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Bill C-38

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First Reading

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	Aggregate Limit
Aggregate limit	466. A company shall not, and shall not permit its prescribed subsidiaries to,
	(a) purchase or otherwise acquire
	(i) participating shares of a body corporate, other than those of a permitted entity in which the company has, or by virtue of the acquisition would have, a substantial investment,
	(ii) ownership interests in an unincorporated entity, other than ownership interests in a permitted entity in which the company has a substantial investment, or
	(iii) interests in real property, or
	(b) make an improvement to real property in which the company or any of its prescribed subsidiaries has an interest
	if the aggregate value of
	(c) all participating shares and ownership interests referred to in subparagraphs (a)(i) and (ii) that are beneficially owned by the company and its prescribed subsidiaries,
	and
	(d) all interests of the company in real property referred to in subparagraph (a)(iii)
	exceeds, or the acquisition or the making of the improvement would cause that aggregate value to exceed, the prescribed percentage of the regulatory capital of the company.
	Miscellaneous
Regulations	467. For the purposes of this Part, the Governor in Council may make regulations
	(a) defining the interests of a company in real property;
	(b) determining the method of valuing those interests; or
	(c) exempting classes of companies from the application of sections 464, 465 and 466.
Divestment order	468. (1) The Superintendent may, by order, direct a company to dispose of, within any period that the Superintendent considers reasonable, any loan, investment or interest made or acquired in contravention of this Part.
Divestment order	(2) If , in the opinion of the Superintendent,
	(a) an investment by a company or any entity it controls in shares of a body corporate or in ownership interests in an unincorporated entity enables the company to control the body corporate or the unincorporated entity, or
	(b) the company or any entity it controls has entered into an arrangement whereby it or its nominee may veto any proposal put before
	(i) the board of directors of a body corporate, or
	(ii) a similar group or committee of an unincorporated entity,
	or whereby no proposal may be approved except with the consent of the company, the entity it controls or the nominee,
	the Superintendent may, by order, require the company, within any period that the Superintendent considers reasonable, to do all things necessary to ensure that the company no longer controls the body corporate or unincorporated entity or has the ability to veto or otherwise defeat any proposal referred to in paragraph (b).
Divestment order	(3) If
	(a) a company
	(i) fails to provide or obtain within a reasonable time the undertakings referred to in subsection 455(1), (2) or (4), or
	(ii) is in default of an undertaking referred to in subsection 455(1) or (2) and the default is not remedied within ninety days after the day of receipt by the company of a notice from the Superintendent of the default, or
	(b) a permitted entity referred to in subsection 455(4) is in default of an undertaking referred to in that subsection and the default is not remedied within ninety days after the day of receipt by the company of a notice from the Superintendent of the default,
	the Superintendent may, by order, require the company, within any period that the Superintendent considers reasonable, to do all things necessary to ensure that the company no longer has a substantial investment in the entity to which the undertaking relates.
Exception	(4) Subsection (2) does not apply in respect of an entity in which a company has a substantial investment permitted by this Part.
Deemed temporary investment	469. If a company controls or has a substantial investment in an entity as permitted by this Part and the company becomes aware of a change in the business or affairs of the entity that, if the change had taken place before the acquisition of control or of the substantial investment, would have caused the entity not to be a permitted entity or would have been such that approval for the acquisition would have been required under subsection 453(5) or (6) , the company is deemed to have acquired, on the day the company becomes aware of the change, a temporary investment in respect of which section 456 applies.
Asset transactions	470. (1) A company shall not, and shall not permit its subsidiaries to , without the approval of the Superintendent, acquire assets from a person or transfer assets to a person if
	A + B > C
	where
	A is the value of the assets;
	B is the total value of all assets that the company and its subsidiaries acquired from or transferred to that person in the twelve months ending immediately before the acquisition or transfer ; and
	C is ten per cent of the value of the total assets of the company, as shown in the last annual statement of the company prepared before the acquisition or transfer .
Exception	(2) The prohibition in subsection (1) does not apply in respect of
	(a) an asset that is a debt obligation referred to in subparagraphs (b)(i) to (v) of the definition ``commercial loan'' in subsection 449(1); or
	(b) a transaction or series of transactions by a company with another financial institution as a result of the company's participation in one or more syndicated loans with that financial institution.
Exception	(3) The approval of the Superintendent is not required if
	(a) the company sells assets under a sale agreement that is approved by the Minister under section 241;
	(b) the company or its subsidiary acquires shares of, or ownership interests in, an entity for which the approval of the Minister under Part VII or subsection 453(5) is required or the approval of the Superintendent under subsection 453(6) is required; or
	(c) the transaction has been approved by the Minister under subsection 678(1) of the Bank Act or subsection 715(1) of the Insurance Companies Act.
Value of assets	(4) For the purposes of ``A'' in subsection (1), the value of the assets is
	(a) in the case of assets that are acquired, the purchase price of the assets or, if the assets are shares of, or ownership interests in, an entity the assets of which will be included in the annual statement of the company after the acquisition, the fair market value of the assets; and
	(b) in the case of assets that are transferred, the book value of the assets as stated in the last annual statement of the company prepared before the transfer, or if the assets are shares of, or ownership interests in, an entity the assets of which were included in the last annual statement of the company before the transfer, the value of the assets as stated in the annual statement.
Total value of all assets	(5) For the purposes of subsection (1), the total value of all assets that the company or any of its subsidiaries has acquired during the period of twelve months referred to in subsection (1) is the purchase price of the assets or, if the assets are shares of, or ownership interests in, an entity the assets of which immediately after the acquisition were included in the annual statement of the company, the fair market value of the assets of the entity at the date of the acquisition.
Total value of all assets	(6) For the purposes of subsection (1), the total value of all assets that the company or any of its subsidiaries has transferred during the period of twelve months referred to in subsection (1) is the book value of the assets as stated in the last annual statement of the company prepared before the transfer, or if the assets are shares of, or ownership interests in, an entity the assets of which were included in the last annual statement of the company before the transfer, the value of the assets of the entity as stated in the annual statement.
Transitional	471. Nothing in this Part requires
	(a) the termination of a loan made before June 25, 1999;
	(b) the termination of a loan made after that date as a result of a commitment made before that date;
	(c) the disposal of an investment made before that date; or
	(d) the disposal of an investment made after that date as a result of a commitment made before that date.
	But if the loan or investment would be precluded or limited by this Part, the amount of the loan or investment may not, except as provided in subsections 456(2), 457(3) and 458(3), be increased after that date.
	529. Subsection 475(2) of the Act is amended by striking out the word ``or'' at the end of paragraph (c) and by adding the following after paragraph (d):
	(e) transactions approved by the Minister under subsection 678(1) of the Bank Act or subsection 715(1) of the Insurance Companies Act; or
	(f) if a company is controlled by a widely held bank holding company or a widely held insurance holding company, transactions approved by the Superintendent that are entered as part of, or in the course of, a restructuring of the holding company or of any entity controlled by it.
	530. The Act is amended by adding the following after section 476:
Deeming	476.1 For the purposes of this Part, a transaction between a company and another person is deemed to be a transaction with a related party of the company if the proceeds of the transaction are transferred to or used for the benefit of a related party of the company or if the transaction otherwise benefits a related party of the company.
	531. The Act is amended by adding the following after section 483:
Transactions with holding companies	483.1 (1) Subject to subsection (2) and sections 483.2 and 483.3, if a widely held insurance holding company or a widely held bank holding company has a significant interest in any class of shares of a company, the company may enter into any transaction with the holding company or with any other related party of the company that is an entity in which the holding company has a substantial investment.
Policies and procedures	(2) The company shall adhere to policies and procedures established under subsection 199(3) when entering into the transaction.
Restriction	483.2 (1) If a company enters into a transaction with a related party of the company with whom the company may enter into transactions under subsection 483.1(1) and that is not a federal financial institution, the company shall not directly or indirectly make, take an assignment of or otherwise acquire a loan to the related party, make an acceptance, endorsement or other guarantee on behalf of the related party or make an investment in the securities of the related party if, immediately following the transaction, the aggregate financial exposure, as that expression is defined by the regulations, of the company would exceed
	(a) in respect of all transactions of the company with the related party, the prescribed percentage of the company's regulatory capital or, if no percentage is prescribed, five per cent of the company's regulatory capital; or
	(b) in respect of all transactions of the company with such related parties of the company, the prescribed percentage of the company's regulatory capital or, if no percentage is prescribed, ten per cent of the company's regulatory capital.
Order	(2) If the Superintendent is of the opinion that it is necessary for the protection of the interests of the depositors and creditors of a company, the Superintendent may, by order,
	(a) reduce the limit in paragraph (1)(a) or (b) that would otherwise apply to the company; and
	(b) impose limits on transactions by the company with related parties with whom the company may enter into transactions under subsection 483.1(1) that are federal financial institutions.
Order	(3) The Superintendent may, by order, increase the limit in paragraph (1)(a) or (b) that would otherwise apply to a company on transactions by the company with related parties that are financial institutions that are regulated in a manner acceptable to the Superintendent.
Assets transactions	483.3 (1) Despite subsection 482(3), a company shall not, without the approval of the Superintendent and its conduct review committee, directly or indirectly acquire assets from a related party of the company with whom the company may enter into transactions under subsection 483.1(1) that is not a federal financial institution, or directly or indirectly transfer assets to such a related party if
	A + B > C
	where
	A is the value of the assets;
	B is the total value of all assets that the company directly or indirectly acquired from, or directly or indirectly transferred to, that related party in the twelve months ending immediately before the acquisition or transfer; and
	C is five per cent, or the percentage that may be prescribed, of the value of the total assets of the company, as shown in the last annual statement of the company prepared before the acquisition or transfer.
Exception	(2) The prohibition in subsection (1) does not apply in respect of assets purchased or otherwise acquired under subsection 482(1), assets sold under subsection 482(2) or any other assets as may be prescribed.
Exception	(3) The approval of the Superintendent is not required if
	(a) the company sells assets under a sale agreement that is approved by the Minister under section 241;
	(b) the company or its subsidiary acquires shares of, or ownership interests in, an entity for which the approval of the Minister under Part VII or subsection 453(5) is required or the approval of the Superintendent under subsection 453(6) is required; or
	(c) the transaction has been approved by the Minister under subsection 678(1) of the Bank Act or subsection 715(1) of the Insurance Companies Act.
Value of assets	(4) For the purposes of ``A'' in subsection (1), the value of the assets is
	(a) in the case of assets that are acquired, the purchase price of the assets or, if the assets are shares of, or ownership interests in, an entity the assets of which will be included in the annual statement of the company after the acquisition, the fair market value of the assets; and
	(b) in the case of assets that are transferred, the book value of the assets as stated in the last annual statement of the company prepared before the transfer, or if the assets are shares of, or ownership interests in, an entity the assets of which were included in the last annual statement of the company before the transfer, the value of the assets as stated in the annual statement.
Total value of all assets	(5) For the purposes of subsection (1), the total value of all assets that the company or any of its subsidiaries has acquired during the period of twelve months referred to in subsection (1) is the purchase price of the assets or, if the assets are shares of, or ownership interests in, an entity the assets of which immediately after the acquisition were included in the annual statement of the company, the fair market value of the assets of the entity at the date of the acquisition.
Total value of all assets	(6) For the purposes of subsection (1), the total value of all assets that the company or any of its subsidiaries has transferred during the period of twelve months referred to in subsection (1) is the book value of the assets as stated in the last annual statement of the company prepared before the transfer, or if the assets are shares of, or ownership interests in, an entity the assets of which were included in the last annual statement of the company before the transfer, the value of the assets of the entity as stated in the annual statement.
	532. Paragraph 489(2)(b) of the Act is replaced by the following:

Bill C-38

Aggregate Limit

Miscellaneous