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Bill C-8

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Portfolio Limits

Exclusion from portfolio limits

502. (1) Subject to subsection (3), the value of all loans, investments and interests acquired by a company and any of its prescribed subsidiaries under section 499 or as a result of a realization of a security interest is not to be included in calculating the value of loans, investments and interests of the company and its prescribed subsidiaries under sections 503 to 508

    (a) for a period of twelve years following the day on which the interest was acquired, in the case of an interest in real property; and

    (b) for a period of five years after the day on which the loan, investment or interest was acquired, in the case of a loan, investment or interest, other than an interest in real property.

Extension

(2) The Superintendent may, in the case of any particular company, extend any period referred to in subsection (1) for any further period or periods, and on any terms and conditions, that the Superintendent considers necessary.

Exception

(3) Subsection (1) does not apply to an investment or interest described in that subsection if the investment or interest is defined by a regulation made under section 509 to be an interest in real property and

    (a) the company or the subsidiary acquired the investment or interest as a result of the realization of a security interest securing a loan that was defined by a regulation made under section 509 to be an interest in real property; or

    (b) the company or the subsidiary acquired the investment or interest under section 499 as a result of a default referred to in that section in respect of a loan that was defined by a regulation made under section 509 to be an interest in real property.

Commercial Lending by Life Companies

Lending limit: companies with regulatory capital of $25 million or less

503. Subject to section 504, a life company that has twenty-five million dollars or less of regulatory capital shall not, and shall not permit its prescribed subsidiaries to, make or acquire a commercial loan or acquire control of a permitted entity that holds commercial loans if the aggregate value of all commercial loans held by the company and its prescribed subsidiaries exceeds, or the making or acquisition of the commercial loan or acquisition of control of the entity would cause the aggregate value of all commercial loans held by the company and its prescribed subsidiaries to exceed, 5 per cent of the total assets of the company.

Lending limit: regulatory capital over $25 million

504. A life company that has twenty-five million dollars or less of regulatory capital that is controlled by a financial institution that has the equivalent of more than twenty-five million dollars of regulatory capital or a life company that has more than twenty-five million dollars of regulatory capital may make or acquire commercial loans or acquire control of a permitted entity that holds commercial loans if the aggregate value of all commercial loans held by the company and its prescribed subsidiaries would thereby exceed the limit set out in section 503 only with the prior approval in writing of the Superintendent and in accordance with any terms and conditions that the Superintendent may specify.

Consumer and Commercial Lending by Property and Casualty Companies

Lending limit - property and casualty companies

505. A property and casualty company shall not, and shall not permit its prescribed subsidiaries to,

    (a) make or acquire a commercial loan or a loan to a natural person, or

    (b) acquire control of a permitted entity that holds commercial loans or loans to natural persons

if the aggregate value of all such loans held by the company and its prescribed subsidiaries exceeds, or the making or acquisition of the loan or the acquisition of control of the permitted entity would cause the aggregate value of all such loans held by the company and its prescribed subsidiaries to exceed, the prescribed percentage of the total assets of the company.

Real Property

Limit on total property interest

506. A company shall not, and shall not permit its prescribed subsidiaries to, purchase or otherwise acquire an interest in real property or make an improvement to any real property in which the company or any of its prescribed subsidiaries has an interest if the aggregate value of all interests of the company in real property exceeds, or the acquisition of the interest or the making of the improvement would cause that aggregate value to exceed, an amount determined in accordance with the regulations.

Equities

Limits on equity acquisitions

507. A company shall not, and shall not permit its prescribed subsidiaries to,

    (a) purchase or otherwise acquire any participating shares of any body corporate or any ownership interests in any unincorporated entity, other than those of a permitted entity in which the company has, or by virtue of the acquisition would have, a substantial investment, or

    (b) acquire control of an entity that holds shares or ownership interests referred to in paragraph (a),

if the aggregate value of

    (c) all participating shares, excluding participating shares of permitted entities in which the company has a substantial investment, and

    (d) all ownership interests in unincorporated entities, other than ownership interests in permitted entities in which the company has a substantial investment,

beneficially owned by the company and its prescribed subsidiaries exceeds, or the purchase or acquisition would cause that aggregate value to exceed, an amount determined in accordance with the regulations.

Aggregate Limit

Aggregate limit

508. 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, or by virtue of the acquisition would have, 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, an amount determined in accordance with the regulations.

Miscellaneous

Regulations

509. 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;

    (c) exempting classes of companies from the application of sections 502 to 508; or

    (d) respecting the determination of an amount for the purpose of each of sections 506, 507 and 508.

Divestment order

510. (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 497(1), (2) or (4), or

      (ii) is in default of an undertaking referred to in subsection 497(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 497(4) is in default of an undertaking referred to in subsection 497(4) 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

511. 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 495(7) or (8), 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 498 applies.

Asset transactions

512. (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 total value of the 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 490(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 subsection 254(2);

    (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 495(7) is required or the approval of the Superintendent under subsection 495(8) is required; or

    (c) the transaction has been approved by the Minister under subsection 715(1) of this Act or subsection 678(1) of the Bank 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

513. Nothing in this Part requires

    (a) the termination of a loan made before February 7, 2001;

    (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 498(2), 499(3) and 500(3), be increased after that date.

1996, c. 6, s. 81

427. Section 515 of the Act is replaced by the following:

Adequacy of capital and liquidity - companies and societies

515. (1) A company and society shall, in relation to its operations, maintain adequate capital and adequate and appropriate forms of liquidity and shall comply with any regulations in relation to adequate capital and adequate and appropriate forms of liquidity.

Regulations and guidelines

(2) The Governor in Council may make regulations and the Superintendent may make guidelines respecting the maintenance by companies and societies of adequate capital and adequate and appropriate forms of liquidity.

Directives

(3) Notwithstanding that a company or society is complying with regulations or guidelines made under subsection (2), the Superintendent may, by order, direct the company or society to increase its capital or to provide additional liquidity in any forms and amounts that the Superintendent may require.

Compliance

(4) A company and society shall comply with an order made under subsection (3) within the time that the Superintendent specifies in the order.

428. (1) Subsection 519(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):

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