Bill C-38

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First Reading

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Application to court	957. (1) Where a person fails to comply with a direction made under subsection 956(1), an application on behalf of the Minister may be made to a court for an order to enforce the direction.
Court order	(2) A court may, on an application under subsection (1), make such order as the circumstances require to give effect to the terms of the direction and may, without limiting the generality of the foregoing, require the insurance holding company concerned to sell the shares that are the subject-matter of the direction.
Appeal	(3) An appeal from an order of a court under this section lies in the same manner as, and to the same court to which, an appeal may be taken from any other order of the court.
Interest of securities underwriter	958. This Division does not apply to a securities underwriter in respect of shares of a body corporate or ownership interests in an unincorporated entity that are acquired by the underwriter in the course of a distribution to the public of those shares or ownership interests and that are held by the underwriter for a period of not more than six months.
Arrangements to effect compliance	959. (1) The directors of an insurance holding company may make such arrangements as they deem necessary to carry out the intent of this Division and, in particular, but without limiting the generality of the foregoing, may
	(a) require any person in whose name a share of the insurance holding company is held to submit a declaration setting out
	(i) the beneficial ownership of the share, and
	(ii) such other information as the directors deem relevant for the purposes of this Division;
	(b) require any person who wishes to have a transfer of a share registered in the name of, or to have a share issued to, that person to submit a declaration referred to in paragraph (a) as though the person were the holder of that share; and
	(c) determine the circumstances in which a declaration referred to in paragraph (a) is to be required, the form of the declaration and the times at which it is to be submitted.
Order of Superinten- dent	(2) The Superintendent may, by order, direct an insurance holding company to obtain from any person in whose name a share of the insurance holding company is held a declaration setting out the name of every entity controlled by that person and containing information concerning
	(a) the ownership or beneficial ownership of the share; and
	(b) such other related matters as are specified by the Superintendent.
Compliance required	(3) As soon as possible after receipt by an insurance holding company of a direction under subsection (2),
	(a) the insurance holding company shall comply with the direction; and
	(b) every person who is requested by the insurance holding company to provide a declaration containing information referred to in subsection (1) or (2) shall comply with the request.
Outstanding declaration: effect	(4) Where, pursuant to this section, a declaration is required to be submitted by a shareholder or other person in respect of the issue or transfer of any share, an insurance holding company may refuse to issue the share or register the transfer unless the required declaration is submitted.
Reliance on information	960. An insurance holding company and any person who is a director or an officer, employee or agent of the insurance holding company may rely on any information contained in a declaration required by the directors pursuant to section 959 or on any information otherwise acquired in respect of any matter that might be the subject of such a declaration, and no action lies against the insurance holding company or any such person for anything done or omitted to be done in good faith in reliance on any such information.
Exemption regulations	961. The Governor in Council may, by regulation, exempt from any of the provisions of this Division any transaction or any class of transactions involving the transfer of shares on the death of the beneficial owner thereof, or any arrangement made in contemplation of the death of the beneficial owner, to one or more members of the beneficial owner's family, or to one or more trustees on their behalf.
Competition Act	962. Nothing in, or done under the authority of, this Act affects the operation of the Competition Act.
	DIVISION 8
	BUSINESS AND POWERS
Main business	963. (1) Subject to this Part, an insurance holding company shall not engage in or carry on any business other than
	(a) acquiring, holding and administering investments that are permitted by this Part;
	(b) providing management, advisory, financing, accounting, information processing or other prescribed services to entities in which it has a substantial investment; and
	(c) any other prescribed business.
Regulations	(2) The Governor in Council may make regulations prescribing businesses or services for the purposes of subsection (1).
Restriction on partnerships	964. (1) Except with the approval of the Superintendent, an insurance holding company shall not be a general partner in a limited partnership or a partner in a general partnership.
Meaning of ``general partnership''	(2) For the purposes of subsection (1), ``general partnership'' means any partnership other than a limited partnership.
Restriction on guarantees	965. (1) An insurance holding company shall not guarantee on behalf of any person the payment or repayment of any sum of money.
Exception	(2) Subsection (1) does not apply if
	(a) the person on whose behalf the insurance holding company has undertaken to guarantee the payment or repayment is a subsidiary of the insurance holding company; and
	(b) the subsidiary has an unqualified obligation to reimburse the insurance holding company for the full amount of the payment or repayment to be guaranteed.
Regulations	(3) The Governor in Council may make regulations imposing terms and conditions in respect of guarantees permitted by this section.
	DIVISION 9
	INVESTMENTS
	Interpretation
Definitions	966. (1) The definitions in subsection 490(1) apply in respect of insurance holding companies, subject to the following:
	(a) the reference to ``section 495'' in the definition ``permitted entity'' is to be read as a reference to ``section 971''; and
	(b) the reference to ``company'' in the definition ``permitted entity'' is to be read as a reference to ``insurance holding company''.
Members of an insurance holding company's group	(2) For the purpose of this Division, a member of an insurance holding company's group is any of the following:
	(a) an entity referred to in any of paragraphs 971(1)(a) to (f) that controls the insurance holding company;
	(b) a subsidiary of the insurance holding company or of an entity referred to in any of paragraphs 971(1)(a) to (f) that controls the insurance holding company;
	(c) an entity in which the insurance holding company, or an entity referred to in any of paragraphs 971(1)(a) to (f) that controls the insurance holding company, has a substantial investment; or
	(d) a prescribed entity in relation to the insurance holding company.
Non-applicati on of Division	(3) This Division does not apply in respect of
	(a) the holding of a security interest in real property, unless the security interest is prescribed under paragraph 984(a) to be an interest in real property; or
	(b) the holding of a security interest in securities of an entity.
	Investments
Investments	967. Subject to this Division, an insurance holding company may invest its funds in permitted entities or make any other investment that its directors consider necessary or advisable to manage the insurance holding company's liquidity.
	General Constraints on Investments
Investment standards	968. The directors of an insurance holding company shall establish and the insurance holding company shall adhere to investment and lending policies, standards and procedures that a reasonable and prudent person would apply to avoid undue risk of loss and obtain a reasonable return.
Restriction on control and substantial investments	969. (1) Subject to subsections (2) and (3), no insurance holding company shall acquire control of, or hold, acquire or increase a substantial investment in, any entity other than a permitted entity.
Exception: indirect investments	(2) An insurance holding company may acquire control of, or acquire or increase a substantial investment in, an entity other than a permitted entity by way of
	(a) an acquisition of control of an entity referred to in any of paragraphs 971(1)(a) to (j), a specialized financing entity or a prescribed entity that controls or has a substantial investment in the entity; or
	(b) an acquisition of shares or ownership interests in the entity by
	(i) an entity referred to in any of paragraphs 971(1)(a) to (j), a specialized financing entity or a prescribed entity that is controlled by the insurance holding company, or
	(ii) an entity controlled by an entity referred to in any of paragraphs 971(1)(a) to (j), a specialized financing entity or a prescribed entity that is controlled by the insurance holding company.
Exception: temporary investments, realizations and loan workouts	(3) An insurance holding company may acquire control of, or acquire or increase a substantial investment in, an entity by way of
	(a) a temporary investment permitted by section 974;
	(b) an acquisition of shares of a body corporate or of ownership interests in an unincorporated entity permitted by section 975; or
	(c) a realization of security permitted by section 976.
Exception: uncontrolled event	(4) An insurance holding company is deemed not to contravene subsection (1) if the insurance holding company acquires control of, or acquires or increases a substantial investment in, an entity solely as the result of an event not within the control of the insurance holding company.
Regulations re limits	970. The Governor in Council may make regulations
	(a) respecting the determination of the amount or value of loans, investments and interests for the purposes of this Division;
	(b) respecting the loans and investments, and the maximum aggregate amount of all loans and investments, that may be made or acquired by an insurance holding company and its prescribed subsidiaries to or in a person and any persons connected with that person;
	(c) specifying the classes of persons who are connected with any person for the purposes of paragraph (b); and
	(d) prescribing terms and conditions under which an insurance holding company may acquire control of, or acquire or increase a substantial investment in, a specialized financing entity.
	Subsidiaries and Equity Investments
Permitted investments	971. (1) Subject to subsections (4) to (6), an insurance holding company may acquire control of, or acquire or increase a substantial investment in,
	(a) a company or a society;
	(b) an insurance holding company;
	(c) a bank;
	(d) a bank holding company;
	(e) a body corporate to which the Trust and Loan Companies Act applies;
	(f) an association to which the Cooperative Credit Associations Act applies;
	(g) a trust, loan or insurance corporation incorporated or formed by or under an Act of the legislature of a province;
	(h) a cooperative credit society incorporated or formed, and regulated, by or under an Act of the legislature of a province;
	(i) an entity that is incorporated or formed by or under an Act of Parliament or of the legislature of a province and that is primarily engaged in dealing in securities; or
	(j) an entity that is incorporated or formed, and regulated, otherwise than by or under an Act of Parliament or of the legislature of a province and that is primarily engaged outside Canada in a business that, if carried on in Canada, would be the business of banking, the business of a cooperative credit society, the business of insurance, the business of providing fiduciary services or the business of dealing in securities.
Permitted investments	(2) Subject to subsections (3) to (6), an insurance holding company may acquire control of, or acquire or increase a substantial investment in, an entity, other than an entity referred to in any of paragraphs (1)(a) to (j), whose business is limited to one or more of the following:
	(a) engaging in any financial service activity or in any other activity that a life company is permitted to engage in under subsection 440(2) or section 441 or 442, other than paragraph 441(1)(h);
	(b) acquiring or holding shares of, or ownership interests in, entities in which an insurance holding company is permitted under this Division to hold or acquire;
	(c) engaging in the provision of any services exclusively to any or all of the following, so long as the entity is providing those services to the insurance holding company or any member of the insurance holding company's group:
	(i) the insurance holding company,
	(ii) any member of the insurance holding company's group,
	(iii) any entity that is primarily engaged in the business of providing financial services,
	(iv) any permitted entity in which an entity referred to in subparagraph (iii) has a substantial investment, or
	(v) any prescribed person, if it is doing so under prescribed terms and conditions, if any are prescribed;
	(d) engaging in any activity that a life company is permitted to engage in, other than an activity referred to in paragraph (a) or (e), that relates to
	(i) the promotion, sale, delivery or distribution of a financial product or financial service that is provided by any member of the insurance holding company's group, or
	(ii) if a significant portion of the business of the entity involves an activity referred to in subparagraph (i), the promotion, sale, delivery or distribution of a financial product or financial service that is provided by any other entity that is primarily engaged in the business of providing financial services;
	(e) engaging in the activities referred to in the definition ``mutual fund entity'' or ``mutual fund distribution entity'' as defined in subsection 490(1); and

Bill C-38

DIVISION 8

BUSINESS AND POWERS

DIVISION 9

INVESTMENTS