company at any time after the day of the most recent purchase or other acquisition by the person or any entity controlled by the person, other than the entity referred to in subsection (1), of shares of that class of shares of the insurance holding company, or of control of an entity that held shares of that class of shares of the insurance holding company, for which approval was given by the Minister.
Exception	(4) Subsection (1) does not apply if the purchase or other acquisition of shares or the acquisition of control referred to in that subsection would
	(a) result in the acquisition of control of the insurance holding company by the person referred to in that subsection;
	(b) where the person controls the insurance holding company but the voting rights attached to the aggregate of any voting shares of the insurance holding company beneficially owned by the person and by entities controlled by the person do not exceed 50 per cent of the voting rights attached to all of the outstanding voting shares of the insurance holding company, cause the voting rights attached to that aggregate to exceed 50 per cent of the voting rights attached to all of the outstanding voting shares of the insurance holding company;
	(c) result in the acquisition of a significant interest in a class of shares of the insurance holding company by an entity controlled by the person and the acquisition of that investment is not exempted by the regulations; or
	(d) result in an increase in a significant interest in a class of shares of the insurance holding company by an entity controlled by the person by a percentage that is greater than the percentage referred to in subsection (2) or (3), whichever is applicable, and the increase is not exempted by the regulations.
Regulations	(5) The Governor in Council may make regulations
	(a) exempting from the application of paragraph (4)(c) the acquisition of a significant interest in a class of shares of the insurance holding company by an entity controlled by the person; and
	(b) exempting from the application of paragraph (4)(d) an increase in a significant interest in a class of shares of the insurance holding company by an entity controlled by the person by a percentage that is greater than the percentage referred to in subsection (2) or (3), whichever applies.
When approval not required	937. (1) Despite subsections 927(1) and (2) and section 934, the approval of the Minister is not required if
	(a) the Superintendent has, by order, directed the insurance holding company to increase its capital and shares of the insurance holding company are issued and acquired in accordance with the terms and conditions, if any, that may be specified in the order; or
	(b) a person who controls, within the meaning of paragraph 3(1)(a), the insurance holding company acquires additional shares of the insurance holding company.
Exception	(2) Paragraph (1)(a) does not apply in respect of an insurance holding company in respect of which subsection 927(4) or (6) applies.
Pre-approval	(3) For the purposes of subsections 927(1) and (2) and section 934, the Minister may approve
	(a) the purchase or other acquisition of such number or percentage of shares of an insurance holding company as may be required in a particular transaction or series of transactions; or
	(b) the purchase or other acquisition of up to a specified number or percentage of shares of an insurance holding company within a specified period.
Public holding requirement	938. (1) Every insurance holding company shall, from and after the day determined under this section in respect of that insurance holding company, have, and continue to have, voting shares that carry at least 35 per cent of the voting rights attached to all of the outstanding voting shares of the insurance holding company and that are
	(a) shares of one or more classes of shares that are listed and posted for trading on a recognized stock exchange in Canada; and
	(b) shares none of which is beneficially owned by a person who is a major shareholder of the insurance holding company in respect of the voting shares of the insurance holding company or by any entity that is controlled by a person who is a major shareholder of the insurance holding company in respect of such shares.
Determina- tion of day	(2) If the insurance holding company has equity of one billion dollars or more on the day it comes into existence, the day referred to in subsection (1) is the day that is three years after that day and, in the case of any other insurance holding company, the day referred to in subsection (1) is the day that is three years after the day of the first annual meeting of the shareholders of the insurance holding company held after the equity of the insurance holding company first reaches one billion dollars.


Extension	(3) If general market conditions so warrant and the Minister is satisfied that an insurance holding company has used its best efforts to be in compliance with this section on the day determined under subsection (2), the Minister may specify a later day as the day from and after which the insurance holding company must comply with subsection (1).
Limit on assets	939. (1) Unless an exemption order with respect to the insurance holding company is granted under section 941, if an insurance holding company fails to comply with section 938 in any month, the Minister may, by order, require the insurance holding company not to have, until it complies with that section, average total assets in any three month period ending on the last day of a subsequent month exceeding the insurance holding company's average total assets in the three month period ending on the last day of the month immediately preceding the month specified in the order.
Average total assets	(2) For the purposes of subsection (1), the average total assets of an insurance holding company in a three month period shall be computed by adding the total assets of the insurance holding company as calculated for the month end of each of the three months in the period and by dividing the sum by three.
Increase of capital	940. Where the Superintendent has, by order, directed an insurance holding company to increase its capital and shares of the insurance holding company are issued and acquired in accordance with such terms and conditions as may be specified in the order, section 938 shall not apply in respect of the insurance holding company until such time as the Superintendent may, by order, specify.
Exemption by order of Minister	941. (1) An entity that controls an insurance holding company and that is
	(a) an insurance holding company that is in compliance with section 938,
	(b) a widely held bank,
	(c) a bank that would be in compliance with section 938 if it were an insurance holding company,
	(d) a widely held bank holding company,
	(e) a bank holding company that would be in compliance with section 938 if it were an insurance holding company,
	(f) a body corporate to which the Trust and Loan Companies Act applies that would be in compliance with section 938 if it were an insurance holding company,
	(g) a company that would be in compliance with section 938 if it were an insurance holding company,
	(h) a mutual company,
	(i) an association to which the Cooperative Credit Associations Act applies,
	(j) a body corporate that is incorporated and regulated by or under an Act of the legislature of a province and that is a mutual insurance corporation,
	(k) a cooperative credit society regulated by or under an Act of the legislature of a province,
	(l) a foreign institution, or
	(m) a body corporate incorporated or formed by or under an Act of Parliament or of the legislature of a province whose activities, and those of any entities that it controls, are, in the opinion of the Minister, when viewed as a whole, primarily financial,
	may apply to the Minister to exempt the insurance holding company from the requirements of section 938.
Terms and conditions	(2) In the case of an entity referred to in any of paragraphs (1)(a) to (l), the Minister may grant the exemption referred to in subsection (1) subject to such terms and conditions as the Minister considers appropriate.
Terms and conditions	(3) In the case of a holding body corporate referred to in paragraph (1)(m), the Minister may grant the exemption referred to in subsection (1) only if the Minister is satisfied that the holding body corporate will, if the exemption is granted, submit to and comply with sections 803 and 938 as though the holding body corporate were an insurance holding company and the Minister may grant the exemption subject to such terms and conditions as the Minister considers appropriate.

Bill C-38

DIVISION 7

OWNERSHIP