Short Title

Marginal note:Short title

1 This Act may be cited as the Bank Act.

PART IInterpretation and Application

Definitions

Marginal note:Definitions

2 In this Act,

affairs

affaires internes

affairs, with respect to a bank, an authorized foreign bank or a bank holding company, means the relationships among the bank, authorized foreign bank or bank holding company and its affiliates and the shareholders, directors and officers of the bank, authorized foreign bank or bank holding company and its affiliates, but does not include the business of the bank, authorized foreign bank or bank holding company or any of its affiliates; (affaires internes)

affiliate

groupe

affiliate means an entity that is affiliated with another entity within the meaning of section 6; (groupe)

Agency

Agence

Agency means the Financial Consumer Agency of Canada established under section 3 of the Financial Consumer Agency of Canada Act; (Agence)

annual return

état annuel

annual return means a return prepared in accordance with section 601; (état annuel)

annual statement

rapport annuel

annual statement, in relation to a bank, means the annual financial statement of the bank within the meaning of paragraph 308(1)(a) and, in relation to a bank holding company, means the annual financial statement of the bank holding company within the meaning of paragraph 840(1)(a); (rapport annuel)

authorized foreign bank

banque étrangère autorisée

authorized foreign bank means a foreign bank that is the subject of an order under subsection 524(1); (banque étrangère autorisée)

bank

banque

bank means a bank listed in Schedule I or II; (banque)

bank holding company

société de portefeuille bancaire

bank holding company means a body corporate that is incorporated or formed under Part XV; (société de portefeuille bancaire)

bearer

porteur

bearer, in relation to a security, means the person in possession of a security payable to bearer or endorsed in blank; (porteur)

bearer form

titre au porteur

bearer form, in respect of a security, means a security in bearer form as determined in accordance with subsection 83(2); (titre au porteur)

beneficial ownership

véritable propriétaire et propriété effective

beneficial ownership includes ownership through one or more trustees, legal representatives, agents or other intermediaries; (véritable propriétaire et propriété effective)

body corporate

personne morale

body corporate means an incorporated body wherever or however incorporated; (personne morale)

branch

succursale

branch

• (a) in respect of a bank, means an agency, the head office or any other office of the bank, and

• (b) in respect of an authorized foreign bank, means an agency, the principal office or any other office of the authorized foreign bank in Canada at which is carried on the business in Canada of the authorized foreign bank; (succursale)

Canadian entity

entité canadienne

Canadian entity means an entity that is incorporated or formed by or under an Act of Parliament or of the legislature of a province, or otherwise formed in Canada, and that carries on business in Canada; (entité canadienne)

Canadian financial institution

institution financière canadienne

Canadian financial institution means a financial institution that is incorporated or formed by or under an Act of Parliament or of the legislature of a province; (institution financière canadienne)

central cooperative credit society

société coopérative de crédit centrale

central cooperative credit society means a body corporate organized on cooperative principles by or under an Act of the legislature of a province, one of whose principal purposes is to receive deposits from and provide liquidity support to local cooperative credit societies, and

• (a) whose membership consists solely or primarily of local cooperative credit societies, or

• (b) whose directors are wholly or primarily persons elected or appointed by local cooperative credit societies; (société coopérative de crédit centrale)

central securities register or securities register

registre central des valeurs mobilières ou registre des valeurs mobilières

central securities register or securities register, in relation to a bank, means the register referred to in section 248 and, in relation to a bank holding company, means the register referred to in section 825; (registre central des valeurs mobilières ou registre des valeurs mobilières)

Commissioner

commissaire

Commissioner means the Commissioner of the Financial Consumer Agency of Canada appointed under section 4 of the Financial Consumer Agency of Canada Act; (commissaire)

common-law partner

conjoint de fait

common-law partner, in relation to an individual, means a person who is cohabiting with the individual in a conjugal relationship, having so cohabited for a period of at least one year; (conjoint de fait)

complainant

plaignant

complainant, in relation to a bank or any matter concerning a bank, means

• (a) a registered holder or beneficial owner, and a former registered holder or beneficial owner, of a security of a bank or any of its affiliates,

• (b) a director or an officer, or a former director or officer, of a bank or any of its affiliates, or

• (c) any other person who, in the discretion of a court, is a proper person to make an application under section 334, 338 or 989; (plaignant)

consumer provision

disposition visant les consommateurs

consumer provision means a provision referred to in paragraph (a) of the definition consumer provision in section 2 of the Financial Consumer Agency of Canada Act; (disposition visant les consommateurs)

court

tribunal

court means

• (a) in the Province of Ontario, the Superior Court of Justice,

• (b) in the Province of Quebec, the Superior Court of the Province,

• (c) in the Provinces of Nova Scotia and British Columbia, the Supreme Court of the Province,

• (d) in the Provinces of New Brunswick, Manitoba, Saskatchewan and Alberta, the Court of Queen’s Bench for the Province,

• (e) in the Provinces of Prince Edward Island and Newfoundland, the trial division of the Supreme Court of the Province, and

• (f) the Supreme Court of Yukon, the Supreme Court of the Northwest Territories and the Nunavut Court of Justice; (tribunal)

court of appeal

cour d’appel

court of appeal means the court to which an appeal lies from a decision or order of a court; (cour d’appel)

debt obligation

titre de créance

debt obligation means a bond, debenture, note or other evidence of indebtedness of an entity, whether secured or unsecured; (titre de créance)

director, board of directors or directors

administrateur, conseil d’administration ou conseil

director means a natural person occupying the position of director, by whatever name called, of a body corporate, and board of directors or directors refers to the directors of a body corporate as a body; (administrateur, conseil d’administration ou conseil)

entity

entité

entity means a body corporate, trust, partnership, fund, an unincorporated association or organization, Her Majesty in right of Canada or of a province, an agency of Her Majesty in either of such rights and the government of a foreign country or any political subdivision thereof and any agency thereof; (entité)

equity

capitaux propres

equity, in respect of a bank or a bank holding company, means its equity as determined in accordance with the regulations; (capitaux propres)

federal financial institution

institution financière fédérale

federal financial institution means

• (a) a bank,

• (b) a body corporate to which the Trust and Loan Companies Act applies,

• (c) an association to which the Cooperative Credit Associations Act applies or a central cooperative credit society for which an order has been made under subsection 473(1) of that Act, or

• (d) an insurance company or a fraternal benefit society incorporated or formed under the Insurance Companies Act; (institution financière fédérale)

federation of cooperative credit societies

fédération de sociétés coopératives de crédit

federation of cooperative credit societies means an association under the Cooperative Credit Associations Act or a federation, league or corporation incorporated or organized by or under an Act of the legislature of a province, the membership or the shareholders of which include two or more central cooperative credit societies; (fédération de sociétés coopératives de crédit)

fiduciary

représentant

fiduciary means any person acting in a fiduciary capacity and includes a personal representative of a deceased person; (représentant)

financial institution

institution financière

financial institution means

• (a) a bank or an authorized foreign bank,

• (b) a body corporate to which the Trust and Loan Companies Act applies,

• (c) an association to which the Cooperative Credit Associations Act applies or a central cooperative credit society for which an order has been made under subsection 473(1) of that Act,

• (d) an insurance company or a fraternal benefit society incorporated or formed under the Insurance Companies Act,

• (e) a trust, loan or insurance corporation incorporated by or under an Act of the legislature of a province,

• (f) a cooperative credit society incorporated and regulated by or under an Act of the legislature of a province,

• (g) 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, including portfolio management and investment counselling, and

• (h) a foreign institution; (institution financière)

foreign bank

banque étrangère

foreign bank, subject to section 12, means an entity incorporated or formed by or under the laws of a country other than Canada that

• (a) is a bank according to the laws of any foreign country where it carries on business,

• (b) carries on a business in any foreign country that, if carried on in Canada, would be, wholly or to a significant extent, the business of banking,

• (c) engages, directly or indirectly, in the business of providing financial services and employs, to identify or describe its business, a name that includes the word “bank”, “banque”, “banking” or “bancaire”, either alone or in combination with other words, or any word or words in any language other than English or French corresponding generally thereto,

• (d) engages in the business of lending money and accepting deposit liabilities transferable by cheque or other instrument,

• (e) engages, directly or indirectly, in the business of providing financial services and is affiliated with another foreign bank,

• (f) controls another foreign bank, or

• (g) is a foreign institution, other than a foreign bank within the meaning of any of paragraphs (a) to (f), that controls a bank incorporated or formed under this Act,

but does not include a subsidiary of a bank named in Schedule I as that Schedule read immediately before the day section 184 of the Financial Consumer Agency of Canada Act comes into force, unless the Minister has specified that subsection 378(1) no longer applies to the bank; (banque étrangère)

foreign bank subsidiary

foreign bank subsidiary[Repealed, 2001, c. 9, s. 35]

foreign institution

institution étrangère

foreign institution means an entity that is

• (a) engaged in the business of banking, the trust, loan or insurance business, the business of a cooperative credit society or the business of dealing in securities or is otherwise engaged primarily in the business of providing financial services, and

• (b) incorporated or formed otherwise than by or under an Act of Parliament or of the legislature of a province; (institution étrangère)

form of proxy

formulaire de procuration

form of proxy means a written or printed form that, when completed and executed by or on behalf of a shareholder, constitutes a proxy; (formulaire de procuration)

going-private transaction

transaction de fermeture

going-private transaction means a going-private transaction as defined in the regulations; (transaction de fermeture)

guarantee

garantie

guarantee includes a letter of credit; (garantie)

head office

siège

head office, in relation to a bank, means the office required to be maintained under section 237 and, in relation to a bank holding company, means the office required to be maintained under section 814; (siège)

holder

détenteur

holder means

• (a) in respect of a security certificate, the person in possession of the certificate issued or endorsed to that person or to bearer or in blank, and

• (b) in respect of the ownership of a share, the shareholder of the share within the meaning of section 7; (détenteur)

holding body corporate

société mère

holding body corporate means a holding body corporate within the meaning of section 4; (société mère)

incorporated

constitué en personne morale

incorporated, when used with reference to a body corporate that is incorporated by or under an Act of Parliament or of the legislature of a province, also refers to a body corporate that is continued by or under any such Act; (constitué en personne morale)

incorporating instrument

acte constitutif

incorporating instrument means the special Act, letters patent, instrument of continuance or other constating instrument by which a body corporate was incorporated or continued and includes any amendment to or restatement of the constating instrument; (acte constitutif)

incorporator

fondateur

incorporator, in relation to a bank or a bank holding company, means a person who applied for letters patent to incorporate the bank or bank holding company, as the case may be; (fondateur)

insurance holding company

société de portefeuille d’assurances

insurance holding company means a body corporate that is incorporated or formed under Part XVII of the Insurance Companies Act; (société de portefeuille d’assurances)

issuer

émetteur

issuer, in respect of a security, means the entity that issues or issued the security; (émetteur)

letters patent

lettres patentes

letters patent, in respect of an instrument authorized to be issued under this Act, means letters patent in a form approved by the Superintendent; (lettres patentes)

local cooperative credit society

société coopérative de crédit locale

local cooperative credit society means a body corporate organized on cooperative principles incorporated by or under an Act of the legislature of a province

• (a) whose members or shareholders consist substantially of natural persons, and

• (b) whose principal purpose is to receive deposits from and make loans to its members and shareholders; (société coopérative de crédit locale)

Minister

ministre

Minister means the Minister of Finance; (ministre)

minor

mineur

minor has the same meaning as in the applicable provincial law and in the absence of any such law has the same meaning as the word “child” in the United Nations Convention on the Rights of the Child adopted in the United Nations General Assembly on November 20, 1989; (mineur)

NAFTA country resident

NAFTA country resident[Repealed, 1999, c. 28, s. 1]

non-WTO Member foreign bank

banque étrangère d’un non-membre de l’OMC

non-WTO Member foreign bank means a foreign bank that is not controlled by a WTO Member resident; (banque étrangère d’un non-membre de l’OMC)

officer

dirigeant

officer means

• (a) in relation to a body corporate, a chief executive officer, president, vice-president, secretary, controller, treasurer and any other natural person designated as an officer of the body corporate by by-law or by resolution of the directors of the body corporate, and

• (b) in relation to any other entity, any natural person designated as an officer of the entity by by-law, by resolution of the members thereof or otherwise; (dirigeant)

order form

titre à ordre

order form, in respect of a security, means a security in order form as determined in accordance with subsection 83(3); (titre à ordre)

ordinary resolution

résolution ordinaire

ordinary resolution means a resolution passed by a majority of the votes cast by or on behalf of the shareholders who voted in respect of that resolution; (résolution ordinaire)

person

personne

person means a natural person, an entity or a personal representative; (personne)

personal representative

représentant personnel

personal representative means a person who stands in place of and represents another person and, without limiting the generality of the foregoing, includes, as the circumstances require, a trustee, an executor, an administrator, a committee, a guardian, a tutor, a curator, an assignee, a receiver, an agent or an attorney of any person; (représentant personnel)

prescribed

Version anglaise seulement

prescribed means prescribed by regulation; (Version anglaise seulement)

principal office

bureau principal

principal office means, in relation to an authorized foreign bank, the office required to be maintained under section 535; (bureau principal)

principal officer

dirigeant principal

principal officer in relation to an authorized foreign bank means the person appointed under section 536; (dirigeant principal)

proxy

procuration

proxy means a completed and executed form of proxy by means of which a shareholder appoints a proxyholder to attend and act on the shareholder’s behalf at a meeting of shareholders; (procuration)

proxyholder

fondé de pouvoir

proxyholder means the person appointed by proxy to attend and act on behalf of a shareholder at a meeting of shareholders; (fondé de pouvoir)

real property

biens immeubles

real property includes a leasehold interest in real property; (biens immeubles)

recorded address

adresse enregistrée

recorded address means

• (a) in relation to a person who is a shareholder of a bank or a bank holding company, the latest postal address of the person according to its central securities register, and

• (b) in relation to a person in any other respect in relation to a bank, the latest postal address of the person according to the records of the branch concerned; (adresse enregistrée)

registered form

titre nominatif

registered form, in respect of a security, means a security in registered form as determined in accordance with subsection 83(4); (titre nominatif)

regulatory capital

capital réglementaire

regulatory capital, in respect of a bank or a bank holding company, has the meaning given that expression by the regulations; (capital réglementaire)

resident Canadian

résident canadien

resident Canadian means a natural person who is

• (a) a Canadian citizen ordinarily resident in Canada,

• (b) a Canadian citizen not ordinarily resident in Canada who is a member of a prescribed class of persons, or

• (c) a permanent resident within the meaning of subsection 2(1) of the Immigration and Refugee Protection Act and ordinarily resident in Canada, except a permanent resident who has been ordinarily resident in Canada for more than one year after the time at which the individual first became eligible to apply for Canadian citizenship; (résident canadien)

residential property

immeuble résidentiel

residential property means real property consisting of buildings that are used, or are to be used, to the extent of at least one half of the floor space thereof, as one or more private dwellings; (immeuble résidentiel)

securities underwriter

souscripteur à forfait

securities underwriter means a person who, as principal, agrees to purchase securities with a view to the distribution of the securities or who, as agent for a body corporate or other person, offers for sale or sells securities in connection with a distribution of the securities, and includes a person who participates, directly or indirectly, in a distribution of securities, other than a person whose interest in the distribution of securities is limited to receiving a distributor’s or seller’s commission payable by a securities underwriter; (souscripteur à forfait)

security

titre ou valeur mobilière

security means

• (a) in relation to a body corporate, a share of any class of shares of the body corporate or a debt obligation of the body corporate, and includes a warrant of the body corporate, but does not include a deposit with a financial institution or any instrument evidencing such a deposit, and

• (b) in relation to any other entity, any ownership interest in or debt obligation of the entity; (titre ou valeur mobilière)

security interest

sûreté

security interest means an interest in or charge on property by way of mortgage, lien, pledge or otherwise taken by a creditor or guarantor to secure the payment or performance of an obligation; (sûreté)

send

envoyer

send includes deliver; (envoyer)

series

série

series, in respect of shares, means a division of a class of shares; (série)

significant interest

intérêt substantiel

significant interest means a significant interest determined in accordance with section 8; (intérêt substantiel)

special resolution

résolution extraordinaire

special resolution means a resolution passed by a majority of not less than two thirds of the votes cast by or on behalf of the shareholders who voted in respect of that resolution or signed by all the shareholders entitled to vote on that resolution; (résolution extraordinaire)

squeeze-out transaction

transaction d’éviction

squeeze-out transaction means a transaction by a bank that is not a distributing bank, or a bank holding company that is not a distributing bank holding company, that requires an amendment to a by-law referred to in subsection 217(1) and that would directly or indirectly result in the interest of a holder of shares of a class of shares being terminated without their consent and without substituting an interest of equivalent value in shares that are issued by the following persons and have rights and privileges equal to or greater than those of the shares of the affected class:

• (a) in the case of a bank, the bank, and

• (b) in the case of a bank holding company, the bank holding company; (transaction d’éviction)

subordinated indebtedness

titre secondaire

subordinated indebtedness means an instrument evidencing an indebtedness of a bank that by its terms provides that the indebtedness will, in the event of the insolvency or winding-up of the bank, be subordinate in right of payment to all deposit liabilities of the bank and all other liabilities of the bank except those that, by their terms, rank equally with or are subordinate to such indebtedness; (titre secondaire)

subsidiary

filiale

subsidiary means an entity that is a subsidiary of another entity as defined in section 5; (filiale)

substantial investment

intérêt de groupe financier

substantial investment means a substantial investment determined in accordance with section 10; (intérêt de groupe financier)

Superintendent

surintendant

Superintendent means the Superintendent of Financial Institutions appointed pursuant to the Office of the Superintendent of Financial Institutions Act; (surintendant)

trade

opération

trade, in respect of securities, means any sale or disposition of securities for valuable consideration; (opération)

transfer

transfert

transfer, in respect of securities, includes a transmission by operation of law; (transfert)

voting share

action avec droit de vote

voting share means a share of any class of shares of a body corporate carrying voting rights under all circumstances or by reason of an event that has occurred and is continuing or by reason of a condition that has been fulfilled; (action avec droit de vote)

WTO Member resident

résident d’un membre de l’OMC

WTO Member resident means a WTO Member resident within the meaning of section 11.1. (résident d’un membre de l’OMC)

Interpretation

Marginal note:References to “authorized foreign bank”

2.1 References in this Act to the carrying on of business in Canada by an authorized foreign bank and to the business in Canada of an authorized foreign bank are deemed, respectively, to be references to the carrying on of business in Canada, or to business in Canada, under Part XII.1.

Marginal note:Major shareholder

2.2 For the purposes of this Act, a person is a major shareholder of a body corporate if

• (a) the aggregate of the shares of any class of voting shares of the body corporate that are beneficially owned by the person and that are beneficially owned by any entities controlled by the person is more than 20 per cent of the outstanding shares of that class of voting shares of the body corporate; or

• (b) the aggregate of the shares of any class of non-voting shares of the body corporate that are beneficially owned by the person and that are beneficially owned by any entities controlled by the person is more than 30 per cent of the outstanding shares of that class of non-voting shares of the body corporate.

Marginal note:Widely held

2.3 For the purposes of this Act, an entity is widely held if it is

• (a) a body corporate that has no major shareholder;

• (b) an insurance company incorporated or formed under a mutual plan;

• (c) an association to which the Cooperative Credit Associations Act applies; or

• (d) a cooperative credit society incorporated or formed, and regulated, by or under an Act of the legislature of a province.

Marginal note:Regulations — distributing bank or bank holding company

• 2.4 (1) The Governor in Council may make regulations respecting the determination of what constitutes a distributing bank or distributing bank holding company for the purposes of this Act.

• Marginal note:Exemption — bank or bank holding company

  (2) On the application of a bank or bank holding company, the Superintendent may determine that it is not or was not a distributing bank or distributing bank holding company, as the case may be, if the Superintendent is satisfied that the determination would not prejudice any security holder of that bank or bank holding company.

• Marginal note:Exemption — class of banks or bank holding companies

  (3) The Superintendent may determine that members of a class of banks or bank holding companies are not or were not distributing banks or distributing bank holding companies, as the case may be, if the Superintendent is satisfied that the determination would not prejudice any security holder of a member of the class.

Marginal note:Control

• 3 (1) For the purposes of this Act,

  • (a) a person controls a body corporate if securities of the body corporate to which are attached more than 50 per cent of the votes that may be cast to elect directors of the body corporate are beneficially owned by the person and the votes attached to those securities are sufficient, if exercised, to elect a majority of the directors of the body corporate;

  • (b) a person controls an unincorporated entity, other than a limited partnership, if more than 50 per cent of the ownership interests, however designated, into which the entity is divided are beneficially owned by that person and the person is able to direct the business and affairs of the entity;

  • (c) the general partner of a limited partnership controls the limited partnership; and

  • (d) a person controls an entity if the person has any direct or indirect influence that, if exercised, would result in control in fact of the entity.

• Marginal note:Deemed control

  (2) A person who controls an entity is deemed to control any entity that is controlled, or deemed to be controlled, by the entity.

• Marginal note:Deemed control

  (3) A person is deemed to control, within the meaning of paragraph (1)(a) or (b), an entity if the aggregate of

  • (a) any securities of the entity that are beneficially owned by that person, and

  • (b) any securities of the entity that are beneficially owned by any entity controlled by that person

  is such that, if that person and all of the entities referred to in paragraph (b) that beneficially own securities of the entity were one person, that person would control the entity.

• Marginal note:Guidelines

  (4) The Minister may, for any purpose of any provision of this Act that refers to control within the meaning of paragraph (1)(d), make guidelines respecting what constitutes such control, including guidelines describing the policy objectives that the guidelines and the relevant provisions of the Act are intended to achieve and, if any such guidelines are made, the reference to paragraph (1)(d) in that provision shall be interpreted in accordance with the guidelines.

Marginal note:Holding body corporate

4 A body corporate is the holding body corporate of any entity that is its subsidiary.

Marginal note:Subsidiary

5 An entity is a subsidiary of another entity if it is controlled by the other entity.

Marginal note:Affiliated entities

• 6 (1) One entity is affiliated with another entity if one of them is controlled by the other or both are controlled by the same person.

• Marginal note:Affiliated entities

  (2) Despite subsection (1), for the purposes of subsections 265(1) and 283(1), one entity is affiliated with another entity if one of them is controlled, determined without regard to paragraph 3(1)(d), by the other or both are controlled, determined without regard to paragraph 3(1)(d), by the same person.

Marginal note:Shareholder

• 7 (1) For the purposes of this Act, a person is a shareholder of a body corporate when, according to the securities register of the body corporate, the person is the owner of one or more shares of the body corporate or is entitled to be entered in the securities register or like record of the body corporate as the owner of the share or shares.

• Marginal note:Holder of a share

  (2) A reference in this Act to the holding of a share by or in the name of any person is a reference to the fact that the person is registered or is entitled to be registered in the securities register or like record of the body corporate as the holder of that share.

Marginal note:Significant interest

• 8 (1) A person has a significant interest in a class of shares of a bank or a bank holding company if the aggregate of

  • (a) any shares of that class beneficially owned by the person, and

  • (b) any shares of that class beneficially owned by entities controlled by the person

  exceeds 10 per cent of all of the outstanding shares of that class of shares of the bank or bank holding company.

• Marginal note:Increasing significant interest

  (2) A person who has a significant interest in a class of shares of a bank or bank holding company increases that significant interest in the class of shares if the person or any entity controlled by the person

  • (a) acquires beneficial ownership of additional shares of that class, or

  • (b) acquires control of any entity that beneficially owns shares of that class,

  in such number as to increase the percentage of shares of that class that are beneficially owned by the person and by any entities controlled by the person.

Marginal note:Acting in concert

• 9 (1) For the purposes of Part VII and Division 7 of Part XV, if two or more persons have agreed, under any agreement, commitment or understanding, whether formal or informal, verbal or written, to act jointly or in concert in respect of

  • (a) shares of a bank or of a bank holding company that they beneficially own,

  • (b) shares or ownership interests that they beneficially own of any entity that beneficially owns shares of a bank or of a bank holding company, or

  • (c) shares or ownership interests that they beneficially own of any entity that controls any entity that beneficially owns shares of a bank or bank holding company,

  those persons are deemed to be a single person who is acquiring beneficial ownership of the aggregate number of shares of the bank or bank holding company or shares or ownership interests of the entity that are beneficially owned by them.

• Marginal note:Acting in concert

  (2) Without limiting the generality of subsection (1), any agreement, commitment or understanding by or between two or more persons who beneficially own shares of a bank or bank holding company or shares or ownership interests of any entity referred to in paragraph (1)(b) or (c),

  • (a) whereby any of them or their nominees may veto any proposal put before the board of directors of the bank or bank holding company, or

  • (b) under which no proposal put before the board of directors of the bank or bank holding company may be approved except with the consent of any of them or their nominees,

  is deemed to be an agreement, commitment or understanding referred to in subsection (1).

• Marginal note:Exceptions

  (3) For the purposes of this section, persons shall be presumed not to have agreed to act jointly or in concert solely by reason of the fact that

  • (a) one is the proxyholder of one or more of the others in respect of shares or ownership interests referred to in subsection (1); or

  • (b) they vote the voting rights attached to shares or ownership interests referred to in subsection (1) in the same manner.

• Marginal note:Designation

  (4) Where in the opinion of the Superintendent it is reasonable to conclude that an agreement, commitment or understanding referred to in subsections (1) and (2) exists by or among two or more persons, the Superintendent may designate those persons as persons who have agreed to act jointly or in concert.

• Marginal note:Contravention

  (5) A person contravenes a provision of Part VII or Division 7 of Part XV if the person agrees to act jointly or in concert with one or more other persons in such a manner that a deemed single person contravenes the provision.

Marginal note:Substantial investment in body corporate

• 10 (1) A person has a substantial investment in a body corporate where

  • (a) the voting rights attached to the aggregate of any voting shares of the body corporate beneficially owned by the person and by any entities controlled by the person exceed 10 per cent of the voting rights attached to all of the outstanding voting shares of the body corporate; or

  • (b) the aggregate of any shares of the body corporate beneficially owned by the person and by any entities controlled by the person represents ownership of greater than 25 per cent of the shareholders’ equity of the body corporate.

• Marginal note:Increasing substantial investment in body corporate

  (2) A person who has a substantial investment in a body corporate pursuant to paragraph (1)(a) increases that substantial investment when the person or any entity controlled by the person

  • (a) acquires beneficial ownership of additional voting shares of the body corporate in such number as to increase the percentage of voting rights attached to the aggregate of the voting shares of the body corporate beneficially owned by the person and by any entities controlled by the person; or

  • (b) acquires control of any entity that beneficially owns any voting shares of the body corporate in such number as to increase the percentage of voting rights attached to the aggregate of the voting shares of the body corporate beneficially owned by the person and by any entities controlled by the person.

• Marginal note:Idem

  (3) A person who has a substantial investment in a body corporate pursuant to paragraph (1)(b) increases that substantial investment when the person or any entity controlled by the person

  • (a) acquires beneficial ownership of additional shares of the body corporate in such number as to increase the percentage of the shareholders’ equity of the body corporate represented by the aggregate of the shares of the body corporate beneficially owned by the person and by any entities controlled by the person; or

  • (b) acquires control of any entity that beneficially owns any shares of the body corporate in such number as to increase the percentage of the shareholders’ equity of the body corporate represented by the aggregate of the shares of the body corporate beneficially owned by the person and by any entities controlled by the person.

• Marginal note:New substantial investment

  (4) For greater certainty,

  • (a) where a person has a substantial investment in a body corporate pursuant to paragraph (1)(a) and the person, or any entity controlled by the person,

    • (i) purchases or otherwise acquires beneficial ownership of shares of the body corporate, or

    • (ii) acquires control of any entity that beneficially owns shares of the body corporate,

    in such number as to cause the shareholders’ equity of the body corporate represented by the aggregate of the shares of the body corporate beneficially owned by the person and by any entities controlled by the person to exceed 25 per cent of the shareholders’ equity of the body corporate, or

  • (b) where a person has a substantial investment in a body corporate pursuant to paragraph (1)(b) and the person or any entity controlled by the person

    • (i) purchases or otherwise acquires beneficial ownership of voting shares of the body corporate, or

    • (ii) acquires control of any entity that beneficially owns voting shares of the body corporate,

    in such number as to cause the voting rights attached to the aggregate of the voting shares beneficially owned by the person and by any entities controlled by the person to exceed 10 per cent of the voting rights attached to all of the outstanding voting shares of the body corporate,

  the acquisition is deemed to cause the person to increase a substantial investment in the body corporate.

• Marginal note:Substantial investment in unincorporated entity

  (5) A person has a substantial investment in an unincorporated entity where the aggregate of any ownership interests, however designated, into which the entity is divided, beneficially owned by the person and by any entities controlled by the person exceeds 25 per cent of all of the ownership interests into which the entity is divided.

• Marginal note:Increasing substantial investment in unincorporated entities

  (6) A person who has a substantial investment in an unincorporated entity increases that substantial investment when the person or any entity controlled by the person

  • (a) acquires beneficial ownership of additional ownership interests in the unincorporated entity in such number as to increase the percentage of ownership interests in the unincorporated entity beneficially owned by the person and by any entities controlled by the person; or

  • (b) acquires control of any entity that beneficially owns ownership interests in the unincorporated entity in such number as to increase the percentage of ownership interests beneficially owned by the person and by any entities controlled by the person.

11 [Repealed, 2005, c. 54, s. 3]

Marginal note:WTO Member resident

• 11.1 (1) For the purposes of this Act, a WTO Member resident is

  • (a) a natural person who is ordinarily resident in a country or territory that is a WTO Member, as defined in subsection 2(1) of the World Trade Organization Agreement Implementation Act, other than Canada;

  • (b) a body corporate, association, partnership or other organization that is incorporated, formed or otherwise organized in a country or territory that is a WTO Member, as defined in subsection 2(1) of the World Trade Organization Agreement Implementation Act, other than Canada, and that is controlled

    • (i) directly or indirectly, by one or more persons referred to in paragraph (a), or

    • (ii) by a government of a WTO Member, whether federal, state or local, or an agency of one of those governments;

  • (c) a trust established by one or more persons referred to in paragraph (a) or (b) or a trust in which one or more of those persons have more than 50 per cent of the beneficial interest; or

  • (d) a body corporate, association, partnership or other organization that is controlled, directly or indirectly, by a trust referred to in paragraph (c).

• Marginal note:Interpretation

  (2) For the purposes of subsection (1),

  • (a) a body corporate is controlled by one or more persons if

    • (i) securities of the body corporate to which are attached more than 50 per cent of the votes that may be cast to elect directors of the body corporate are beneficially owned by the person or persons, and

    • (ii) the votes attached to those securities are sufficient to elect a majority of the directors of the body corporate;

  • (b) an association, partnership or other organization is controlled by one or more persons if

    • (i) more than 50 per cent of the ownership interests, however designated, into which the association, partnership or other organization is divided are beneficially owned by the person or persons, and

    • (ii) the person or persons are able to direct the business and affairs of the association, partnership or other organization;

  • (c) a body corporate, association, partnership or other organization is controlled by one or more persons if the person or persons have, directly or indirectly, control in fact of the body corporate, association, partnership or other organization; and

  • (d) a body corporate, association, partnership or other organization that controls another body corporate, association, partnership or other organization is deemed to control any body corporate, association, partnership or other organization that is controlled or deemed to be controlled by the other body corporate, association, partnership or other organization.

Marginal note:Exemption from foreign bank status

• 12 (1) The Minister may, by order, and subject to such terms and conditions as the Minister considers appropriate, exempt for the purposes of any provision of this Act any entity from being a foreign bank that, but for that order, would be a foreign bank.

• Marginal note:Revocation of order

  (2) The Minister may, by further order, revoke or vary any order made under subsection (1), and any such revocation or variation shall come into force three months after the date the further order is made, unless the Minister and the entity to which the order relates agree that the revocation or variation should come into force at some other time agreed by them.

• Marginal note:Notice

  (3) Before filing an application for an order referred to in subsection (1), an applicant shall publish a notice of intention to make the application in the Canada Gazette.

Application

Marginal note:Application of Act

13 This Act is the charter of and applies to each bank.

Marginal note:Schedule I and Schedule II banks

• 14 (1) Subject to this Act,

  • (a) there shall be set out in Schedule I

    • (i) the name of every bank named in Schedules I and II as those Schedules read immediately before the day section 184 of the Financial Consumer Agency of Canada Act comes into force that was not a subsidiary of a foreign bank,

    • (ii) the name of every bank incorporated or formed under this Act that is not a subsidiary of a foreign bank, and

    • (iii) the province in which the head office of the bank is situated; and

  • (b) there shall be set out in Schedule II

    • (i) the name of every bank named in Schedule II as that Schedule read immediately before the day section 184 of the Financial Consumer Agency of Canada Act comes into force that was a subsidiary of a foreign bank,

    • (ii) the name of every bank incorporated or formed under this Act that is a subsidiary of a foreign bank, and

    • (iii) the province in which the head office of the bank is situated.

• Marginal note:Amending the schedules

  (2) Where

  • (a) a bank is incorporated,

  • (b) a body corporate is continued as a bank,

  • (c) one or more bodies corporate are amalgamated as a bank,

  • (d) the name of a bank is changed,

  • (e) the head office of a bank is changed,

  • (f) a bank becomes, or ceases to be, a subsidiary of a foreign bank,

  • (g) a bank is dissolved, or

  • (h) a bank is continued, or amalgamated and continued, as a body corporate to which another Act of Parliament applies,

  Schedules I and II shall be amended accordingly.

• Marginal note:Notice of amendments

  (3) If in any year either Schedule I or II is amended, the Superintendent shall, within sixty days after the end of the year, cause a notice to be published in the Canada Gazette showing Schedule I or II in its complete amended form as at the end of the year.

Marginal note:Schedule III authorized foreign banks

• 14.1 (1) There shall be set out in Schedule III

  • (a) the name of every authorized foreign bank and, where applicable, any other name under which it is permitted to carry on business in Canada;

  • (b) the province in which the principal office of the authorized foreign bank is situated; and

  • (c) whether the authorized foreign bank is subject to the restrictions and requirements referred to in subsection 524(2).

• Marginal note:Amending Schedule III

  (2) Schedule III shall be amended accordingly where

  • (a) an order made under subsection 524(1) is revoked;

  • (b) any of the information referred to in paragraph (1)(a) or (b) changes; or

  • (c) the restrictions and requirements referred to in subsection 524(2) to which an authorized foreign bank is subject are added or removed.

• Marginal note:Notice of amendments

  (3) Where in any year Schedule III is amended, the Superintendent shall, within sixty days after the end of the year, cause a notice to be published in the Canada Gazette showing Schedule III in its complete amended form as at the end of the year.

Marginal note:Exemption of foreign banks

14.2 The Governor in Council may make regulations exempting any class of foreign banks from the application of any provision of this Act.

PART IIStatus and Powers

Marginal note:Corporate powers

• 15 (1) A bank has the capacity of a natural person and, subject to this Act, the rights, powers and privileges of a natural person.

• Marginal note:Powers restricted

  (2) A bank shall not carry on any business or exercise any power that it is restricted by this Act from carrying on or exercising, or exercise any of its powers in a manner contrary to this Act.

• Marginal note:Business in Canada

  (3) A bank may carry on business throughout Canada.

• Marginal note:Powers outside Canada

  (4) Subject to this Act, a bank has the capacity to carry on its business, conduct its affairs and exercise its powers in any jurisdiction outside Canada to the extent and in the manner that the laws of that jurisdiction permit.

Marginal note:No invalidity

16 No act of a bank or authorized foreign bank, including any transfer of property to or by a bank or authorized foreign bank, is invalid by reason only that the act or transfer is contrary to

• (a) in the case of a bank, the bank’s incorporating instrument or this Act; or

• (b) in the case of an authorized foreign bank, this Act.

Marginal note:By-law not necessary

17 It is not necessary for a bank to pass a by-law in order to confer any particular power on the bank or its directors.

Marginal note:No personal liability

18 The shareholders of a bank are not, as shareholders, liable for any liability, act or default of the bank except as otherwise provided by this Act.

Marginal note:No constructive notice

19 No person is affected by or is deemed to have notice or knowledge of the contents of a document concerning a bank or authorized foreign bank by reason only that the document has been filed with the Superintendent or the Minister or is available for inspection at a branch of the bank or authorized foreign bank.

Marginal note:Authority of directors and officers

• 20 (1) No bank and no guarantor of an obligation of a bank may assert against a person dealing with the bank or against a person who has acquired rights from the bank that

  • (a) the bank’s incorporating instrument or any by-laws of the bank have not been complied with;

  • (b) the persons named as directors of the bank in the most recent return sent to the Superintendent under section 632 are not the directors of the bank;

  • (c) the place named in the incorporating instrument or by-laws of the bank is not the place where the head office of the bank is situated;

  • (d) a person held out by the bank as a director, officer or representative of the bank has not been duly appointed or has no authority to exercise the powers and perform the duties that are customary in the business of the bank or usual for a director, officer or representative; or

  • (e) a document issued by any director, officer or representative of the bank with actual or usual authority to issue the document is not valid or not genuine.

• Marginal note:Exception — knowledge

  (2) Subsection (1) does not apply in respect of a person who has or ought to have knowledge of a situation described in that subsection by virtue of their relationship to the bank.

Marginal note:Sunset provision

• 21 (1) Subject to subsections (2) and (3), banks shall not carry on business, and authorized foreign banks shall not carry on business in Canada, after the day that is the fifth anniversary of the day on which this section comes into force.

• Marginal note:Extension

  (2) The Governor in Council may, by order, extend by up to six months the time during which banks may continue to carry on business and authorized foreign banks may continue to carry on business in Canada. No more than one order may be made under this subsection.

• Marginal note:Exception

  (3) If Parliament dissolves on the fifth anniversary of the day on which this section comes into force, on any day within the three-month period before that anniversary or on any day within an extension under subsection (2), banks may continue to carry on business, and authorized foreign banks may continue to carry on business in Canada, for 180 days after the first day of the first session of the next Parliament.

PART IIIIncorporation and Continuance

Formalities of Incorporation

Marginal note:Incorporation of bank

22 On the application of one or more persons made in accordance with this Act, the Minister may, subject to this Part, issue letters patent incorporating a bank.

Marginal note:Restrictions on incorporation

23 Letters patent incorporating a bank 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 that is controlled by the government of a foreign country or any political subdivision thereof, other than an entity that is a foreign bank, a foreign institution or a subsidiary of a foreign bank or foreign institution.

Marginal note:Subsidiary of foreign bank

24 If a proposed bank would be a subsidiary of a foreign bank, within the meaning of paragraphs (a) to (f) of the definition foreign bank in section 2, and the application for letters patent to incorporate the bank is made by a non-WTO Member foreign bank, letters patent to incorporate the bank may not be issued unless the Minister is satisfied that treatment as favourable for banks 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.

Marginal note:Application for incorporation

• 25 (1) An application for letters patent to incorporate a bank setting out the names of the first directors of the bank shall be filed with the Superintendent, together with such other information, material and evidence as the Superintendent may require.

• Marginal note:Publishing notice of intent

  (2) Before filing an application referred to in subsection (1), the applicant or one of the applicants, as the case may be, shall, at least once a week for a period of four consecutive weeks, publish, in a form satisfactory to the Superintendent, a notice of intention to make the application in the Canada Gazette and in a newspaper in general circulation at or near the place where the head office of the bank is to be situated.

Marginal note:Objections to incorporation

• 26 (1) Any person who objects to the proposed incorporation of a bank may, within thirty days after the date of the last publication under subsection 25(2) in respect of the proposed bank, submit the objection in writing to the Superintendent.

• Marginal note:Minister to be informed

  (2) On receipt of an objection under subsection (1), the Superintendent shall inform the Minister of the objection.

• Marginal note:Inquiry into objection and report

  (3) On receipt of an objection under subsection (1), and if the application for the issuance of the letters patent to which the objection relates has been received, the Superintendent shall, if satisfied that it is necessary and in the public interest to do so, hold or cause to be held a public inquiry into the objection as it relates to the application and, on completion of the inquiry, the Superintendent shall report the findings of the inquiry to the Minister.

• Marginal note:Report to be made available

  (4) Within thirty days after receiving a report under subsection (3), the Minister shall make the report available to the public.

• Marginal note:Rules governing proceedings

  (5) Subject to the approval of the Governor in Council, the Superintendent may make rules governing the proceedings at public inquiries held under this section.

Marginal note:Matters for consideration

27 Before issuing letters patent to incorporate a bank, 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;

• (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;

• (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 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 on the conduct of those businesses and operations;

• (g) the opinion of the Superintendent regarding the extent to which the proposed corporate structure of the applicant or applicants and their affiliates may affect the supervision and regulation of the bank, having regard to

  • (i) the nature and extent of the proposed financial services activities to be carried out by the bank and its affiliates, and

  • (ii) the nature and degree of supervision and regulation applying to the proposed financial services activities to be carried out by the affiliates of the bank; and

• (h) the best interests of the financial system in Canada.

Marginal note:Contents of letters patent

• 28 (1) There shall be set out in the letters patent incorporating a bank

  • (a) the name of the bank;

  • (b) the province in which the head office of the bank is to be situated; and

  • (c) the date that the bank came, or is to come, into existence.

• Marginal note:Provisions in letters patent

  (2) The Minister may set out in the letters patent incorporating a bank 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.

• Marginal note:Terms and conditions

  (3) The Minister may impose such terms and conditions in respect of the issuance of letters patent incorporating a bank as the Minister considers necessary or appropriate.

Marginal note:Letters patent of incorporation on application of certain companies

• 29 (1) If the Minister issues letters patent, under section 22, incorporating a bank on the application of a company to which the Trust and Loan Companies Act or the Insurance Companies Act applies and the paid-in capital of the bank immediately following its incorporation will be not less than five million dollars or any greater amount that the Minister may specify under subsection 46(1), there may, on the request of the company and with the approval of the Minister, be included in the letters patent a provision deeming shares of the bank to be issued, on a share for share basis, to all shareholders of the company in exchange for all the issued and outstanding shares of the company.

• Marginal note:Effect of provision

  (2) Shares of a bank deemed to be issued pursuant to 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 company for which they are exchanged and the shares of the company, on the issuance of the letters patent, become the property of the bank free and clear of any charge, encumbrance or other restriction.

• Marginal note:Idem

  (3) An exchange of shares of a company referred to in subsection (1) pursuant to a provision included in the letters patent incorporating a bank does not deprive a person who was a holder of shares of the company immediately prior to the exchange of any right or privilege with respect to the shares or relieve the person of any liability in respect thereof, but any such right or privilege shall be exercised in accordance with this Act.

• Marginal note:Transfer and voting of bank shares

  (4) Notwithstanding subsection (3), no share of a bank that is deemed to be issued pursuant to a provision included in the letters patent incorporating a bank may subsequently be transferred or voted contrary to this Act, but any shareholder of a bank who acquired shares of the bank by means of an exchange of shares of a company referred to in subsection (1) pursuant to that provision may, for a period of ten years from the date of issuance of the letters patent, exercise the voting rights attached to the shares without regard to any provisions of this Act, other than subsection (7), that would otherwise prohibit the shareholder from voting the shares.

• Marginal note:Shareholder approval

  (5) No provision described in subsection (1) may be included in letters patent issued pursuant to section 22 unless the application therefor is accompanied by evidence that the request for such a provision was approved by a vote of at least two thirds of those shareholders of the applicant company entitled to vote thereon, present or represented by proxy and voting at a shareholders’ meeting called to consider the application.

• Marginal note:Exchange of share certificates

  (6) Where, pursuant to a provision included in the letters patent incorporating a bank, a share exchange is deemed to have taken place, the bank shall, within ninety days after the issuance of the letters patent, make provision for the issue of share certificates representing shares of the bank and for the exchange of those certificates for share certificates representing the shares of the company that were outstanding on the day the letters patent were issued.

• Marginal note:Shares of bank may continue to be held

  (7) Notwithstanding any other provision of this Act, where letters patent incorporating a bank include a provision described in subsection (1) and, on the date of issuance of the letters patent, another bank and any entities controlled by that other bank held, in the aggregate, more than ten per cent of any class of shares of the applicant company, that other bank may have a significant interest in any class of shares of the bank deemed to be issued pursuant to subsection (1) in exchange for the shares of the company for a period of two years from the date of issuance of the letters patent.

• Marginal note:Extension of period

  (8) On application of a bank authorized by subsection (7) to hold, directly or through a subsidiary, shares of another bank, the Minister may, by order, extend the period referred to in subsection (7), but the aggregate of such extensions from time to time granted to a bank and of the period referred to in subsection (7) may not, in any case, exceed ten years.

• (9) [Repealed, 2001, c. 9, s. 48]

Marginal note:Notice of issue of letters patent

30 The Superintendent shall cause to be published in the Canada Gazette a notice of the issuance of letters patent incorporating a bank.

Marginal note:First directors

31 The first directors of a bank are the directors named in the application for letters patent to incorporate the bank.

Marginal note:Effect of letters patent

32 A bank comes into existence on the date provided therefor in its letters patent.

Continuance

Marginal note:Federal corporations

• 33 (1) A body corporate incorporated under the Canada Business Corporations Act or any other Act of Parliament, including a bank holding company, may apply to the Minister for letters patent continuing the body corporate as a bank under this Act.

• Marginal note: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 under this Act.

Marginal note:Application for continuance

• 34 (1) Where a body corporate applies for letters patent under subsection 33(1) or (2), sections 23 to 27 apply in respect of the application, with such modifications as the circumstances require.

• Marginal note:Special resolution approval

  (2) Where a body corporate applies for letters patent under subsection 33(1) or (2), the application must be duly authorized by a special resolution.

• Marginal note:Copy of special resolution

  (3) A copy of the special resolution referred to in subsection (2) shall be filed with the application.

Marginal note:Power to issue letters patent

• 35 (1) On the application of a body corporate under subsection 33(1) or (2), the Minister may, subject to this Part, issue letters patent continuing the body corporate as a bank under this Act.

• Marginal note:Issue of letters patent

  (2) Where letters patent are issued to a body corporate under subsection (1), section 28 applies in respect of the issue of letters patent, with such modifications as the circumstances require.

Marginal note:Effect of letters patent

36 On the day set out in the letters patent continuing a body corporate as a bank under subsection 35(1),

• (a) the body corporate becomes a bank as if it had been incorporated under this Act; and

• (b) the letters patent are deemed to be the incorporating instrument of the continued bank.

Marginal note:Copy of letters patent

• 37 (1) Where a body corporate is continued as a bank under this Part, the Superintendent shall forthwith 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 Act.

• Marginal note: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 under this Act.

Marginal note:Effects of continuance

38 Where a body corporate is continued as a bank under this Part,

• (a) the property of the body corporate continues to be the property of the bank;

• (b) the bank 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;

• (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;

• (f) a person who, on the day the body corporate becomes a bank, 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.

Marginal note:Transitional

• 39 (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 in respect of which letters patent were issued under subsection 35(1) permission to

  • (a) engage in a business activity specified in the order that a bank is not otherwise permitted by this Act to engage in and that the body corporate continued as the bank 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) [Repealed, 1994, c. 47, s. 14]

  • (d) hold assets that a bank is not otherwise permitted by this Act to hold if the assets were held by the body corporate continued as the bank at the time the application for the letters patent was made;

  • (e) acquire and hold assets that a bank is not otherwise permitted by this Act to acquire or hold if the body corporate continued as the bank was obliged, at the time the application for the letters patent was made, to acquire those assets; and

  • (f) maintain outside Canada any records or registers required by this Act to be maintained in Canada.

• Marginal note: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 date of issue of the letters patent or, where the activity is conducted pursuant to an agreement existing on the date of issue 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)(d) to (f), two years.

• Marginal note: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 (e) for such further period or periods as the Minister considers necessary.

• Marginal note:Limitation

  (4) The Minister shall not grant to a bank any permission

  • (a) with respect to matters described in paragraph (1)(b), that purports to be effective more than ten years after the date of the approval for the bank to commence and carry on business, unless the Minister is satisfied on the basis of evidence on oath provided by an officer of the bank that the bank 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)(d) and (e), that purports to be effective more than ten years after the date of the approval for the bank to commence and carry on business.

Discontinuance

Marginal note:Transferring to other federal Acts

• 39.1 (1) A bank may

  • (a) apply, with the approval in writing of the Minister, under the Canada Business Corporations Act for a certificate of continuance as a corporation under that Act;

  • (b) apply, with the approval in writing of the Minister, under the Canada Cooperatives Act for a certificate of continuance, or a certificate of continuance and a certificate of amalgamation, as a cooperative under that Act;

  • (c) apply, under the Cooperative Credit Associations Act, for letters patent continuing the bank as an association under that Act, or amalgamating and continuing the bank as an association under that Act;

  • (d) apply, under the Insurance Companies Act, for letters patent continuing the bank as a company (other than a mutual company) or an insurance holding company under that Act, or amalgamating and continuing the bank as a company (other than a mutual company) or an insurance holding company under that Act; or

  • (e) apply, under the Trust and Loan Companies Act, for letters patent continuing the bank as a company under that Act, or amalgamating and continuing the bank as a company under that Act.

• Marginal note:Conditions for approval

  (2) The approval referred to in paragraph (1)(a) or (b) may be given only if the Minister is satisfied that

  • (a) the bank has published, once a week for four consecutive weeks in the Canada Gazette and in a newspaper in general circulation at or near the place where the head office of the bank is situated, a notice of its intention to apply for the approval;

  • (b) the application has been authorized by a special resolution; and

  • (c) the bank does not hold deposits, other than deposits that are made by a person who controls the bank or by a person who has a significant interest in a class of shares of the bank and that are not insured by the Canada Deposit Insurance Corporation.

• Marginal note:Withdrawing application

  (3) If a special resolution authorizing the application for the certificate or letters patent so states, the directors of the bank may, without further approval of the shareholders, withdraw the application before it is acted on.

• Marginal note:Restriction on other transfers

  (4) A bank may not apply to be continued, or to be amalgamated and continued, as the case may be, as a body corporate other than one referred to in subsection (1).

Marginal note:Act ceases to apply

39.2 If a bank applies for a certificate or letters patent referred to in section 39.1 in accordance with that section and the certificate is given or the letters patent are issued, this Act ceases to apply to the bank as of the day the certificate or the letters patent take effect.

Corporate Name

Marginal note:Prohibited names

40 A bank may not be incorporated under this Act with a name

• (a) that is prohibited by an Act of Parliament;

• (b) that is, in the opinion of the Superintendent, deceptively misdescriptive;

• (c) that is the same as or, in the opinion of the Superintendent, substantially the same as or confusingly similar to, any existing

  • (i) trade-mark or trade name, or

  • (ii) corporate name of a body corporate,

  except where the trade-mark or trade name is being changed or the body corporate is being dissolved or is changing its corporate name and consent to the use of the trade-mark, trade name or corporate name is signified to the Superintendent in such manner as the Superintendent may require;

• (d) that is the same as or, in the opinion of the Superintendent, substantially the same as or confusingly similar to, the known name under or by which any entity carries on business or is identified; or

• (e) that is reserved under section 43 for another bank or an authorized foreign bank or a proposed bank or a proposed authorized foreign bank or under section 697 for a bank holding company or a proposed bank holding company.

Marginal note:Affiliated bank

41 Despite section 40, a bank that is affiliated with another entity may, with the consent of that entity, be incorporated with, or change its name to, substantially the same name as that of the affiliated entity.

Marginal note:French or English form of name

• 42 (1) The name of a bank may be set out in its letters patent in an English form, a French form, an English form and a French form or in a combined English and French form, and the bank may use and be legally designated by any such form.

• Marginal note:Alternate name

  (2) A bank may identify itself outside Canada by its name in any language and the bank may use and be legally designated by any such form of its name outside Canada.

• Marginal note:Other name

  (3) Subject to subsection (4) and section 255, a bank may carry on business under or identify itself by a name other than its corporate name.

• Marginal note:Directions

  (4) Where a bank is carrying on business under or identifying itself by a name other than its corporate name, the Superintendent may, by order, direct the bank not to use that other name if the Superintendent is of the opinion that that other name is a name referred to in any of paragraphs 40(a) to (e).

Marginal note:Reserved name

43 The Superintendent may, on request, reserve for ninety days a name for a proposed bank or proposed authorized foreign bank or for a bank or authorized foreign bank that intends to change its name.

Marginal note:Directing change of name

• 44 (1) If through inadvertence or otherwise a bank

  • (a) comes into existence or is continued with a name, or

  • (b) on an application to change its name, is granted a name

  that is prohibited by section 40, the Superintendent may, by order, direct the bank to change its name and the bank shall comply with that direction.

• Marginal note:Revoking name

  (2) If a bank has been directed under subsection (1) to change its name and has not, within sixty days after the service of the direction, changed its name to a name that is not prohibited by this Act, the Superintendent may revoke the name of the bank and assign to it a name and, until changed in accordance with section 215 or 217, the name of the bank is thereafter the name so assigned.

PART IVOrganization and Commencement

Organization Meetings

Marginal note:First directors’ meeting

• 45 (1) After letters patent incorporating a bank are issued, a meeting of the directors of the bank shall be held at which the directors may, subject to this Part,

  • (a) make by-laws;

  • (b) adopt forms of share certificates and corporate records;

  • (c) authorize the issue of shares of the bank;

  • (d) appoint officers;

  • (e) appoint, pursuant to subsection 314(1), an auditor or auditors to hold office until the first meeting of shareholders;

  • (f) make banking arrangements; and

  • (g) deal with any other matters necessary to organize the bank.

• Marginal note:Calling directors’ meeting

  (2) An incorporator or a director named in the application for letters patent may call the meeting referred to in subsection (1) by giving, subject to subsection 181(2), no fewer than five days notice of the purpose, time and place of the meeting to each director of the bank.

Marginal note:Calling shareholders’ meeting

• 46 (1) If at least five million dollars, or any greater amount that the Minister may specify, has been received by a bank in respect of which letters patent were issued under section 22 from the issue of its shares, the directors of the bank shall without delay call a meeting of the shareholders of the bank.

• Marginal note:Meeting of shareholders

  (2) The shareholders of a bank shall, by resolution at the meeting of shareholders called pursuant to subsection (1),

  • (a) approve, amend or reject any by-law made by the directors of the bank;

  • (b) subject to section 168, elect directors to hold office for a term expiring not later than the close of the third annual meeting of shareholders following the election; and

  • (c) appoint an auditor or auditors to hold office until the close of the first annual meeting of shareholders.

Marginal note:Term of first directors

47 A director named in the application for letters patent to incorporate a bank holds office until the election of directors at the meeting of shareholders called pursuant to subsection 46(1).

Commencement and Carrying on of Business

Marginal note:Order to commence and carry on business

• 48 (1) A bank shall not carry on any business until the Superintendent has, by order, approved the commencement and carrying on of business by the bank.

• Marginal note:Deeming

  (2) If, on the day this subsection comes into force, an order approving the commencement and carrying on of business by a bank named in Schedule I or II as those Schedules read immediately before that day, has not been made, such an order is deemed to have been made in respect of the bank on that day.

• Marginal note:Continued bank

  (3) Except in respect of a body corporate that is continued as a bank under this Act for the purposes of forthwith amalgamating with one or more bodies corporate and continuing as a bank under this Act, where letters patent continuing a body corporate as a bank under this Act are issued, the Superintendent shall make an order approving the commencement and carrying on of business by the bank.

• Marginal note:Amalgamated bank

  (4) Where letters patent amalgamating and continuing two or more bodies corporate as a bank under this Act are issued, the Superintendent shall make an order approving the commencement and carrying on of business by the bank.

• Marginal note:Subsection 49(2) and section 52 do not apply

  (5) For greater certainty, subsection 49(2) and section 52 do not apply in respect of a bank referred to in subsections (3) and (4).

Marginal note:Authority to make order

• 49 (1) On application by a bank, the Superintendent may make an order approving the commencement and carrying on of business by the bank.

• Marginal note:Statement of payments

  (2) An application by a bank for an order under subsection (1) must contain a statement setting out the amounts paid or to be paid by the bank in connection with its incorporation and organization.

Marginal note:No payments before order

50 Until an order approving the commencement and carrying on of business is made for a bank, the bank shall not make any payment on account of incorporation or organization expenses out of moneys received from the issue of the shares of the bank and interest thereon, except reasonable sums

• (a) for the remuneration of not more than two officers;

• (b) for the payment of costs related to the issue of shares of the bank; and

• (c) for the payment of clerical assistance, legal services, accounting services, office accommodation at one location, office expenses, advertising, stationery, postage and travel expenses.

Marginal note:Deposits and investments before order

51 Where a bank comes into existence but no order approving the commencement and carrying on of business is made for the bank, the bank may only

• (a) deposit, in Canada, paid-in capital of the bank in another deposit-taking Canadian financial institution; or

• (b) invest paid-in capital of the bank in unencumbered securities of the Government of Canada or the government of any province.

Marginal note:Conditions for order

• 52 (1) The Superintendent shall not make an order approving the commencement and carrying on of business by a bank until it has been shown to the satisfaction of the Superintendent that

  • (a) the meeting of shareholders of the bank referred to in subsection 46(1) has been duly held;

  • (b) the bank has paid-in capital of at least five million dollars or any greater amount that is specified by the Minister under subsection 46(1);

  • (c) the expenses of incorporation and organization to be borne by the bank are reasonable; and

  • (d) all other relevant requirements of this Act have been complied with.

• Marginal note:Time limit

  (2) The Superintendent shall not make an order approving the commencement and carrying on of business by a bank more than one year after the day on which the bank comes into existence.

Marginal note:Conditions of order

53 An order approving the commencement and carrying on of business by a bank may contain such conditions or limitations that are consistent with this Act and relate to the business of the bank as the Superintendent deems expedient and necessary.

Marginal note:Variations

• 54 (1) In respect of the order approving the commencement and carrying on of business by a bank, the Superintendent may at any time, by further order,

  • (a) make the order subject to such conditions or limitations that are consistent with this Act and that relate to the business of the bank as the Superintendent deems expedient and necessary, or

  • (b) amend or revoke any authorization contained in the order or any condition or limitation to which the order is subject,

  but before making any such further order the Superintendent shall provide the bank with an opportunity to make representations regarding that further order.

• (2) to (6) [Repealed, 1996, c. 6, s. 4]

Marginal note:Limit on assets

• 54.1 (1) The Minister may, by order, require a bank not to have average total assets in any three month period ending on the last day of a month subsequent to the month specified in the order exceeding the bank’s average total assets in the three month period ending on the last day of the month immediately before the month specified in the order if the Minister is of the opinion that it is in the best interests of the financial system in Canada to do so, after having considered the Superintendent’s opinion on

  • (a) the nature and extent of the financial services activities carried out by entities affiliated with the bank; and

  • (b) the impact that the nature and degree of supervision and regulation of those financial services activities have on the supervision and regulation of the bank.

• Marginal note:Revocation of order

  (2) If the Minister is of the opinion that the circumstances giving rise to the order have ceased to exist or have changed substantially, the Minister may, by further order, revoke the order.

• Marginal note:Average total assets

  (3) For the purposes of subsection (1), the average total assets of a bank in a three month period shall be computed by adding the total assets of the bank as calculated for the month end of each of the three months in the period and by dividing the sum by three.

• Definition of total assets

  (4) For the purposes of subsections (1) and (3), total assets, in respect of a bank, has the meaning given that expression by the regulations.

Marginal note:Permission to subsidiary of foreign bank

• 55 (1) On the recommendation of the Superintendent, the Minister may, at the same time that an order is made approving the commencement and carrying on of business by a bank that is the subsidiary of a foreign bank, by further order, grant the subsidiary permission to

  • (a) hold assets that banks are not otherwise permitted by this Act to hold if those assets consist of shares of a body corporate incorporated by or under an Act of Parliament or of the legislature of a province that, at the time application for letters patent incorporating the subsidiary was made, were held by the eligible foreign institution, as defined in subsection 370(1), that is the holding body corporate of the subsidiary or any affiliate of that eligible foreign institution; and

  • (b) hold assets that banks are not otherwise permitted by this Act to hold if, at the time application for letters patent incorporating the subsidiary was made, the assets were held by an affiliate of the eligible foreign institution, as defined in subsection 370(1), that is the holding body corporate of the subsidiary.

  Despite any other provision of this Act or the regulations, the subsidiary may act in accordance with that permission.

• Marginal note:Extension of permission

  (2) Permission granted to a bank by order of the Minister under subsection (1) is only for the period specified in the order. That period may not be more than two years, except that the Minister may extend the period by further order on application by the bank. The total of the period and any extensions of it may not, in any case, exceed ten years.

Marginal note:Public notice

• 56 (1) On the making of an order approving the commencement and carrying on of business by a bank, the bank shall publish a notice of the making of the order in a newspaper in general circulation at or near the place where the head office of the bank is located.

• Marginal note:Notice in Canada Gazette

  (2) The Superintendent shall cause to be published in the Canada Gazette a notice of the making of an order approving the commencement and carrying on of business by a bank.

• Marginal note:Non-application to existing bank

  (3) For greater certainty, this section does not apply to a bank referred to in subsection 48(2).

Marginal note:Cessation of existence

57 Except for the sole purpose of winding up the bank’s affairs, a bank ceases to exist one year after the day on which its incorporating instrument became effective if it does not obtain an order approving the commencement and carrying on of business within that year.

Marginal note:Allowed disbursements

• 58 (1) Where an order approving the commencement and carrying on of business is not made for a bank, no part of the moneys of the bank shall be used for the payment of incorporation and organization expenses, other than remuneration and costs referred to in section 50, unless the payment has been approved by a special resolution.

• Marginal note:Application to court to settle disbursements

  (2) If the amount allowed by a special resolution for the payment of any incorporation and organization expenses referred to in subsection (1) is considered insufficient by the directors or if no special resolution for the payment of such expenses is passed, the directors may apply to any court having jurisdiction in the place where the head office of the bank is situated to settle and determine the amounts to be paid out of any moneys of the bank before distribution of the balance to the shareholders or, where there are no shareholders, to the incorporators.

• Marginal note:Notice of application to court

  (3) The directors shall, at least twenty-one days prior to the date fixed for the hearing of the application referred to in subsection (2), send to the shareholders or incorporators, as the case may be, a notice of the application, which notice shall contain a statement of the amounts that are proposed to be settled and determined by the court.

• Marginal note:Ratio payable

  (4) In order that the amounts paid and payable under this section may be equitably borne by the shareholders or incorporators, as the case may be, the directors shall, after the amounts of the payments have been approved by special resolution or settled and determined by a court, fix the proportionate part thereof chargeable to each shareholder or incorporator as the ratio of the amount paid in by the shareholder or incorporator to the aggregate of all the amounts paid in by the shareholders or incorporators.

• Marginal note:Return of excess

  (5) After the amounts referred to in this section have been paid, the directors shall pay, with any interest earned thereon, to the shareholders or incorporators, the respective balances of the moneys paid in by them, less the amount chargeable to each shareholder or incorporator under subsection (4).

PART VCapital Structure

Share Capital

Marginal note:Power to issue shares

• 59 (1) Subject to this Act and the by-laws of the bank, shares of a bank may be issued at such times and to such persons and for such consideration as the directors of the bank may determine.

• Marginal note:Shares

  (2) Shares of a bank shall be in registered form and shall be without nominal or par value.

• Marginal note:Shares of existing bank

  (3) Shares with nominal or par value of a bank that was in existence immediately prior to the day this Part comes into force are deemed to be shares without nominal or par value.

• Marginal note:Shares of continued bank

  (4) Where a body corporate is continued as a bank under this Act, shares with nominal or par value issued by the body corporate before it was so continued are deemed to be shares without nominal or par value.

• Marginal note:Deemed share conditions

  (5) If a right, other than a voting right, of a holder of a share with nominal or par value of a bank referred to in subsection (3) or a body corporate continued as a bank under this Act was stated or expressed in terms of the nominal or par value of the share immediately before the coming into force of this subsection or the continuance under this Act, as the case may be, that right is deemed, after the coming into force of this Part or the continuance, as the case may be, to be the same right stated or expressed without reference to the nominal or par value of the share.

Marginal note:Common shares

• 60 (1) A bank shall have one class of shares, to be designated as “common shares”, which are non-redeemable and in which the rights of the holders thereof are equal in all respects, and those rights include

  • (a) the right to vote at all meetings of shareholders except where only holders of a specified class of shares are entitled to vote;

  • (b) the right to receive dividends declared on those shares; and

  • (c) the right to receive the remaining property of the bank on dissolution.

• Marginal note:Designations of shares

  (2) No bank shall designate more than one class of its shares as “common shares” or any variation of that term.

• Marginal note:Existing bank

  (3) A bank that is not in compliance with subsection (2) on the coming into force of this Part shall, within twelve months after the coming into force of this Part, redesignate its shares to comply with that subsection.

• Marginal note:Continued bank

  (4) A body corporate continued as a bank under this Act that is not in compliance with subsection (2) on the date letters patent continuing it as a bank are issued shall, within twelve months after that date, redesignate its shares to comply with that subsection.

Marginal note:Classes of shares

• 61 (1) The by-laws of a bank may provide for more than one class of shares and, if they so provide, shall set out

  • (a) the rights, privileges, restrictions and conditions attaching to the shares of each class; and

  • (b) the maximum number, if any, of shares of any class that the bank is authorized to issue.

• Marginal note:Shareholder approval

  (2) Where a by-law referred to in subsection (1) is made, the directors of the bank shall submit the by-law to the shareholders at the next meeting of shareholders.

• Marginal note:Effective date

  (3) A by-law referred to in subsection (1) is not effective until it is confirmed or confirmed with amendments by special resolution of the shareholders at the meeting referred to in subsection (2).

Marginal note:Shares issued in series

• 62 (1) The by-laws of a bank may, subject to any limitations set out in them, authorize the issue of any class of shares in one or more series and may

  • (a) fix the maximum number of shares in each series and determine the designation, rights, privileges, restrictions and conditions attaching to them; and

  • (b) authorize the directors to do anything referred to in paragraph (a).

• Marginal note:Series participation

  (2) If any cumulative dividend or amounts payable on return of capital in respect of a series of shares are not paid in full, the shares of all series of the same class participate rateably in respect of accumulated dividends and return of capital.

• Marginal note:Voting rights

  (3) Where voting rights are attached to any series of a class of shares, the shares of every other series of that class shall have the same voting rights.

• Marginal note:Restriction on series

  (4) No rights, privileges, restrictions or conditions attached to a series of shares authorized under this section confer on the series a priority in respect of dividends or return of capital over any other series of shares of the same class that are then outstanding.

• Marginal note:Material to Superintendent

  (5) If the directors exercise their authority under paragraph (1)(b), the directors shall, before the issue of shares of the series, send to the Superintendent particulars of the series of shares and a copy of the by-law that granted the authority to the directors.

Marginal note:One share, one vote

63 Where voting rights are attached to a share of a bank, the voting rights may confer only one vote in respect of that share.

Marginal note:Shares non-assessable

64 Shares issued by a bank after the coming into force of this section are non-assessable and the shareholders are not liable to the bank or to its creditors in respect thereof.

Marginal note:Consideration for share

• 65 (1) No share of any class of shares of a bank shall be issued until it is fully paid for in money or, with the approval of the Superintendent, in property.

• Marginal note:Other currencies

  (2) When issuing shares, a bank may provide that any aspect of the shares relating to money or involving the payment of or the liability to pay money be in a currency other than the currency of Canada.

Marginal note:Stated capital account

• 66 (1) A bank shall maintain a separate stated capital account for each class and series of shares it issues.

• Marginal note:Addition to stated capital account

  (2) A bank shall record in the appropriate stated capital account the full amount of any consideration it receives for any shares it issues.

• Marginal note:Exception

  (3) Despite subsection (2), a bank may, subject to subsection (4), record in the stated capital account maintained for the shares of a class or series any part of the consideration it receives in an exchange if it issues shares

  • (a) in exchange for

    • (i) property of a person who immediately before the exchange did not deal with the bank at arm’s length within the meaning of that expression in the Income Tax Act,

    • (ii) shares of or another interest in a body corporate that immediately before the exchange or because of it did not deal with the bank at arm’s length within the meaning of that expression in the Income Tax Act, or

    • (iii) property of a person who immediately before the exchange dealt with the bank at arm’s length within the meaning of that expression in the Income Tax Act if the person, the bank and all of the holders of shares in the class or series of shares so issued consent to the exchange;

  • (b) under an agreement referred to in subsection 224(1); or

  • (c) to shareholders of an amalgamating body corporate who receive the shares in addition to or instead of securities of the amalgamated bank.

• Marginal note:Limit on addition to a stated capital account

  (4) On the issuance of a share, a bank shall not add to the stated capital account in respect of the share an amount greater than the amount of the consideration it receives for the share.

• Marginal note:Constraint on addition to a stated capital account

  (5) Where a bank that has issued any outstanding shares of more than one class or series proposes to add to a stated capital account that it maintains in respect of a class or series of shares an amount that was not received by the bank as consideration for the issue of shares, the addition must be approved by special resolution unless all the issued and outstanding shares are of not more than two classes of convertible shares referred to in subsection 77(4).

Marginal note:Stated capital of continued bank

• 67 (1) Where a body corporate is continued as a bank under this Act, the bank shall record in the stated capital account maintained for each class and series of shares then outstanding an amount that is equal to the aggregate of

  • (a) the aggregate amount paid up on the shares of each class and series of shares immediately before the body corporate was so continued, and

  • (b) the amount of the contributed surplus of the bank that is attributable to those shares.

• Marginal note:Contributed surplus entry

  (2) The amount of any contributed surplus recorded in the stated capital account pursuant to paragraph (1)(b) shall be deducted from the contributed surplus account of the bank.

• Marginal note:Shares issued before continuance

  (3) Any amount unpaid in respect of a share issued by a body corporate before it was continued as a bank under this Act and paid after it was so continued shall be recorded in the stated capital account maintained by the bank for the shares of that class or series.

Marginal note:Pre-emptive right

• 68 (1) Where the by-laws of a bank so provide, no shares of any class shall be issued unless the shares have first been offered to the shareholders holding shares of that class, and those shareholders have a pre-emptive right to acquire the offered shares in proportion to their holdings of the shares of that class, at such price and on such terms as those shares are to be offered to others.

• Marginal note:Exception

  (2) Notwithstanding the existence of a pre-emptive right, a shareholder of a bank has no pre-emptive right in respect of shares of a class to be issued

  • (a) for a consideration other than money;

  • (b) as a share dividend; or

  • (c) pursuant to the exercise of conversion privileges, options or rights previously granted by the bank.

• Marginal note:Idem

  (3) Notwithstanding the existence of a pre-emptive right, a shareholder of a bank has no pre-emptive right in respect of shares to be issued

  • (a) where the issue of shares to the shareholder is prohibited by this Act; or

  • (b) where, to the knowledge of the directors of the bank, the offer of shares to a shareholder whose recorded address is in a country other than Canada ought not to be made unless the appropriate authority in that country is provided with information in addition to that submitted to the shareholders at the last annual meeting.

Marginal note:Conversion privileges

• 69 (1) A bank may issue conversion privileges, options or rights to acquire securities of the bank, and shall set out the conditions thereof

  • (a) in the documents that evidence the conversion privileges, options or rights; or

  • (b) in the securities to which the conversion privileges, options or rights are attached.

• Marginal note:Transferable rights

  (2) Conversion privileges, options and rights to acquire securities of a bank may be made transferable or non-transferable, and options and rights to acquire such securities may be made separable or inseparable from any securities to which they are attached.

• Marginal note:Reserved shares

  (3) Where a bank has granted privileges to convert any securities issued by the bank into shares, or into shares of another class or series, or has issued or granted options or rights to acquire shares, if the by-laws limit the number of authorized shares, the bank shall reserve and continue to reserve sufficient authorized shares to meet the exercise of such conversion privileges, options and rights.

Marginal note:Holding of own shares

70 Except as provided in sections 71 to 74, or unless permitted by the regulations, a bank shall not

• (a) hold shares of the bank or of any body corporate that controls the bank;

• (b) hold any ownership interests of any unincorporated entity that controls the bank;

• (c) permit any of its subsidiaries to hold any shares of the bank or of any body corporate that controls the bank; or

• (d) permit any of its subsidiaries to hold any ownership interests of any unincorporated entity that controls the bank.

Marginal note:Purchase and redemption of shares

• 71 (1) Subject to subsection (2) and to its by-laws, a bank may, with the consent of the Superintendent, purchase, for the purpose of cancellation, any shares issued by it, or redeem any redeemable shares issued by it at prices not exceeding the redemption price thereof calculated according to a formula stated in its by-laws or the conditions attaching to the shares.

• Marginal note:Restrictions on purchase and redemption

  (2) A bank shall not make any payment to purchase or redeem any shares issued by it if there are reasonable grounds for believing that the bank is, or the payment would cause the bank to be, in contravention of any regulation referred to in subsection 485(1) or (2) or any direction made pursuant to subsection 485(3).

• Marginal note:Donated shares

  (3) A bank may accept from any shareholder a share of the bank surrendered to it as a gift, but may not extinguish or reduce a liability in respect of an amount unpaid on any such share except in accordance with section 75.

Marginal note:Holding as personal representative

• 72 (1) A bank may, and may permit its subsidiaries to, hold, in the capacity of a personal representative, shares of the bank or of any body corporate that controls the bank or ownership interests in any unincorporated entity that controls the bank, but only where the bank or the subsidiary does not have a beneficial interest in the shares or ownership interests.

• Marginal note:Security interest

  (2) A bank may, and may permit its subsidiaries to, by way of a security interest

  • (a) hold shares of the bank or of any body corporate that controls the bank, or

  • (b) hold any ownership interests of any entity that controls the bank,

  where the security interest is nominal or immaterial when measured by criteria established by the bank that have been approved in writing by the Superintendent.

• Marginal note:Saving

  (3) Nothing in subsection (2) precludes a bank that was in existence immediately prior to the day this Part comes into force, or any of its subsidiaries, from holding any security interest held immediately prior to the coming into force of this Part.

Marginal note:Exception — conditions before acquisition

• 72.1 (1) A bank may permit any of its subsidiaries to acquire shares of the bank through the issuance of those shares by the bank to the subsidiary if the conditions prescribed for the purposes of this subsection are met before the subsidiary acquires the shares.

• Marginal note:Conditions after acquisition

  (2) After a subsidiary has acquired shares under the purported authority of subsection (1), the conditions prescribed for the purposes of this subsection must be met.

• Marginal note:Non-compliance with conditions

  (3) If a bank permits any of its subsidiaries to acquire shares of the bank under the purported authority of subsection (1) and one or more of the conditions prescribed for the purposes of subsections (1) and (2) were not met, are not met or cease to be met, as the case may be, then, despite section 16 and subsection 66(2), the bank must comply with the prescribed requirements.

Marginal note:Cancellation of shares

• 73 (1) Subject to subsection (2), where a bank purchases shares of the bank or fractions thereof or redeems or otherwise acquires shares of the bank, the bank shall cancel those shares.

• Marginal note:Requirement to sell

  (2) Where a bank or any of its subsidiaries, through the realization of security, acquires any shares of the bank or of any body corporate that controls the bank or any ownership interests in an unincorporated entity that controls the bank, the bank shall, or shall cause its subsidiaries to, as the case may be, within six months after the day of the realization, sell or otherwise dispose of the shares or ownership interests.

Marginal note:Subsidiary holding shares

74 Subject to the regulations, a bank that was in existence immediately prior to the day this Part comes into force shall cause any subsidiary of the bank that holds shares of the bank, or of any body corporate that controls the bank, or any ownership interests of any unincorporated entity that controls the bank to sell or otherwise dispose of those shares or ownership interests within six months after the day this section comes into force.

Marginal note:Reduction of capital

• 75 (1) The stated capital of a bank may be reduced by special resolution.

• Marginal note:Limitation

  (2) A bank shall not reduce its stated capital by special resolution if there are reasonable grounds for believing that the bank is, or the reduction would cause the bank to be, in contravention of any regulation referred to in subsection 485(1) or (2) or any direction made pursuant to subsection 485(3).

• Marginal note:Contents of special resolution

  (3) A special resolution to reduce the stated capital of a bank shall specify the stated capital account or accounts from which the reduction of stated capital effected by the special resolution will be deducted.

• Marginal note:Approval by Superintendent

  (4) A special resolution to reduce the stated capital of a bank has no effect until it is approved in writing by the Superintendent.

• Marginal note:Exception

  (4.1) Subsection (4) does not apply if

  • (a) the reduction in the stated capital is made solely as a result of changes made to the accounting principles referred to in subsection 308(4); and

  • (b) there is to be no return of capital to shareholders as a result of the reduction.

• Marginal note:Conditions for approval

  (5) No approval to reduce the stated capital of a bank may be given by the Superintendent unless application therefor is made within three months after the time of the passing of the special resolution and a copy of the special resolution, together with a notice of intention to apply for approval, has been published in the Canada Gazette.

• Marginal note:Statements to be submitted

  (6) In addition to evidence of the passing of a special resolution to reduce the stated capital of a bank and of the publication thereof, statements showing

  • (a) the number of the bank’s shares issued and outstanding,

  • (b) the results of the voting by class of shares of the bank,

  • (c) the bank’s assets and liabilities, and

  • (d) the reason why the bank seeks the reduction of capital

  shall be submitted to the Superintendent at the time of the application for approval of the special resolution.

Marginal note:Recovery by action

• 76 (1) Where any money or property was paid or distributed to a shareholder or other person as a consequence of a reduction of capital made contrary to section 75, a creditor of the bank may apply to a court for an order compelling the shareholder or other person to pay the money or deliver the property to the bank.

• Marginal note:Shares held by personal representative

  (2) No person holding shares in the capacity of a personal representative and registered on the records of the bank as a shareholder and therein described as the personal representative of a named person is personally liable under subsection (1), but the named person is subject to all the liabilities imposed by that subsection.

• Marginal note:Limitation

  (3) An action to enforce a liability imposed by subsection (1) may not be commenced more than two years after the date of the act complained of.

• Marginal note:Remedy preserved

  (4) This section does not affect any liability that arises under section 207.

Marginal note:Adjustment of stated capital account

• 77 (1) On a purchase, redemption or other acquisition by a bank of shares or fractions thereof issued by it, other than shares acquired pursuant to section 72 or acquired through the realization of security and sold pursuant to subsection 73(2), the bank shall deduct from the stated capital account maintained for the class or series of shares so purchased, redeemed or otherwise acquired an amount equal to the result obtained by multiplying the stated capital in respect of the shares of that class or series by the number of shares of that class or series so purchased, redeemed or otherwise acquired and dividing by the number of shares of that class or series outstanding immediately before the purchase, redemption or other acquisition.

• Marginal note:Idem

  (2) A bank shall adjust its stated capital account or accounts in accordance with any special resolution referred to in section 75.

• Marginal note:Shares converted to another class

  (3) On a conversion of outstanding shares of a bank into shares of another class or series, or on a change of outstanding shares of the bank into shares of another class or series, the bank shall

  • (a) deduct from the stated capital account maintained for the class or series of shares converted or changed an amount equal to the result obtained by multiplying the stated capital of the shares of that class or series by the number of shares of that class or series converted or changed, and dividing by the number of outstanding shares of that class or series immediately before the conversion or change; and

  • (b) record the result obtained under paragraph (a) and any additional consideration received pursuant to the conversion or change in the stated capital account maintained or to be maintained for the class or series of shares into which the shares have been converted or changed.

• Marginal note:Stated capital of convertible shares

  (4) For the purposes of subsection (3) and subject to the bank’s by-laws, where a bank issues two classes of shares and there is attached to each class a right to convert a share of one class into a share of the other class and a share is so converted, the amount of stated capital attributable to a share in either class is the aggregate of the stated capital of both classes divided by the number of outstanding shares of both classes immediately before the conversion.

• Marginal note:Conversion or change of shares

  (5) Shares issued by a bank and converted into shares of another class or series, or changed under subsection 217(1) into shares of another class or series, become issued shares of the class or series of shares into which the shares have been converted or changed.

Marginal note:Addition to stated capital account

78 On a conversion of any debt obligation of a bank into shares of a class or series of shares, the bank shall

• (a) deduct from the liabilities of the bank the nominal value of the debt obligation being converted; and

• (b) record the result obtained under paragraph (a) and any additional consideration received for the conversion in the stated capital account maintained or to be maintained for the class or series of shares into which the debt obligation has been converted.

Marginal note:Declaration of dividend

• 79 (1) The directors of a bank may declare and a bank may pay a dividend by issuing fully paid shares of the bank or options or rights to acquire fully paid shares of the bank and, subject to subsection (4), the directors of a bank may declare and a bank may pay a dividend in money or property, and if a dividend is to be paid in money, the dividend may be paid in a currency other than the currency of Canada.

• Marginal note:Notice to Superintendent

  (2) The directors of a bank shall notify the Superintendent of the declaration of a dividend at least 15 days before the day fixed for its payment.

• Marginal note:Share dividend

  (3) If shares of a bank are issued in payment of a dividend, the bank shall record in the stated capital account maintained or to be maintained for the shares of the class or series issued in payment of the dividend the declared amount of the dividend stated as an amount of money.

• Marginal note:When dividend not to be declared

  (4) The directors of a bank shall not declare and a bank shall not pay a dividend if there are reasonable grounds for believing that the bank is, or the payment would cause the bank to be, in contravention of any regulation referred to in subsection 485(1) or (2) or any direction made pursuant to subsection 485(3).

• (5) [Repealed, 2007, c. 6, s. 11]

Subordinated Indebtedness

Marginal note:Restriction on subordinated indebtedness

• 80 (1) A bank shall not issue subordinated indebtedness unless the subordinated indebtedness is fully paid for in money or, with the approval of the Superintendent, in property.

• Marginal note:References to subordinated indebtedness

  (2) A person shall not in any prospectus, advertisement, correspondence or literature relating to any subordinated indebtedness issued or to be issued by a bank refer to the subordinated indebtedness otherwise than as subordinated indebtedness.

• Marginal note:Deemed not to be a deposit

  (3) Subordinated indebtedness issued by a bank is deemed not to be a deposit.

• Marginal note:Other currencies

  (4) When issuing subordinated indebtedness, a bank may provide that any aspect of the subordinated indebtedness relating to money or involving the payment of or the liability to pay money in relation thereto be in a currency other than that of Canada including, without restricting the generality of the foregoing, the payment of any interest thereon.

Security Certificates and Transfers

Marginal note:Definitions

81 In this section and sections 82 to 135,

adverse claim

opposition

adverse claim includes a claim that a transfer was or would be wrongful or that a particular adverse person is the owner of or has an interest in a security; (opposition)

bona fide purchaser

acheteur de bonne foi

bona fide purchaser means a purchaser for value in good faith and without notice of any adverse claim who takes delivery of a security in bearer form or order form or of a security in registered form issued to the purchaser or endorsed to the purchaser or endorsed in blank; (acheteur de bonne foi)

clearing agency

agence de compensation et de dépôt

clearing agency means a person designated as a recognized clearing agency by the Superintendent; (agence de compensation et de dépôt)

delivery

livraison ou remise

delivery means voluntary transfer of possession; (livraison ou remise)

fungible

fongibles

fungible, in respect of securities, means securities of which any unit is, by nature or usage of trade, the equivalent of any other like unit; (fongibles)

genuine

authentique

genuine means free of forgery or counterfeit; (authentique)

good faith

bonne foi

good faith means honesty in fact in the conduct of the transaction concerned; (bonne foi)

over-issue

émission excédentaire

over-issue means the issue of securities in excess of any maximum number of securities that the issuer is authorized to issue; (émission excédentaire)

purchaser

acquéreur

purchaser means a person who takes an interest in a security by sale, mortgage, pledge, issue, reissue, gift or any other voluntary transaction; (acquéreur)

security or security certificate

valeur mobilière ou certificat de valeur mobilière

security or security certificate means an instrument issued by a bank that is

• (a) in bearer, order or registered form,

• (b) of a type commonly dealt in on securities exchanges or markets or commonly recognized in any area in which it is issued or dealt in as a medium for investment,

• (c) one of a class or series or by its terms divisible into a class or series of instruments, and

• (d) evidence of a share, participation or other interest in or obligation of a bank,

but does not include an instrument evidencing a deposit; (valeur mobilière ou certificat de valeur mobilière)

securities broker

courtier

securities broker means a person who is engaged for all or part of the person’s time in the business of buying and selling securities and who, in the transaction concerned, acts for, or buys a security from, or sells a security to, a customer; (courtier)

trust indenture

acte de fiducie

trust indenture has the meaning given that expression by section 294; (acte de fiducie)

unauthorized

non autorisé

unauthorized, in relation to a signature or an endorsement, means a signature or an endorsement made without actual, implied or apparent authority, and includes a forgery; (non autorisé)

uncertificated security

valeur mobilière sans certificat

uncertificated security means a security, not evidenced by a security certificate, the issue and any transfer of which is registered or recorded in records maintained for that purpose by or on behalf of a bank; (valeur mobilière sans certificat)

valid

valide

valid means issued in accordance with the applicable law or validated under section 97. (valide)

Marginal note:Provisions governing transfers of securities

82 The transfer of a security is governed by sections 83 to 135.

Marginal note:Security a negotiable instrument

• 83 (1) A security is a negotiable instrument but, in the case of any inconsistency between the provisions of the Bills of Exchange Act and this Act, this Act prevails to the extent of the inconsistency.

• Marginal note:Bearer form

  (2) A security is in bearer form if it is payable to bearer according to its terms and not by reason of any endorsement.

• Marginal note:Order form

  (3) A security is in order form where the security is not a share and, by its terms, it is payable to the order or assigns of any person therein specified with reasonable certainty or to the person or the person’s order.

• Marginal note:Registered form

  (4) A security is in registered form if

  • (a) it specifies a person entitled to the security or to the rights it evidences, and its transfer is capable of being recorded in a securities register; or

  • (b) it bears a statement that it is in registered form.

Marginal note:Status of guarantor

84 A guarantor for an issuer of a security is deemed to be an issuer to the extent of the guarantee, whether or not the guarantor’s obligation is noted on the security.

Marginal note:Rights of holder

• 85 (1) Subject to Part VII, every security holder is entitled at the holder’s option to a security certificate that complies with this Act or to a non-transferable written acknowledgement of the holder’s right to obtain a security certificate that complies with this Act from a bank in respect of the securities of that bank held by the security holder.

• Marginal note:Fee for security certificate

  (2) A bank may charge a fee, not exceeding a prescribed amount, for a security certificate issued in respect of a transfer.

• Marginal note:Joint holders

  (3) A bank is not required to issue more than one security certificate in respect of securities held jointly by several persons, and delivery of a security certificate to one of several joint holders is sufficient delivery to all joint holders of the security.

Marginal note:Signatures

• 86 (1) A security certificate shall be signed by or bear the printed or otherwise mechanically reproduced signature of at least one of the following:

  • (a) a director or officer of the bank;

  • (b) a registrar or transfer agent of the bank or a branch transfer agent or a natural person on their behalf; or

  • (c) a trustee who certifies it in accordance with a trust indenture.

• Marginal note:Continuation of validity of signature

  (2) If a security certificate contains a person’s printed or mechanically reproduced signature, the bank may issue the security certificate even if the person has ceased to be a director or officer of the bank. The security certificate is as valid as if the person were a director or officer at the date of its issue.

Marginal note:Contents of share certificate

87 There shall be stated on the face of each share certificate issued by a bank after the coming into force of this section

• (a) the name of the bank;

• (b) a statement that the bank is subject to the Bank Act;

• (c) the name of the person to whom the share certificate is issued; and

• (d) the number and class of shares and the designation of any series that the certificate represents.

Marginal note:Restrictions and charges

• 88 (1) No charge in favour of a bank and no restriction on transfer other than a constraint under Part VII is effective against a transferee of a security issued by the bank if the transferee has no actual knowledge of the charge or restriction unless it or a reference to it is noted conspicuously on the security certificate.

• Marginal note:No restriction

  (2) If any of the issued shares of a distributing bank remain outstanding and are held by more than one person, the bank may not restrict the transfer or ownership of its shares except by way of a constraint under Part VII.

• Marginal note:Continuance

  (3) If a body corporate that is continued as a bank under this Act has outstanding security certificates and the words “private company” or “private corporation” appear on the certificates, those words are deemed to be a notice of a charge or restriction for the purposes of subsection (1).

Marginal note:Particulars of class

• 89 (1) There shall be stated legibly on a share certificate issued after the coming into force of this section by a bank that is authorized to issue shares of more than one class or series

  • (a) the rights, privileges, restrictions and conditions attached to the shares of each class and series existing when the share certificate is issued; or

  • (b) that the class or series of shares that the certificate represents has rights, privileges, restrictions or conditions attached thereto and that the bank will furnish a shareholder, on demand and without charge, with a full copy of

    • (i) the text of the rights, privileges, restrictions and conditions attached to each class authorized to be issued and to each series in so far as those rights, privileges, restrictions and conditions have been fixed by the directors, and

    • (ii) the text of the authority of the directors, if the directors are so authorized, to fix the rights, privileges, restrictions and conditions of subsequent series of shares.

• Marginal note:Duty

  (2) Where a share certificate issued by a bank contains the statement mentioned in paragraph (1)(b), the bank shall provide a shareholder, on demand and without charge, with a full copy of the texts referred to in subparagraphs (1)(b)(i) and (ii).

Marginal note:Fractional share

90 A bank may issue a certificate for a fractional share or may issue in place thereof a scrip certificate in bearer form that entitles the holder to receive a certificate for a full share by exchanging scrip certificates aggregating a full share.

Marginal note:Scrip certificates

91 The directors of a bank may attach conditions to any scrip certificate issued by the bank, including conditions that

• (a) the scrip certificate becomes void if not exchanged for a share certificate representing a full share before a specified date; and

• (b) any shares for which the scrip certificate is exchangeable may, notwithstanding any pre-emptive right, be issued by the bank to any person and the proceeds thereof may be distributed rateably to the holders of all the scrip certificates.

Marginal note:Holders of fractional shares

• 92 (1) A holder of a fractional share issued by a bank is not entitled to exercise voting rights or to receive a dividend in respect of the fractional share.

• Marginal note:Holders of scrip certificates

  (2) A holder of a scrip certificate is not entitled to exercise voting rights or to receive a dividend in respect of the scrip certificate.

Marginal note:Dealings with registered owner

• 93 (1) A bank or a trustee within the meaning of section 294 may, subject to subsections 137(5) to (7) and sections 138 to 141 and 145, treat the registered owner of a security as the person exclusively entitled to vote, to receive notices, to receive any interest, dividend or other payment in respect of the security and to exercise all of the rights and powers of an owner of the security.

• Marginal note:Constructive registered holder

  (2) Notwithstanding subsection (1), a bank may treat a person as a registered security holder entitled to exercise all of the rights of the security holder that the person represents, if that person provides the bank with evidence as described in subsection 127(4) that the person is

  • (a) the heir or personal representative of a deceased security holder or the personal representative of the heirs of the deceased security holder;

  • (b) the personal representative of a registered security holder who is a minor, an incompetent person or a missing person; or

  • (c) a liquidator of, or a trustee in bankruptcy for, a registered security holder.

• Marginal note:Permissible registered holder

  (3) If a person on whom the ownership of a security of a bank devolves by operation of law, other than a person described in subsection (2), provides proof of that person’s authority to exercise rights or privileges in respect of a security of the bank that is not registered in the person’s name, the bank shall, subject to this Act, treat that person as entitled to exercise those rights or privileges.

• Marginal note:Immunity of bank

  (4) A bank is not required to inquire into the existence of, or see to the performance or observance of, any duty owed to a third person by a registered holder of any of its securities or by anyone whom it treats, as permitted or required by this Part, as the owner or registered holder thereof.

Marginal note:Minors

94 If a minor exercises any rights of ownership in the securities of a bank, no subsequent repudiation or avoidance is effective against the bank.

Marginal note:Joint shareholders

95 A bank may treat as owners of a security the survivors of persons to whom the security was issued as joint holders, if the bank receives proof satisfactory to it of the death of any of the joint holders.

Marginal note:Transmission of securities

• 96 (1) Subject to the provisions of Part VII and any applicable law relating to the collection of taxes, a person referred to in paragraph 93(2)(a) is entitled to become registered as the owner of a security, or to designate another person to be registered as the owner of a security, if the person referred to in paragraph 93(2)(a) delivers to the bank or its transfer agent

  • (a) the original grant of probate or of letters of administration, or a copy thereof certified to be a true copy by

    • (i) the court that granted the probate or letters of administration,

    • (ii) a trust company incorporated under the Trust and Loan Companies Act or under the laws of a province, or

    • (iii) a lawyer or notary acting on behalf of the person referred to in paragraph 93(2)(a), or

  • (b) in the case of transmission by notarial will in the Province of Quebec, a copy thereof authenticated pursuant to the laws of that Province,

  together with

  • (c) an affidavit or declaration of transmission made by the person referred to in paragraph 93(2)(a) that states the particulars of the transmission, and

  • (d) the security certificate that was owned by the deceased holder

    • (i) in the case of a transfer to the person referred to in paragraph 93(2)(a), with or without the endorsement of that person, and

    • (ii) in the case of a transfer to any other person, endorsed in accordance with section 111,

  and accompanied by any assurance the bank may require under section 127.

• Marginal note:Excepted transmissions

  (2) Notwithstanding subsection (1), if the laws of the jurisdiction governing the transmission of a security of a deceased holder do not require a grant of probate or of letters of administration in respect of the transmission, a personal representative of the deceased holder is entitled, subject to Part VII and any applicable law relating to the collection of taxes, to become registered as the owner or to designate a person to be registered as the owner, if the personal representative delivers to the bank or its transfer agent the following documents, namely,

  • (a) the security certificate that was owned by the deceased holder; and

  • (b) reasonable proof of the governing laws, of the deceased holder’s interest in the security and of the right of the personal representative or the designated person to become the registered shareholder.

• Marginal note:Right of bank to treat as owner

  (3) Subject to Part VII, delivery of the documents referred to in this section empowers a bank or its transfer agent to record in a securities register the transmission of a security from the deceased holder to a person referred to in paragraph 93(2)(a) or to such person as the person referred to in that paragraph may designate and, thereafter, to treat the person who becomes so registered as the owner of that security.

Marginal note:Over-issue

• 97 (1) The provisions of this Part that validate a security or compel its issue or reissue do not apply to the extent that a validation, issue or reissue would result in over-issue, but

  • (a) if a valid security similar in all respects to the security involved in the over-issue is reasonably available for purchase, the person entitled to the validation or issue may compel the issuer to purchase and deliver such a security to that person against surrender of the security that the person holds; or

  • (b) if a valid security similar in all respects to the security involved in the over-issue is not reasonably available for purchase, the person entitled to the validation or issue may recover from the issuer an amount equal to the price the last purchaser for value paid for the invalid security.

• Marginal note:Retroactive validation

  (2) Where an issuer is subsequently authorized to issue securities of a number equal to or exceeding the number of securities previously authorized plus the amount of the securities over-issued, the securities so over-issued are valid from the date of their issue.

• Marginal note:Payment not a purchase or redemption

  (3) A purchase or payment by an issuer under subsection (1) is not a purchase or payment in respect of which section 71 or 77 applies.

Marginal note:Burden of proof

98 In any action on a security,

• (a) unless specifically denied in the pleadings, each signature on the security or in a necessary endorsement is admitted;

• (b) a signature on the security is presumed to be genuine and authorized but, if the effectiveness of the signature is put in issue, the burden of establishing that it is genuine and authorized is on the party claiming under the signature;

• (c) if a signature is admitted or established, production of the instrument entitles a holder to recover on it unless the defendant establishes a defence or a defect going to the validity of the security; and

• (d) if the defendant establishes that a defence or defect exists, the plaintiff has the burden of establishing that the defence or defect is ineffective against the plaintiff or any person under whom the plaintiff claims.

Marginal note:Securities fungible

99 Unless otherwise agreed, and subject to any applicable law, regulation or stock exchange rule, a person required to deliver securities may deliver any security of the specified issue in bearer form or registered in the name of the transferee or endorsed to the transferee or in blank.

Marginal note:Notice of defect

• 100 (1) Even against a purchaser for value and without notice of a defect going to the validity of a security, the terms of the security include those stated on the security and those incorporated therein by reference to another instrument, statute, rule, regulation or order to the extent that the terms so referred to do not conflict with the stated terms, but such a reference is not of itself notice to a purchaser for value of a defect going to the validity of the security, notwithstanding that the security expressly states that a person accepting it admits the notice.

• Marginal note:Purchaser for value

  (2) A security is valid in the hands of a purchaser for value without notice of any defect going to its validity.

• Marginal note:Lack of genuineness

  (3) Except as provided in section 101, the fact that a security is not genuine is a complete defence even against a purchaser for value and without notice.

• Marginal note:Ineffective defences

  (4) All defences of an issuer, including non-delivery and conditional delivery of a security but not including lack of genuineness, are ineffective against a purchaser for value without notice of the particular defence.

• Marginal note:Staleness as defect notice

  (5) After an event that creates a right to immediate performance of the principal obligation evidenced by a security, or that sets a date on or after which a security is to be presented or surrendered for redemption or exchange, a purchaser is deemed to have notice of any defect in its issue or of any defence of the issuer

  • (a) if the event requires the payment of money or the delivery of securities, or both, on presentation or surrender of the security, and the funds or securities are available on the date set for payment or exchange, and the purchaser takes the security more than one year after that date; or

  • (b) if the purchaser takes the security more than two years after the date set for presentation or surrender or the date on which the performance became due.

Marginal note:Unauthorized signature

101 An unauthorized signature on a security before or in the course of issue is ineffective, except that the signature is effective in favour of a purchaser for value and without notice of the lack of authority, if the signing has been done by

• (a) an authenticating trustee, registrar, transfer agent or other person entrusted by the issuer with the signing of the security, or of similar securities, or their immediate preparation for signing; or

• (b) an employee of the issuer or of a person referred to in paragraph (a) who, in the ordinary course of the employee’s duties, handles the security.

Marginal note:Completion or alteration

• 102 (1) Where a security contains the signatures necessary to its issue or transfer but is incomplete in any other respect,

  • (a) any person may complete it by filling in the blanks in accordance with the person’s authority; and

  • (b) notwithstanding that the blanks are incorrectly filled in, the security as completed is enforceable by a purchaser who took it for value and without notice of the incorrectness.

• Marginal note:Enforceability

  (2) A completed security that has been improperly altered, even if fraudulently altered, remains enforceable, but only according to its original terms.

Marginal note:Warranties of agents

• 103 (1) A person signing a security, as authenticating trustee, registrar, transfer agent or other person entrusted by the issuer with the signing of the security, warrants to a purchaser for value without notice that

  • (a) the security is genuine;

  • (b) the person’s acts in connection with the issue of the security are within the person’s authority; and

  • (c) the person has reasonable grounds for believing that the security is in the form and within the amount the issuer is authorized to issue.

• Marginal note:Limitation of liability

  (2) Unless otherwise agreed, a person referred to in subsection (1) does not assume any further liability for the validity of a security.

Marginal note:Title of purchaser

• 104 (1) Subject to Part VII, on delivery of a security the purchaser acquires the rights in the security that the purchaser’s transferor had or had authority to convey, except that the position of a purchaser who has been a party to any fraud or illegality affecting the security or who as a prior holder had notice of an adverse claim is not improved by taking from a later bona fide purchaser.

• Marginal note:Title of bona fide purchaser

  (2) A bona fide purchaser, in addition to acquiring the rights of a purchaser, also acquires the security free from any adverse claim.

• Marginal note:Limited interest purchaser

  (3) A purchaser of a limited interest acquires rights only to the extent of the interest purchased.

Marginal note:Deemed notice of adverse claim

105 A purchaser of a security, or any securities broker for a seller or purchaser, is deemed to have notice of an adverse claim if

• (a) the security, whether in bearer form or registered form, has been endorsed “for collection” or “for surrender” or for some other purpose not involving transfer; or

• (b) the security is in bearer form and has on it a statement that it is the property of a person other than the transferor, except that the mere writing of a name on a security is not such a statement.

Marginal note:Notice of fiduciary duty

106 Notwithstanding that a purchaser, or any securities broker for a seller or purchaser, has notice that a security is held for a third person by, or is registered in the name of or endorsed by, a fiduciary, neither the purchaser nor the securities broker has any duty to inquire into the rightfulness of the transfer or any notice of an adverse claim, except that if the purchaser or securities broker for the seller or purchaser knows that the consideration is to be used for, or that the transaction is for, the personal benefit of the fiduciary or is otherwise in breach of the fiduciary’s duty, the purchaser or securities broker is deemed to have notice of an adverse claim.

Marginal note:Staleness as notice

107 An event that creates a right to immediate performance of the principal obligation evidenced by a security or that sets a date on or after which the security is to be presented or surrendered for redemption or exchange is not of itself notice of an adverse claim, except in the case of a purchase

• (a) made more than one year after any date set for such a presentation or surrender; or

• (b) made more than six months after any date set for payment of money against such a presentation or surrender if funds are available for payment on that date.

Marginal note:Warranties to issuer

• 108 (1) A person who presents a security for registration of transfer or for payment or exchange warrants to the issuer that the person is entitled to the registration, payment or exchange, except that a purchaser for value without notice of an adverse claim who receives a new, reissued or re-registered security on registration of transfer warrants only that the purchaser has no knowledge of any unauthorized signature in a necessary endorsement.

• Marginal note:Warranties to purchaser

  (2) A person by transferring a security to a purchaser for value warrants only that

  • (a) the transfer is effective and rightful;

  • (b) the security is genuine and has not been materially altered; and

  • (c) the person knows of nothing that might impair the validity of the security.

• Marginal note:Warranties of intermediary

  (3) Where a security is delivered by an intermediary known by the purchaser to be entrusted with delivery of the security on behalf of another or with collection of a draft or other claim to be collected against that delivery, the intermediary by that delivery warrants only the intermediary’s own good faith and authority even if the intermediary has purchased or made advances against the draft or other claim to be collected against the delivery.

• Marginal note:Warranties of pledgee

  (4) A pledgee or other holder for purposes of security who redelivers a security received, or after payment and on order of the debtor delivers that security to a third person, gives only the warranties of an intermediary under subsection (3).

• Marginal note:Warranties of securities broker

  (5) A securities broker gives to the broker’s customer, to the issuer and to a purchaser, as the case may be, the warranties provided in subsections (1) to (4) and has the rights and privileges of a purchaser under those subsections, and those warranties of and in favour of the broker acting as an agent are in addition to warranties given by the broker’s customer and warranties given in favour of the broker’s customer.

Marginal note:Right to compel endorsement

109 Where a security in registered form is delivered to a purchaser without a necessary endorsement, the purchaser may become a bona fide purchaser only as of the time the endorsement is supplied, but against the transferor the transfer is complete on delivery and the purchaser has a specifically enforceable right to have any necessary endorsement supplied.

Definition of appropriate person

• 110 (1) In this section, section 111, subsections 118(1), 121(4) and 126(1) and section 130, appropriate person means

  • (a) the person specified by the security or by special endorsement to be entitled to the security;

  • (b) if a person described in paragraph (a) is described as a fiduciary but is no longer serving in the described capacity, either that person or that person’s successor;

  • (c) if the security or endorsement mentioned in paragraph (a) specifies more than one person as fiduciaries and one or more of those persons are no longer serving in the described capacity, the remaining fiduciary or fiduciaries, whether or not a successor has been appointed;

  • (d) if a person described in paragraph (a) is a natural person and is without capacity to act by reason of death, incompetence, minority or other reason, the person’s fiduciary;

  • (e) if the security or endorsement mentioned in paragraph (a) specifies more than one person with right of survivorship and by reason of death not all of the persons can sign, the survivor or survivors;

  • (f) a person having power to sign under any applicable law or a power of attorney; or

  • (g) to the extent that a person described in any of paragraphs (a) to (f) may act through an agent, the person’s authorized agent.

• Marginal note:Determining an “appropriate person”

  (2) Whether the person signing is an appropriate person is determined as of the time of signing, and an endorsement by such a person does not become unauthorized for the purposes of this Part by reason of any subsequent change of circumstances.

Marginal note:Endorsement

• 111 (1) An endorsement of a security in registered form is made when an appropriate person signs, either on the security or on a separate document, an assignment or transfer of the security or a power to assign or transfer it, or when the signature of an appropriate person is written without more on the back of the security.

• Marginal note:Special or blank

  (2) An endorsement may be special or in blank.

• Marginal note:Blank endorsement

  (3) An endorsement in blank includes an endorsement to bearer.

• Marginal note:Special endorsement

  (4) A special endorsement specifies the person to whom the security is to be transferred, or who has power to transfer it.

• Marginal note:Right of holder

  (5) A holder may convert an endorsement in blank into a special endorsement.

Marginal note:Immunity of endorser

112 Unless otherwise agreed, the endorser by the endorsement assumes no obligation that the security will be honoured by the issuer.

Marginal note:Partial endorsement

113 An endorsement purporting to be an endorsement of only part of a security representing units intended by the issuer to be separately transferable is effective to the extent of the endorsement.

Marginal note:Effect of failure by fiduciary to comply

114 Failure of a fiduciary to comply with a controlling instrument or with the law of the jurisdiction governing the fiduciary relationship, including any law requiring the fiduciary to obtain court approval of a transfer, does not render the fiduciary’s endorsement unauthorized for the purposes of this Part.

Marginal note:Effect of endorsement without delivery

115 An endorsement of a security, whether special or in blank, does not constitute a transfer until delivery of the security on which it appears or, if the endorsement is on a separate document, until delivery of both the security and that document.

Marginal note:Endorsement in bearer form

116 An endorsement of a security in bearer form may give notice of an adverse claim under section 105 but does not otherwise affect any of the holder’s rights.

Marginal note:Effect of unauthorized endorsement

• 117 (1) The owner of a security may assert the ineffectiveness of an endorsement against the issuer or any purchaser, other than a purchaser for value and without notice of an adverse claim, who has in good faith received a new, reissued or re-registered security on registration of transfer, unless the owner

  • (a) has ratified an unauthorized endorsement of the security; or

  • (b) is otherwise precluded from impugning the effectiveness of an unauthorized endorsement.

• Marginal note:Liability of issuer

  (2) An issuer who registers the transfer of a security on an unauthorized endorsement is liable for improper registration.

Marginal note:Warranties of guarantor of signature

• 118 (1) A person who guarantees the signature of an endorser of a security warrants that, at the time of signing,

  • (a) the signature was genuine;

  • (b) the signer was an appropriate person to endorse; and

  • (c) the signer had legal capacity to sign.

• Marginal note:Limitation of liability

  (2) A person who guarantees the signature of an endorser does not otherwise warrant the rightfulness of the transfer to which the signature relates.

• Marginal note:Warranties of guarantor of endorsement

  (3) A person who guarantees the endorsement of a security warrants both the signature and the rightfulness, in all respects, of the transfer to which the signature relates, but an issuer may not require a guarantee of endorsement as a condition to registration of transfer.

• Marginal note:Extent of warrantor’s liability

  (4) The warranties referred to in subsections (1) to (3) are made to any person who, relying on the guarantee, takes or deals with the security, and the guarantor is liable to such a person for any loss resulting from breach of warranty.

Marginal note:Constructive delivery of a security

119 Delivery to a purchaser occurs when

• (a) the purchaser or a person designated by the purchaser acquires possession of a security;

• (b) the purchaser’s securities broker acquires possession of a security specially endorsed to or issued in the name of the purchaser;

• (c) the purchaser’s securities broker sends the purchaser confirmation of the purchase and the broker in the broker’s records identifies a specific security as belonging to the purchaser; or

• (d) in respect of an identified security to be delivered while still in the possession of a third person, that person acknowledges that it is held for the purchaser.

Marginal note:Constructive ownership of security

• 120 (1) A purchaser is the owner of a security held for the purchaser by a securities broker, but a purchaser is not a holder except in the cases referred to in paragraphs 119(b) and (c).

• Marginal note:Ownership of part of fungible bulk

  (2) If a security is part of a fungible bulk, a purchaser of the security is the owner of the proportionate interest in the fungible bulk.

• Marginal note:Notice to securities broker of adverse claim

  (3) Notice of an adverse claim received by a securities broker or by a purchaser after the broker takes delivery as a holder for value is not effective against the broker or the purchaser, except that, as between the broker and the purchaser, the purchaser may demand delivery of an equivalent security in respect of which no notice of an adverse claim has been received.

Marginal note:Delivery of security

• 121 (1) Unless otherwise agreed, if a sale of a security is made on a stock exchange or otherwise through securities brokers,

  • (a) the selling customer fulfils the customer’s duty to deliver when the customer delivers the security to the selling securities broker or to a person designated by the selling securities broker or causes an acknowledgement to be made to the selling securities broker that it is held for the selling securities broker; and

  • (b) the selling securities broker, including a correspondent broker, acting for a selling customer fulfils the securities broker’s duty to deliver by delivering the security or a like security to the buying securities broker or to a person designated by the buying securities broker or by effecting clearance of the sale in accordance with the rules of the exchange on which the transaction took place.

• Marginal note:Duty to deliver

  (2) Except as otherwise provided in this section and unless otherwise agreed, a transferor’s duty to deliver a security under a contract of purchase is not fulfilled until the transferor delivers the security in negotiable form to the purchaser or to a person designated by the purchaser, or causes an acknowledgement to be made to the purchaser that the security is held for the purchaser.

• Marginal note:Delivery to securities broker

  (3) A sale to a securities broker purchasing for the securities broker’s own account is subject to subsection (2) and not subsection (1), unless the sale is made on a stock exchange.

• Marginal note:Transfer through clearing agency

  (4) If a security shown in the records of a clearing agency is evidenced by

  • (a) a security certificate in the custody of the clearing agency or a custodian, or a nominee of either, subject to the instructions of the clearing agency, and is in bearer form or endorsed in blank by an appropriate person or registered in the name of the clearing agency or a custodian, or of a nominee of either, or

  • (b) an uncertificated security registered or recorded in records maintained by or on behalf of the bank in the name of the clearing agency or a custodian, or of a nominee of either, subject to the instructions of the clearing agency,

  then, in addition to other methods, a transfer or pledge of the security or any interest therein may be effected by the making of an appropriate entry in the records of the clearing agency.

• Marginal note:Interest in fungible bulk

  (5) Under subsections (4) to (10), entries may be in respect of like securities or interests therein as part of a fungible bulk and may refer merely to a quantity of a particular security without reference to the name of the registered owner, certificate or bond number or the like and, in appropriate cases, may be on a net basis taking into account other transfers or pledges of the same security.

• Marginal note:Constructive endorsement and delivery

  (6) A transfer or pledge under subsections (4) to (10) has the effect of a delivery of a security in bearer form or duly endorsed in blank representing the amount of the obligation or the number of shares or rights transferred or pledged.

• Marginal note:Idem

  (7) If a pledge or the creation of a security interest is intended, the making of entries has the effect of a taking of delivery by the pledgee or a secured party and the pledgee or secured party shall be deemed to have taken possession for all purposes.

• Marginal note:Holder

  (8) A person depositing a security certificate or an uncertificated security with a clearing agency, or a transferee or pledgee of a security under subsections (4) to (10), is a holder of the security and shall be deemed to have possession of the security so deposited, transferred or pledged, as the case may be, for all purposes.

• Marginal note:Not registration

  (9) A transfer or pledge under subsections (4) to (10) does not constitute a registration of transfer under sections 126 to 133.

• Marginal note:Error in records

  (10) That entries made in the records of the clearing agency as provided in subsection (4) are not appropriate does not affect the validity or effect of the entries nor the liabilities or obligations of the clearing agency to any person adversely affected thereby.

Marginal note:Right to reclaim possession

• 122 (1) A person against whom the transfer of a security is wrongful for any reason, including the person’s incapacity, may, against anyone except abona fide purchaser,

  • (a) reclaim possession of the security or obtain possession of any new security evidencing all or part of the same rights; or

  • (b) claim damages.

• Marginal note:Recovery where unauthorized endorsement

  (2) If the transfer of a security is wrongful by reason of an unauthorized endorsement, the owner may reclaim possession of the security or a new security even from a bona fide purchaser if the ineffectiveness of the purported endorsement is asserted against the purchaser under section 117.

• Marginal note:Remedies

  (3) The right to reclaim possession of a security may be specially enforced, its transfer may be restrained and the security may be impounded pending litigation.

Marginal note:Right to requisites for registration

• 123 (1) Unless otherwise agreed, a transferor shall, on demand, supply a purchaser with proof of the transferor’s authority to transfer a security or with any other requisite that is necessary to obtain registration of the transfer of a security, but if the transfer is not for value, it is not necessary for a transferor to prove authority to transfer unless the purchaser pays the reasonable and necessary costs of the proof and transfer.

• Marginal note:Rescission of transfer

  (2) If a transferor fails to comply with a demand under subsection (1) within a reasonable time, the purchaser may reject or rescind the transfer.

Marginal note:Seizure of security

124 No seizure of a security or other interest evidenced thereby is effective until the person making the seizure obtains possession of the security.

Marginal note:No conversion if good faith delivery

125 An agent or bailee who in good faith, including observance of reasonable commercial standards if the agent or bailee is in the business of buying, selling or otherwise dealing with securities of a bank, has received securities and sold, pledged or delivered them according to the instructions of the agent’s or bailee’s principal is not liable for conversion or for participation in breach of fiduciary duty even though the principal has no right to dispose of the securities.

Marginal note:Duty to register transfer

• 126 (1) Subject to Part VII, where a security in registered form is presented for transfer, the issuer shall register the transfer if

  • (a) the security is endorsed by an appropriate person;

  • (b) reasonable assurance is given that the endorsement is genuine and effective;

  • (c) the issuer has no duty to inquire into adverse claims or has discharged any such duty;

  • (d) all applicable laws relating to the collection of taxes have been complied with;

  • (e) the transfer is rightful or is to a bona fide purchaser; and

  • (f) the fee, if any, referred to in subsection 85(2) has been paid.

• Marginal note:Liability for delay

  (2) Where an issuer has a duty to register a transfer of a security, the issuer is liable to the person presenting it for registration for any loss resulting from any unreasonable delay in registration or from the failure or refusal to register the transfer.

Marginal note:Assurance of endorsements

• 127 (1) An issuer may require an assurance that each necessary endorsement on a security is genuine and effective by requiring a guarantee of the signature of the person endorsing the security and by requiring

  • (a) if the endorsement is by an agent, reasonable assurance of authority to sign;

  • (b) if the endorsement is by a fiduciary, evidence of appointment or incumbency;

  • (c) if there is more than one fiduciary, reasonable assurance that all who are required to sign have done so; and

  • (d) in any other case, assurance that corresponds as closely as practicable to the foregoing.

• Definition of guarantee of the signature

  (2) For the purposes of subsection (1), guarantee of the signature means a guarantee signed by or on behalf of a person whom the issuer believes, on reasonable grounds, to be a responsible person.

• Marginal note:Standards

  (3) An issuer may adopt reasonable standards to determine responsible persons for the purposes of subsection (2).

• Definition of evidence of appointment or incumbency

  (4) For the purposes of paragraph (1)(b), evidence of appointment or incumbency means

  • (a) in the case of a fiduciary appointed by a court and referred to in subsection 96(1), a copy of the certified court order referred to in subsection 96(1) and dated not earlier than sixty days before the day a security is presented for transfer; or

  • (b) in the case of any other fiduciary, a copy of a document showing the appointment or other evidence believed by the issuer to be appropriate.

• Marginal note:Standards

  (5) An issuer may adopt reasonable standards with respect to evidence referred to in paragraph (4)(b).

• Marginal note:No notice to issuer

  (6) An issuer is deemed not to have notice of the contents of any document referred to in subsection (4) that is obtained by the issuer except to the extent that the contents relate directly to appointment or incumbency.

Marginal note:Notice from additional documentation

128 If an issuer, in relation to a transfer, demands assurance other than an assurance specified in subsection 127(1) and obtains a copy of a will, trust or partnership agreement or a by-law or similar document, the issuer is deemed to have notice of all matters contained therein affecting the transfer.

Marginal note:Limited duty of inquiry

• 129 (1) An issuer to whom a security is presented for registration has a duty to inquire into adverse claims if

  • (a) the issuer receives written notice of an adverse claim at a time and in a manner that provides the issuer with a reasonable opportunity to act on it before the issue of a new, reissued or re-registered security and the notice discloses the name and address of the claimant, the registered owner and the issue of which the security is a part; or

  • (b) the issuer is deemed to have notice of an adverse claim from a document that it obtained under section 128.

• Marginal note:Discharge of duty

  (2) An issuer may discharge a duty of inquiry by any reasonable means, including notifying an adverse claimant by registered mail sent to the address provided by the adverse claimant or, if no such address has been provided, to the adverse claimant’s residence or regular place of business, that a security has been presented for registration of transfer by a named person and that the transfer will be registered unless, within thirty days after the date of mailing of the notice, either

  • (a) the issuer is served with a restraining order or other order of a court, or

  • (b) the issuer is provided with an indemnity bond sufficient in the issuer’s judgment to protect the issuer and any registrar, transfer agent or other agent of the issuer from any loss that may be incurred by any of them as a result of complying with the adverse claim.

Marginal note:Inquiry into adverse claims

130 Unless an issuer is deemed to have notice of an adverse claim from a document that it obtained under section 128 or has received notice of an adverse claim under subsection 129(1), if a security presented for registration is endorsed by the appropriate person, the issuer has no duty to inquire into adverse claims and, in particular,

• (a) an issuer registering a security in the name of a person who is a fiduciary or who is described as a fiduciary is not bound to inquire into the existence, extent or correct description of the fiduciary relationship and thereafter the issuer may assume without inquiry that the newly registered owner continues to be the fiduciary until the issuer receives written notice that the fiduciary is no longer acting as such with respect to the particular security;

• (b) an issuer registering a transfer on an endorsement by a fiduciary has no duty to inquire into whether the transfer is made in compliance with the document or with the law of the jurisdiction governing the fiduciary relationship; and

• (c) an issuer is deemed not to have notice of the contents of any court record or any registered document even if the record or document is in the issuer’s possession and even if the transfer is made on the endorsement of a fiduciary to the fiduciary specifically or to the fiduciary’s nominee.

Marginal note:Duration of notice of adverse claim

131 A written notice of adverse claim received by an issuer is effective for twelve months after the day it was received unless the notice is renewed in writing.

Marginal note:Limitation on issuer’s liability

• 132 (1) Except as otherwise provided in any applicable law relating to the collection of taxes, an issuer is not liable to the owner or any other person who incurs a loss as a result of the registration of a transfer of a security if

  • (a) the necessary endorsements were on or with the security; and

  • (b) the issuer had no duty to inquire into adverse claims or had discharged any such duty.

• Marginal note:Duty of issuer on default

  (2) If an issuer has registered a transfer of a security to a person not entitled to it, the issuer shall on demand deliver a like security to the owner unless

  • (a) the issuer is not liable by virtue of subsection (1);

  • (b) the owner is precluded by subsection 133(1) from asserting any claim; or

  • (c) the delivery would result in over-issue in respect of which section 97 applies.

Marginal note:Lost or stolen security

• 133 (1) Where a security has been lost, apparently destroyed or wrongfully taken, and the owner fails to notify the issuer of that fact by giving the issuer written notice of the owner’s adverse claim within a reasonable time after the owner knows of the loss, destruction or taking, then, if the issuer has registered a transfer of the security before receiving the notice, the owner is precluded from asserting against the issuer any claim to a new security.

• Marginal note:Duty to issue new security

  (2) Where the owner of a security claims that the security has been lost, destroyed or wrongfully taken, the issuer shall issue a new security in place of the original security if the owner

  • (a) so requests before the issuer has notice that the security has been acquired by a bona fide purchaser;

  • (b) provides the issuer with a sufficient indemnity bond; and

  • (c) satisfies any other reasonable requirements imposed by the issuer.

• Marginal note:Duty to register transfer

  (3) If, after the issue of a new security under subsection (2), a bona fide purchaser of the original security presents the original security for registration of transfer, the issuer shall register the transfer unless registration would result in over-issue in respect of which section 97 applies.

• Marginal note:Right of issuer to recover

  (4) In addition to the rights that an issuer has by reason of an indemnity bond, the issuer may recover the new security issued under subsection (2) from the person to whom it was issued or any person taking under that person other than a bona fide purchaser.

Marginal note:Authenticating agent’s duty

134 An authenticating trustee, registrar, transfer agent or other agent of an issuer has, in respect of the issue, registration of transfer and cancellation of a security of the issuer,

• (a) a duty to the issuer to exercise good faith and reasonable diligence; and

• (b) the same obligations to the holder or owner of a security and the same rights, privileges and immunities as the issuer.

Marginal note:Notice to agent

135 Notice to an authenticating trustee, registrar, transfer agent or other agent of an issuer is notice to the issuer in respect of the functions performed by the agent.

PART VICorporate Governance

Shareholders

Marginal note:Place of meetings

• 136 (1) Meetings of shareholders of a bank shall be held at the place within Canada provided for in the by-laws of the bank or, in the absence of any such provision, at the place within Canada that the directors determine.

• Marginal note:Participation by electronic means

  (2) Unless the by-laws provide otherwise, any person who is entitled to attend a meeting of shareholders may participate in the meeting by means of a telephonic, electronic or other communication facility that permits all participants to communicate adequately with each other during the meeting if the bank makes one available. A person who is participating in a meeting by one of those means is deemed for the purposes of this Act to be present at the meeting.

• Marginal note:Regulations

  (3) The Governor in Council may make regulations respecting the manner of and conditions for participating in a meeting by means of a telephonic, electronic or other communication facility that permits all participants to communicate adequately with each other during the meeting.

Marginal note:Calling meetings

• 137 (1) The directors of a bank

  • (a) shall, after the meeting called pursuant to subsection 46(1), call the first annual meeting of shareholders of the bank, which meeting must be held not later than six months after the end of the first financial year of the bank, and subsequently call an annual meeting of shareholders, which meeting must be held not later than six months after the end of each financial year; and

  • (b) may at any time call a special meeting of shareholders.

• Marginal note:Order to delay calling annual meeting

  (2) Despite subsection (1), the bank may apply to the court for an order extending the time for calling an annual meeting.

• Marginal note:Obligation to notify Superintendent

  (3) The bank shall give notice of the application to the Superintendent before any hearing concerning the application and shall provide the Superintendent with a copy of any order that is issued.

• Marginal note:Superintendent’s right to appear

  (4) The Superintendent is entitled to appear and be heard in person or by counsel at any hearing concerning the application.

• Marginal note:Authority to fix record date

  (5) The directors may in advance fix a record date, that is within the prescribed period, for the determination of shareholders for any purpose, including for a determination of which shareholders are entitled to

  • (a) receive payment of a dividend;

  • (b) participate in a liquidation distribution;

  • (c) receive notice of a meeting of shareholders; or

  • (d) vote at a meeting of shareholders.

• Marginal note:Determination of record date

  (6) If no record date is fixed,

  • (a) the record date for the determination of shareholders who are entitled to receive notice of a meeting of shareholders is

    • (i) at the close of business on the day immediately preceding the day on which the notice is given, or

    • (ii) if no notice is given, the day on which the meeting is held; and

  • (b) the record date for the determination of shareholders for any other purpose, other than to establish a shareholder’s right to vote, is at the close of business on the day on which the directors pass a resolution in respect of that purpose.

• Marginal note:Notice of record date

  (7) If a record date is fixed and unless notice of the record date is waived in writing by every holder of a share of the class or series affected whose name is set out in the securities register at the close of business on the day on which the directors fix the record date, notice of the record date shall be given within the prescribed period by

  • (a) advertisement in a newspaper in general circulation in the place where the bank’s head office is situated and in each place in Canada where the bank has a transfer agent or where a transfer of its shares may be recorded; and

  • (b) written notice to each stock exchange in Canada on which the bank’s shares are listed for trading.

Marginal note:Notice of meeting

• 138 (1) Notice of the time and place of a meeting of shareholders of a bank shall be sent within the prescribed period to

  • (a) each shareholder entitled to vote at the meeting;

  • (b) each director;

  • (c) the auditor or auditors of the bank; and

  • (d) the Superintendent.

• Marginal note:Exception

  (1.01) In the case of a bank that is not a distributing bank, notice may be sent within any shorter period specified in its by-laws.

• Marginal note:Number of eligible votes

  (1.1) A bank with equity of eight billion dollars or more shall set out in the notice of a meeting the number of eligible votes, as defined under subsection 156.09(1), that may be cast at the meeting as of the record date for determining those shareholders entitled to receive the notice of meeting or, if there are to be separate votes of shareholders at the meeting, the number of eligible votes, as defined in that subsection, in respect of each separate vote to be held at the meeting.

• Marginal note:Publication in newspaper

  (2) In addition to the notice required under subsection (1), where any class of shares of a bank is publicly traded on a recognized stock exchange in Canada, notice of the time and place of a meeting of shareholders shall be published once a week for at least four consecutive weeks before the date of the meeting in a newspaper in general circulation in the place where the head office of the bank is situated and in each place in Canada where the bank has a transfer agent or where a transfer of the bank’s shares may be recorded.

Marginal note:Notice not required

• 139 (1) A notice of a meeting is not required to be sent to shareholders who are not registered on the records of the bank or the bank’s transfer agent on the record date fixed under paragraph 137(5)(c) or determined under paragraph 137(6)(a).

• Marginal note:Effect of default

  (2) Failure to receive a notice of a meeting of shareholders does not deprive a shareholder of the right to vote at the meeting.

Marginal note:Notice of adjourned meeting

• 140 (1) If a meeting of shareholders is adjourned for less than thirty days, it is not necessary, unless the by-laws otherwise provide, to give notice of the adjourned meeting, other than by announcement at the earliest meeting that is adjourned.

• Marginal note:Notice where adjournment is longer

  (2) If a meeting of shareholders is adjourned by one or more adjournments for a total of thirty days or more, notice of the continuation of the meeting shall be given as for an original meeting but, unless the meeting is adjourned by one or more adjournments for a total of more than ninety days, subsection 156.04(1) does not apply.

Marginal note:Special business

• 141 (1) All matters dealt with at a special meeting of shareholders and all matters dealt with at an annual meeting of shareholders, except consideration of the financial statements, report of the auditor or auditors, election of directors, remuneration of directors and reappointment of the incumbent auditor or auditors, are deemed to be special business.

• Marginal note:Notice of special business

  (2) Notice of a meeting of shareholders at which special business is to be transacted must

  • (a) state the nature of the special business in sufficient detail to permit a shareholder to form a reasoned judgment thereon; and

  • (b) contain the text of any special resolution to be submitted to the meeting.

Marginal note:Waiver of notice

• 142 (1) A shareholder and any other person entitled to attend a meeting of shareholders may in any manner waive notice of a meeting of shareholders.

• Marginal note:Idem

  (2) Attendance at a meeting of shareholders is a waiver of notice of the meeting, except when a person attends the meeting for the express purpose of objecting to the transaction of any business on the grounds that the meeting is not lawfully called.

Marginal note:Proposals

• 143 (1) Subject to subsections (1.1) and (1.2), a registered holder or beneficial owner of shares that may be voted at an annual meeting of shareholders may

  • (a) submit to the bank notice of any matter that they propose to raise at the meeting (in this section and section 144 referred to as a “proposal”); and

  • (b) discuss at the meeting any matter in respect of which they would have been entitled to submit a proposal.

• Marginal note:Eligibility to submit proposal

  (1.1) To be eligible to submit a proposal a person shall

  • (a) for at least the prescribed period be the registered holder or beneficial owner of at least the prescribed number of the bank’s outstanding shares; or

  • (b) have the support of persons who, in the aggregate and including or not including the person who submits the proposal, have for at least the prescribed period been the registered holders or beneficial owners of at least the prescribed number of the bank’s outstanding shares.

• Marginal note:Information to be provided

  (1.2) A proposal is to be accompanied by the following information:

  • (a) the name and address of the person submitting the proposal and the names and addresses of their supporters, if any; and

  • (b) the number of shares held or owned by the person and their supporters, if any, and the date that the shares were acquired.

• Marginal note:Information not part of proposal

  (1.3) The information provided under subsection (1.2) does not form part of a proposal or of the supporting statement referred to in subsection (3) and is not to be included for the purpose of the prescribed maximum number of words referred to in subsection (3).

• Marginal note:Proof may be required

  (1.4) If the bank requests within the prescribed period that a person provide proof that they are eligible to submit a proposal, the person shall within the prescribed period provide proof that they meet the requirements of subsection (1.1).

• Marginal note:Management proxy

  (2) A bank that solicits proxies shall, in the management proxy circular required by subsection 156.05(1), set out any proposal of a shareholder submitted for consideration at a meeting of shareholders or attach the proposal to the management proxy circular.

• Marginal note:Supporting statement

  (3) At the request of the person who submits a proposal, the bank shall set out in the management proxy circular or attach to it the person’s statement in support of the proposal and their name and address. The statement and proposal together are not to exceed the prescribed maximum number of words.

• Marginal note:Nomination of directors

  (4) A proposal may include nominations for the election of directors if it is signed by one or more registered holders or beneficial owners of shares representing in the aggregate not less than 5% of the shares of the bank or 5% of the shares of a class of its shares entitled to vote at the meeting at which the proposal is to be presented.

• Marginal note:Exemption

  (5) A bank is not required to comply with subsections (2) and (3) if

  • (a) the proposal is not submitted to the bank at least the prescribed number of days before the anniversary date of the notice of meeting that was sent to shareholders in respect of the previous annual meeting of shareholders;

  • (b) it clearly appears that the primary purpose of the proposal is to enforce a personal claim or redress a personal griev­ance against the bank or its directors, officers or security holders;

  • (b.1) it clearly appears that the proposal does not relate in a significant way to the business or affairs of the bank;

  • (c) the person submitting the proposal failed within the prescribed period before the bank receives their proposal to present, in person or by proxy, at a meeting of shareholders a proposal that at their request had been set out in or attached to a management proxy circular;

  • (d) substantially the same proposal was set out in or attached to a management proxy circular or dissident’s proxy circular relating to, and presented to shareholders at, a meeting of shareholders held within the prescribed period before the receipt of the proposal and did not receive the prescribed minimum amount of support at the meeting; or

  • (e) the rights conferred by subsections (1) to (4) are being abused to secure publicity.

• Marginal note:Bank may refuse to include proposal

  (5.1) If a person who submits a proposal fails to continue to hold or own shares in accordance with paragraph (1.1)(a) or, as the case may be, does not continue to have the support of persons who are in the aggregate the registered holders or beneficial owners of the prescribed number of shares in accordance with paragraph (1.1)(b) until the end of the meeting, the bank is not required to set out any proposal submitted by that person in or attach it to a management proxy circular for any meeting held within the prescribed period after the day of the meeting.

• Marginal note:Immunity for proposal and statement

  (6) No bank or person acting on behalf of a bank incurs any liability by reason only of circulating a proposal or statement in compliance with subsections (2) and (3).

Marginal note:Notice of refusal

• 144 (1) If a bank refuses to include a proposal in a management proxy circular, it shall in writing notify the person submitting the proposal of its intention to omit the proposal from the management proxy circular and of the reasons for the refusal. It shall notify the person within the prescribed period after either the day on which it receives the proposal or, if it has requested proof under subsection 143(1.4), the day on which it receives the proof.

• Marginal note:Application to court

  (2) On the application of a person submitting a proposal who claims to be aggrieved by a bank’s refusal under subsection (1), a court may restrain the holding of the meeting at which the proposal is sought to be presented and make any further order that it thinks fit.

• Marginal note:Idem

  (3) A bank or any person claiming to be aggrieved by a proposal may apply to a court for an order permitting the bank to omit the proposal from the management proxy circular, and the court, if it is satisfied that subsection 143(5) applies, may make such order as it thinks fit.

• Marginal note:Notice to Superintendent

  (4) An applicant under subsection (2) or (3) shall give the Superintendent written notice of the application and the Superintendent may appear and be heard at the hearing of the application in person or by counsel.

Marginal note:List of shareholders entitled to notice

• 145 (1) A bank shall prepare an alphabet­ical list of shareholders entitled to receive notice of a meeting showing the number of shares held by each shareholder

  • (a) if a record date is fixed under paragraph 137(5)(c), no later than 10 days after that date; and

  • (b) if no record date is fixed, on the record date determined under paragraph 137(6)(a).

• Marginal note:Voting list

  (2) The bank shall prepare an alphabetical list of shareholders entitled to vote as of the record date showing the number of shares held by each shareholder

  • (a) if a record date is fixed under paragraph 137(5)(d), no later than 10 days after that date; and

  • (b) if no record date is fixed under paragraph 137(5)(d), no later than 10 days after a record date is fixed under paragraph 137(5)(c) or no later than the record date determined under paragraph 137(6)(a), as the case may be.

• Marginal note:Entitlement to vote

  (3) Subject to section 156.09, a shareholder whose name appears on a list prepared under subsection (2) is entitled to vote the shares shown opposite their name.

• Marginal note:Examination of list

  (4) A shareholder may examine the list of shareholders

  • (a) during usual business hours at the head office of the bank or at the place where its central securities register is maintained; and

  • (b) at the meeting of shareholders for which the list was prepared.

Marginal note:Quorum

• 146 (1) Unless the by-laws otherwise provide, a quorum of shareholders is present at a meeting of shareholders if the holders of a majority of the shares who are entitled to vote at the meeting are present in person or represented by proxyholders.

• Marginal note:Idem

  (2) If a quorum is present at the opening of a meeting of shareholders, the shareholders present may, unless the by-laws otherwise provide, proceed with the business of the meeting, notwithstanding that a quorum is not present throughout the meeting.

• Marginal note:Idem

  (3) If a quorum is not present at the opening of a meeting of shareholders, the shareholders present may adjourn the meeting to a fixed time and place but may not transact any other business.

Marginal note:One shareholder meeting

147 If a bank has only one shareholder, or only one holder of any class or series of shares, the shareholder present in person or represented by a proxyholder constitutes a meeting of shareholders or a meeting of shareholders of that class or series.

Marginal note:One share — one vote

148 Subject to section 156.09, if a share of a bank entitles the holder of the share to vote at a meeting of shareholders, that share entitles the shareholder to one vote at the meeting.

Marginal note:Representative shareholder

• 149 (1) If an entity is a shareholder of a bank, the bank shall recognize any natural person authorized by a resolution of the directors or governing body or similar authority of the entity to represent it at meetings of shareholders of the bank.

• Marginal note:Idem

  (2) A natural person authorized under subsection (1) to represent an entity may exercise on behalf of the entity all the powers the entity could exercise if it were a natural person as well as a shareholder.

Marginal note:Joint shareholders

150 Unless the by-laws otherwise provide, if two or more persons hold shares jointly, one of those holders present at a meeting of shareholders may in the absence of the others vote the shares, but if two or more of those persons who are present in person or represented by proxyholder vote, they shall vote as one on the shares jointly held by them.

Marginal note:Voting by hands or ballot

• 151 (1) Unless the by-laws otherwise provide, voting at a meeting of shareholders shall take place by show of hands except when a ballot is demanded by either a shareholder or proxyholder entitled to vote at the meeting.

• Marginal note:Ballot

  (2) A shareholder or proxyholder may demand a ballot either before or after any vote by show of hands.

• Marginal note:Electronic voting

  (3) Despite subsection (1) and unless the by-laws provide otherwise, any vote referred to in that subsection may be held entirely by means of a telephonic, electronic or other communication facility if the bank makes one available.

• Marginal note:Voting while participating electronically

  (4) Unless the by-laws provide otherwise, any person who is participating in a meeting of shareholders under subsection 136(2) and entitled to vote at that meeting may vote by means of the telephonic, electronic or other communication facility that the bank has made available for that purpose.

• Marginal note:Regulations

  (5) The Governor in Council may make regulations respecting the manner of and conditions for voting at a meeting of shareholders by means of a telephonic, electronic or other communication facility.

Marginal note:Resolution in lieu of meeting

• 152 (1) Except where a written statement is submitted by a director under section 174 or by an auditor under subsection 321(1),

  • (a) a resolution in writing signed by all the shareholders entitled to vote on that resolution at a meeting of shareholders is as valid as if it had been passed at a meeting of the shareholders; and

  • (b) a resolution in writing dealing with all matters required by this Act to be dealt with at a meeting of shareholders, and signed by all the shareholders entitled to vote at that meeting, satisfies all the requirements of this Act relating to meetings of shareholders.

• Marginal note:Filing resolution

  (2) A copy of every resolution referred to in subsection (1) shall be kept with the minutes of the meetings of shareholders.

• Marginal note:Evidence

  (3) Unless a ballot is demanded, an entry in the minutes of a meeting that the chairperson declared a resolution to be carried or defeated is in the absence of evidence to the contrary proof of that fact without proof of the number or proportion of votes recorded in favour of or against the resolution.

Marginal note:Requisitioned meeting

• 153 (1) Shareholders who together hold not less than 5 per cent of the issued and outstanding shares of a bank that carry the right to vote at a meeting sought to be held may requisition the directors to call a meeting of shareholders for the purposes stated in the requisition.

• Marginal note:Form

  (2) A requisition referred to in subsection (1)

  • (a) must state the business to be transacted at the meeting and must be sent to each director and to the head office of the bank; and

  • (b) may consist of several documents of like form, each signed by one or more shareholders.

• Marginal note:Directors calling meeting

  (3) On receipt of a requisition referred to in subsection (1), the directors shall call a meeting of shareholders to transact the business stated in the requisition, unless

  • (a) a record date has been fixed under paragraph 137(5)(c) and notice of it has been given under subsection 137(7);

  • (b) the directors have called a meeting of shareholders and have given notice thereof under section 138; or

  • (c) the business of the meeting as stated in the requisition includes matters described in paragraphs 143(5)(b) to (e).

• Marginal note:Shareholders’ power

  (4) If the directors do not call a meeting within twenty-one days after receiving the requisition referred to in subsection (1), any shareholder who signed the requisition may call the meeting.

• Marginal note:Procedure

  (5) A meeting called under this section shall be called as nearly as possible in the manner in which meetings are to be called pursuant to the by-laws and this Act.

• Marginal note:Reimbursement

  (6) Unless the shareholders otherwise resolve at a meeting called under subsection (4), the bank shall reimburse the shareholders for any expenses reasonably incurred by them in requisitioning, calling and holding the meeting.

Marginal note:Court may order meeting to be called

• 154 (1) A court may, on the application of a director, a shareholder who is entitled to vote at a meeting of shareholders or the Superintendent, order a meeting to be called, held or conducted in the manner that the court directs if

  • (a) it is impracticable to call the meeting within the time or in the manner in which it is to be called;

  • (b) it is impracticable to conduct the meeting in the manner required by this Act or the by-laws; or

  • (c) the court thinks that the meeting ought to be called, held or conducted within the time or in the manner that it directs for any other reason.

• Marginal note:Varying quorum

  (2) Without restricting the generality of subsection (1), a court may order that the quorum required by the by-laws or this Act be varied or dispensed with at a meeting called, held and conducted pursuant to this section.

• Marginal note:Valid meeting

  (3) A meeting called, held and conducted pursuant to this section is for all purposes a meeting of shareholders of the bank duly called, held and conducted.

Marginal note:Court review of election

• 155 (1) A bank or a shareholder or director of a bank may apply to a court to resolve any dispute in respect of the election or appointment of a director or an auditor of the bank.

• Marginal note:Powers of court

  (2) On an application under subsection (1), a court may make any order it thinks fit including, without limiting the generality of the foregoing,

  • (a) an order restraining a director or auditor whose election or appointment is challenged from acting pending determination of the dispute;

  • (b) an order declaring the result of the disputed election or appointment;

  • (c) an order requiring a new election or appointment, and including in the order directions for the management of the business and affairs of the bank until a new election is held or the new appointment is made; and

  • (d) an order determining the voting rights of shareholders and of persons claiming to own shares.

Marginal note:Notice to Superintendent

• 156 (1) A person who makes an application under subsection 154(1) or 155(1) shall give notice of the application to the Superintendent before the hearing and shall deliver a copy of the order of the court, if any, to the Superintendent.

• Marginal note:Superintendent representation

  (2) The Superintendent may appear and be heard in person or by counsel at the hearing of an application referred to in subsection (1).

Proxies

Marginal note:Definitions

156.01 The definitions in this section apply in this section and sections 156.02 to 156.08.

intermediary

intermediary means a person who holds a security on behalf of another person who is not the registered holder of the security, and includes

• (a) a securities broker or dealer required to be registered to trade or deal in securities under the laws of any jurisdiction;

• (b) a securities depositary;

• (c) a financial institution;

• (d) in respect of a clearing agency, a securities dealer, trust company, association within the meaning of section 2 of the Cooperative Credit Associations Act, bank or other person, including another clearing agency, on whose behalf the clearing agency or its nominee holds securities of an issuer;

• (e) a trustee or administrator of a self-administered retirement savings plan, retirement income fund or education savings plan or another similar self-administered savings or investment plan that is registered under the Income Tax Act;

• (f) a nominee of a person referred to in any of paragraphs (a) to (e); and

• (g) a person who performs functions similar to those performed by a person referred to in any of paragraphs (a) to (e) and holds a security registered in their name, or in the name of their nominee, on behalf of another person who is not the registered holder of the security. (intermédiaire)

registrant

registrant[Repealed, 2005, c. 54, s. 27]

solicit

solicit or solicitation includes

• (a) a request for a proxy, whether or not accompanied by or included in a form of proxy,

• (b) a request to execute or not to execute a form of proxy or to revoke a proxy,

• (c) the sending of a form of proxy or other communication to a shareholder under circumstances reasonably calculated to result in the procurement, withholding or revocation of a proxy, and

• (d) the sending of a form of proxy to a shareholder under section 156.04,

but does not include

• (e) the sending of a form of proxy in response to an unsolicited request made by or on behalf of a shareholder,

• (f) the performance of administrative acts or professional services on behalf of a person soliciting a proxy,

• (g) the sending by a registrant of the documents referred to in section 156.07, or

• (h) a solicitation by a person in respect of shares of which that person is the beneficial owner. (sollicitation)

solicitation by or on behalf of the management of a bank

solicitation by or on behalf of the management of a bank means a solicitation by any person pursuant to a resolution or instruction of, or with the acquiescence of, the directors or a committee of the directors of the bank. (sollicitation effectuée par la direction d’une banque ou pour son compte)

Marginal note:Appointing proxyholder

• 156.02 (1) A shareholder who is entitled to vote at a meeting of shareholders may, by executing a form of proxy, appoint a proxyholder or one or more alternate proxyholders, who are not required to be shareholders, to attend and act at the meeting in the manner and to the extent authorized by the proxy and with the authority conferred by the proxy.

• Marginal note:Execution of proxy

  (2) A form of proxy shall be executed by a shareholder or by a shareholder’s attorney authorized in writing to do so.

• Marginal note:Limit on authority

  (3) No appointment of a proxyholder provides authority for the proxyholder to act in respect of the appointment of an auditor or the election of a director unless a nominee proposed in good faith for the appointment or election is named in the form of proxy, a management proxy circular, a dissident’s proxy circular or a proposal under subsection 143(1).

• Marginal note:Required information

  (4) A form of proxy must indicate, in bold-face type, that the shareholder by whom or on whose behalf it is executed may appoint a proxyholder, other than a person designated in the form of proxy, to attend and act on the shareholder’s behalf at a meeting to which the proxy relates, and must contain instructions as to the manner in which the shareholder may do so.

• Marginal note:Validity of proxy

  (5) A proxy is valid only at the meeting in respect of which it is given or at a continuation of the meeting after an adjournment.

• Marginal note:Revocation of proxy

  (6) A shareholder may revoke a proxy

  • (a) by depositing an instrument in writing executed by the shareholder or by the shareholder’s attorney authorized in writing to do so

    • (i) at the head office of the bank at any time up to and including the last business day before the day of a meeting, or a continuation of the meeting after an adjournment, at which the proxy is to be used, or

    • (ii) with the chairperson of the meeting on the day of the meeting or a continuation of the meeting after an adjournment; or

  • (b) in any other manner permitted by law.

Marginal note:Deposit of proxies

156.03 The directors may specify, in a notice calling a meeting of shareholders or a continuation of a meeting of shareholders after an adjournment, a time before which executed forms of proxy to be used at the meeting or the continued meeting must be deposited with the bank or its transfer agent. The time specified may not be more than forty-eight hours, excluding Saturdays and holidays, before the meeting or the continued meeting.

Marginal note:Mandatory solicitation

• 156.04 (1) Subject to subsection 140(2) and subsection (2), the management of a bank shall, concurrently with giving notice of a meeting of shareholders, send a form of proxy in prescribed form to each shareholder entitled to receive notice of the meeting.

• Marginal note:Exception

  (2) The management of a bank is not required to send a form of proxy under subsection (1) if the bank

  • (a) is not a distributing bank; and

  • (b) has 50 or fewer shareholders who are entitled to vote at a meeting, two or more joint holders of a share being counted as one shareholder.

Marginal note:Soliciting proxies

• 156.05 (1) A person shall not solicit proxies unless

  • (a) in the case of solicitation by or on behalf of the management of a bank, a management proxy circular in prescribed form, either as an appendix to, or as a separate document accompanying, the notice of the meeting, is sent to the auditor or auditors of the bank and to each shareholder whose proxy is solicited; and

  • (b) in the case of any other solicitation, a dissident’s proxy circular in prescribed form stating the purposes of the solicitation is sent to the auditor or auditors of the bank, to each shareholder whose proxy is solicited and to the bank.

• Marginal note:Copy to Superintendent

  (2) A person who sends a management proxy circular or dissident’s proxy circular shall at the same time file with the Superintendent

  • (a) in the case of a management proxy circular, a copy of it together with a copy of the notice of meeting, form of proxy and any other documents for use in connection with the meeting; and

  • (b) in the case of a dissident’s proxy circular, a copy of it together with a copy of the form of proxy and any other documents for use in connection with the meeting.

• Marginal note:Exemption by Superintendent

  (3) On the application of an interested person, the Superintendent may, on any terms that the Superintendent thinks fit, exempt the person from any of the requirements of subsection (1) and section 156.04, and the exemption may be given retroactive effect.

• Marginal note:Reporting exemptions

  (4) The Superintendent shall set out in a periodical available to the public the particulars of each exemption granted under subsection (3) together with the reasons for the exemption.

Marginal note:Attendance at meeting

• 156.06 (1) A person who solicits a proxy and is appointed proxyholder shall attend in person or cause an alternate proxyholder to attend the meeting in respect of which the proxy is valid, and the proxyholder or alternate proxyholder shall comply with the directions of the shareholder who executed the form of proxy.

• Marginal note:Rights of proxyholder

  (2) A proxyholder or an alternate proxyholder has the same rights as the appointing shareholder to speak at a meeting of shareholders in respect of any matter, to vote by way of ballot at the meeting and, except where a proxyholder or an alternate proxyholder has conflicting instructions from more than one shareholder, to vote at the meeting in respect of any matter by way of a show of hands.

• Marginal note:Vote by show of hands

  (3) Despite subsections (1) and (2) and unless a shareholder or proxyholder demands a ballot, if the chairperson of a meeting of shareholders declares to the meeting that, if a ballot were conducted, the total number of votes attached to shares represented at the meeting by proxy required to be voted against what, to the knowledge of the chairperson, would be the decision of the meeting on a matter or group of matters is less than 5% of all the votes that might be cast by shareholders in person or by proxy,

  • (a) the chairperson may conduct the vote in respect of that matter or group of matters by way of a show of hands; and

  • (b) a proxyholder or alternate proxyholder may vote in respect of that matter or group of matters by way of a show of hands.

Marginal note:Duty of intermediary

• 156.07 (1) Shares of a bank that are registered in the name of an intermediary or an intermediary’s nominee and not beneficially owned by the intermediary may not be voted unless the intermediary sends to the beneficial owner

  • (a) a copy of the notice of the meeting, annual statement, management proxy circular and dissident’s proxy circular and any other documents, other than the form of proxy, that were sent to shareholders by or on behalf of any person for use in connection with the meeting; and

  • (b) a written request for voting instructions except if the intermediary has already received written voting instructions from the beneficial owner.

• Marginal note:When documents to be sent

  (2) The intermediary shall send the documents referred to in subsection (1) without delay after they receive the documents referred to in paragraph (1)(a).

• Marginal note:Restriction on voting

  (3) An intermediary or a proxyholder appointed by them may not vote shares that the intermediary does not beneficially own and that are registered in the name of the intermediary or their nominee unless the intermediary or proxyholder, as the case may be, receives written voting instructions from the beneficial owner.

• Marginal note:Copies

  (4) A person by or on behalf of whom a solicitation is made shall on request and without delay provide the intermediary, at the person’s expense, with the necessary number of copies of the documents referred to in paragraph (1)(a).

• Marginal note:Instructions to intermediary

  (5) The intermediary shall vote or appoint a proxyholder to vote in accordance with any written voting instructions received from the beneficial owner.

• Marginal note:Beneficial owner as proxyholder

  (6) If a beneficial owner so requests and provides an intermediary with the appropriate documentation, the intermediary shall appoint the beneficial owner or a nominee of the beneficial owner as proxyholder.

• Marginal note:Effect of intermediary’s failure to comply

  (7) The failure of an intermediary to comply with any of subsections (1) to (6) does not render void any meeting of shareholders or any action taken at the meeting.

• Marginal note:Intermediary may not vote

  (8) Nothing in this Part gives an intermediary the right to vote shares that they are otherwise prohibited from voting.

Marginal note:Exemption

156.071 The Governor in Council may make regulations respecting the conditions under which a bank is exempt from any of the requirements of sections 156.02 to 156.07.

Marginal note:Restraining order

• 156.08 (1) If a form of proxy, management proxy circular or dissident’s proxy circular contains an untrue statement of a material fact or omits to state a material fact that is required to be contained in it or that is necessary to make a statement contained in it not misleading in light of the circumstances in which the statement is made, an interested person or the Superintendent may apply to a court and the court may make any order it thinks fit, including

  • (a) an order restraining the solicitation or the holding of the meeting, or restraining any person from implementing or acting on a resolution passed at the meeting, to which the form of proxy, management proxy circular or dissident’s proxy circular relates;

  • (b) an order requiring correction of any form of proxy or proxy circular and a further solicitation; and

  • (c) an order adjourning the meeting.

• Marginal note:Notice of application

  (2) Where a person other than the Superintendent is an applicant under subsection (1), the applicant shall give notice of the application to the Superintendent and the Superintendent is entitled to appear and to be heard in person or by counsel.

Restrictions on Voting

Meaning of eligible votes

• 156.09 (1) In this section, eligible votes means the total number of votes that may be cast by or on behalf of shareholders on a vote of shareholders or a vote of holders of a class or series of shares, as the case may be, in respect of any particular matter, calculated without regard to subsection (2).

• Marginal note:Restriction

  (2) At a meeting of shareholders of a bank with equity of eight billion dollars or more, no person and no entity controlled by any person may, in respect of any vote of shareholders or holders of any class or series of shares of the bank, cast votes in respect of any shares beneficially owned by the person or the entity that are, in aggregate, more than 20 per cent of the eligible votes that may be cast in respect of that vote.

• Marginal note:Proxyholders

  (3) No person who is a proxyholder for a person or for an entity controlled by a person may cast votes to which the proxy relates that the person or entity may not cast by reason of subsection (2).

• Marginal note:Exception

  (4) If a person is, with respect to a bank, a person referred to in subsection 375(1), subsections (2) and (3) do not apply with respect to votes cast by or on behalf of the person during any period that the person is entitled under section 375 to remain a major shareholder of the bank.

• Marginal note:Exception

  (5) Subsections (2) and (3) do not apply in respect of votes cast by or on behalf of any entity that controls the bank or any entity that is controlled by an entity that controls the bank.

• Marginal note:Exception

  (6) Subsection (2) does not apply in respect of a vote held under section 218.

• Marginal note:Validity of vote

  (7) A vote in respect of a particular matter is not invalid merely because a person voted contrary to subsection (2) or (3).

• Marginal note:Disposition of shareholdings

  (8) If, with respect to any bank, a person contravenes subsection (2) or (3), the Minister may, by order, direct the shareholder of the shares to which the contravention relates or any person controlled by that shareholder to dispose of any number of shares of the bank beneficially owned by any of those persons that the Minister specifies in the order, within the time specified in the order and in the proportion, if any, as between the shareholder and the persons controlled by that shareholder that is specified in the order.

• Marginal note:Restriction on voting rights

  (9) If the Minister makes an order under subsection (8), the person to whom the order relates may not, in person or by proxy, exercise any voting rights that are attached to shares of the bank beneficially owned by the person.

• Marginal note:Subsection (9) ceases to apply

  (10) Subsection (9) ceases to apply in respect of a person when the shares to which the order relates have been disposed of.

• Marginal note:Reliance on number in notice

  (11) For the purpose of this section, a person is entitled to rely on the number of eligible votes set out in a notice of a meeting under subsection 138(1.1).

• Marginal note:Designation of persons

  (12) For the purpose of this section, the Minister may, with respect to a particular bank, designate two or more persons who are parties to an agreement, commitment or understanding referred to in section 9 to be a single person.

Directors and Officers

Duties

Marginal note:Duty to manage

• 157 (1) Subject to this Act, the directors of a bank shall manage or supervise the management of the business and affairs of the bank.

• Marginal note:Specific duties

  (2) Without limiting the generality of subsection (1), the directors of a bank shall

  • (a) establish an audit committee to perform the duties referred to in subsections 194(3) and (4);

  • (b) establish a conduct review committee to perform the duties referred to in subsection 195(3);

  • (c) establish procedures to resolve conflicts of interest, including techniques for the identification of potential conflict situations and for restricting the use of confidential information;

  • (d) designate a committee of the board of directors to monitor the procedures referred to in paragraph (c);

  • (e) establish procedures to provide disclosure of information to customers of the bank that is required to be disclosed by this Act and for dealing with complaints as required by subsection 455(1);

  • (f) designate a committee of the board of directors to monitor the procedures referred to in paragraph (e) and satisfy itself that they are being adhered to by the bank; and

  • (g) establish investment and lending policies, standards and procedures in accordance with section 465.

• Marginal note:Exception

  (3) Paragraphs (2)(a) and (b) do not apply to the directors of a bank if

  • (a) all the voting shares of the bank are beneficially owned by a Canadian financial institution described in any of paragraphs (a) to (d) of the definition financial institution in section 2; and

  • (b) the audit committee or conduct review committee of the financial institution performs for and on behalf of the bank all the functions that would otherwise be required to be performed by the audit committee or conduct review committee of the bank under this Act.

Marginal note:Duty of care

• 158 (1) Every director and officer of a bank in exercising any of the powers of a director or an officer and discharging any of the duties of a director or an officer shall

  • (a) act honestly and in good faith with a view to the best interests of the bank; and

  • (b) exercise the care, diligence and skill that a reasonably prudent person would exercise in comparable circumstances.

• Marginal note:Duty to comply

  (2) Every director, officer and employee of a bank shall comply with this Act, the regulations, the bank’s incorporating instrument and the by-laws of the bank.

• Marginal note:No exculpation

  (3) No provision in any contract, in any resolution or in the by-laws of a bank relieves any director, officer or employee of the bank from the duty to act in accordance with this Act and the regulations or relieves a director, officer or employee from liability for a breach thereof.

Qualification and Number — Directors

Marginal note:Minimum number of directors

• 159 (1) A bank shall have at least seven directors.

• Marginal note:Residency requirement

  (2) At least one half of the directors of a bank that is a subsidiary of a foreign bank and a majority of the directors of any other bank must be, at the time of each director’s election or appointment, resident Canadians.

Marginal note:Disqualified persons

160 The following persons are disqualified from being directors of a bank:

• (a) a person who is less than eighteen years of age;

• (b) a person who is of unsound mind and has been so found by a court in Canada or elsewhere;

• (c) a person who has the status of a bankrupt;

• (d) a person who is not a natural person;

• (e) a person who is prohibited by section 392 or 401.3 or subsection 156.09(9) from exercising voting rights attached to shares of the bank;

• (f) a person who is an officer, director or full time employee of an entity that is prohibited by section 392 or 401.3 or subsection 156.09(9) from exercising voting rights attached to shares of the bank;

• (g) a person who is an agent or employee of Her Majesty in right of Canada or in right of a province;

• (h) a minister of Her Majesty in right of Canada or in right of a province; and

• (i) a person who is an agent or employee of the government of a foreign country or any political subdivision thereof.

Marginal note:Exception

160.1 Paragraph 160(g) does not apply to a person if

• (a) the person is employed in a department or agency of the Government of Canada that is not involved in the regulation or supervision of financial institutions;

• (b) the person’s duties do not involve financial institutions; and

• (c) the bank is controlled by a local cooperative credit society, as defined in section 2 of the Cooperative Credit Associations Act, in which the following persons, in aggregate, hold more than 50 per cent or, if a percentage has been prescribed for the purpose of this paragraph, the prescribed percentage, of the ownership interests in the local cooperative credit society, namely,

  • (i) employees of Her Majesty in right of Canada or of a province,

  • (ii) former employees of Her Majesty in right of Canada or of a province,

  • (iii) the spouse or common-law partner of a person referred to in subparagraph (i) or (ii), and

  • (iv) a child who is less than eighteen years of age of a person referred to in subparagraph (i) or (ii).

Marginal note:No shareholder requirement

161 A director of a bank is not required to hold shares of the bank.

Marginal note:Affiliated person

162 The Governor in Council may make regulations specifying the circumstances under which a natural person is affiliated with a bank for the purposes of this Act.

Marginal note:Affiliated director determination

• 162.1 (1) Notwithstanding section 162, the Superintendent may determine that a particular director is affiliated with a bank for the purposes of this Act if, in the opinion of the Superintendent, the director has a significant or sufficient commercial, business or financial relationship with the bank or with an affiliate of the bank to the extent that the relationship can be construed as being material to the director and can reasonably be expected to affect the exercise of the director’s best judgment.

• Marginal note:Notification by Superintendent

  (2) A determination by the Superintendent under subsection (1)

  • (a) becomes effective on the day of the next annual meeting of the shareholders unless a notice in writing by the Superintendent revoking the determination is received by the bank prior to that day; and

  • (b) ceases to be in effect on the day of the next annual meeting of the shareholders after a notice in writing by the Superintendent revoking the determination is received by the bank.

Marginal note:Unaffiliated directors

• 163 (1) At the election of directors at each annual meeting of a bank and at all times until the day of the next annual meeting, no more than two thirds of the directors may be persons affiliated with the bank.

• Marginal note:Exception

  (2) Subsection (1) does not apply where all the voting shares of a bank, other than directors’ qualifying shares, if any, are beneficially owned by a Canadian financial institution incorporated by or under an Act of Parliament.

• Marginal note:Determination of affiliation

  (3) For the purposes of subsection (1), whether or not a person is affiliated with a bank shall be determined as at the day the notice of the annual meeting is sent to shareholders pursuant to section 138 and that determination becomes effective on the day of that meeting, and a person shall be deemed to continue to be affiliated or unaffiliated, as the case may be, until the next annual meeting of the shareholders.

• Marginal note:Transitional

  (4) Subsection (1) does not apply in respect of a bank that was in existence immediately prior to the day that subsection comes into force until the day that is three years after the day that subsection comes into force.

Marginal note:Limit on directors

164 No more than 15 per cent of the directors of a bank may, at each director’s election or appointment, be employees of the bank or a subsidiary of the bank, except that up to four persons who are employees of the bank or a subsidiary of the bank may be directors of the bank if those directors constitute not more than one half of the directors of the bank.

Election and Tenure — Directors

Marginal note:Number of directors

• 165 (1) Subject to subsection 159(1) and sections 168 and 217, the directors of a bank shall, by by-law, determine the number of directors or the minimum and maximum number of directors, but no by-law that decreases the number of directors shortens the term of an incumbent director.

• Marginal note:Election at annual meeting

  (2) A by-law made pursuant to subsection (1) that provides for a minimum and maximum number of directors may provide that the number of directors to be elected at any annual meeting of the shareholders be such number as is fixed by the directors prior to the annual meeting.

Marginal note:Election or appointment as director

165.1 The election or appointment of a person as a director is subject to the following:

• (a) the person was present at the meeting when the election or appointment took place and did not refuse to hold office as a director; or

• (b) the person was not present at the meeting when the election or appointment took place but

  • (i) consented in writing to hold office as a director before the election or appointment or within 10 days after it, or

  • (ii) acted as a director after the election or appointment.

Marginal note:Term of directors

• 166 (1) Except where this Act or the by-laws of a bank provide for cumulative voting, a bank may, by by-law, provide that the directors be elected for terms of one, two or three years.

• Marginal note:Term of one, two or three years

  (2) A director elected for a term of one, two or three years holds office until the close of the first, second or third annual meeting of shareholders, as the case may be, following the election of the director.

• Marginal note:No stated term

  (3) A director who is not elected for an expressly stated term of office ceases to hold office at the close of the next annual meeting of shareholders following the election of the director.

• Marginal note:Tenure of office

  (4) It is not necessary that all directors elected at a meeting of shareholders hold office for the same term.

• Marginal note:Idem

  (5) If a by-law of a bank provides that the directors be elected for a term of two or three years, it may also provide that the term of office of each director be for the whole of that term, or that, as nearly as may be, one half of the directors retire each year if the term is two years, and that one third of the directors retire each year if the term is three years.

• Marginal note:Composition requirements

  (6) Subject to subsection 163(4), where a director of a bank is elected or appointed for a term of more than one year, the bank shall comply with subsections 159(2) and 163(1) and section 164 at each annual meeting of shareholders during the director’s term of office as if that director were elected or appointed on that date.

Marginal note:Determining election of directors

• 167 (1) Except where this Act or the by-laws of a bank provide for cumulative voting, the persons, to the number authorized to be elected, who receive the greatest number of votes at an election of directors of a bank shall be the directors thereof.

• Marginal note:Idem

  (2) If, at any election of directors referred to in subsection (1), two or more persons receive an equal number of votes and there are not sufficient vacancies remaining to enable all the persons receiving an equal number of votes to be elected, the directors who receive a greater number of votes or the majority of them shall, in order to complete the full number of directors, determine which of the persons so receiving an equal number of votes are to be elected.

Marginal note:Cumulative voting

• 168 (1) Where this Act or the by-laws provide for cumulative voting,

  • (a) there shall be a stated number of directors fixed by by-law and not a minimum and maximum number of directors;

  • (b) each shareholder entitled to vote at an election of directors has the right to cast a number of votes equal to the number of votes attached to the shares held by the shareholder multiplied by the number of directors to be elected, and the shareholder may cast all such votes in favour of one candidate or distribute them among the candidates in any manner;

  • (c) a separate vote of shareholders shall be taken with respect to each candidate nominated for director unless a resolution is passed unanimously permitting two or more persons to be elected by a single vote;

  • (d) if a shareholder has voted for more than one candidate without specifying the distribution of the votes among the candidates, the shareholder is deemed to have distributed the votes equally among the candidates for whom the shareholder voted;

  • (e) if the number of candidates nominated for director exceeds the number of positions to be filled, the candidates who receive the least number of votes shall be eliminated until the number of candidates remaining equals the number of positions to be filled;

  • (f) each director ceases to hold office at the close of the next annual meeting of shareholders following the director’s election;

  • (g) a director may be removed from office only if the number of votes cast in favour of a motion to remove the director is greater than the product of the number of directors required by the by-laws and the number of votes cast against the motion; and

  • (h) the number of directors required by the by-laws may be decreased only if the number of votes cast in favour of a motion to decrease the number of directors is greater than the product of the number of directors required by the by-laws and the number of votes cast against the motion.

• Marginal note:Mandatory cumulative voting

  (2) Where the aggregate of the voting shares beneficially owned by a person and any entities controlled by the person carries more than 10 per cent of the voting rights attached to all the outstanding voting shares of a bank, the directors shall be elected by cumulative voting.

• Marginal note:Exception

  (3) Subsection (2) does not apply

  • (a) where all the voting shares of the bank that are outstanding are beneficially owned by

    • (i) one person,

    • (ii) one person and one or more entities controlled by that person, or

    • (iii) one or more entities controlled by the same person;

  • (b) in respect of a bank that was in existence immediately prior to the day that subsection comes into force whose shareholders are confined to entities incorporated or formed by or under an Act of Parliament or of the legislature of a province that are, in the opinion of the directors, operating as credit unions or cooperative associations.

• Marginal note:Exception

  (3.1) Subsection (2) does not apply to a widely held bank with equity of eight billion dollars or more or to a bank in respect of which subsection 378(1) applies.

• Marginal note:Transitional election

  (4) Where this Act or the by-laws of a bank provide for cumulative voting, the shareholders of the bank shall,

  • (a) at the first annual meeting of shareholders held not earlier than ninety days following the date that cumulative voting is required under subsection (2) or provided for in the by-laws, and

  • (b) at each succeeding annual meeting,

  elect the stated number of directors to hold office until the close of the next annual meeting of shareholders following their election.

• Marginal note:Exception

  (5) Nothing in this Act precludes the holders of any class or series of shares of a bank from having an exclusive right to elect one or more directors.

Marginal note:Re-election of directors

169 A director who has completed a term of office is, if otherwise qualified, eligible for re-election.

Incomplete Elections and Director Vacancies

Marginal note:Void election or appointment

• 170 (1) If, immediately after the time of any purported election or appointment of directors, the board of directors would fail to comply with subsection 159(2) or 163(1) or section 164, the purported election or appointment of all persons purported to be elected or appointed at that time is void unless the directors, within forty-five days after the discovery of the non-compliance, develop a plan, approved by the Superintendent, to rectify the non-compliance.

• Marginal note:Failure to elect minimum

  (2) Where, at the close of a meeting of shareholders of a bank, the shareholders have failed to elect the number or minimum number of directors required by this Act or the by-laws of a bank, the purported election of directors at the meeting

  • (a) is valid if the directors purported to be elected and those incumbent directors, if any, whose terms did not expire at the close of the meeting, together constitute a quorum; or

  • (b) is void if the directors purported to be elected and those incumbent directors, if any, whose terms did not expire at the close of the meeting, together do not constitute a quorum.

• (3) and (4) [Repealed, 1997, c. 15, s. 15]

Marginal note:Directors where elections incomplete or void

• 171 (1) Notwithstanding subsections 166(2) and (3) and paragraphs 168(1)(f) and 172(1)(a), where subsection 170(1) or (2) applies at the close of any meeting of shareholders of a bank, the board of directors shall, until their successors are elected or appointed, consist solely of

  • (a) where paragraph 170(2)(a) applies, the directors referred to in that paragraph; or

  • (b) where subsection 170(1) or paragraph 170(2)(b) applies, the persons who were the incumbent directors immediately before the meeting.

• Marginal note:Where there is no approved rectification plan

  (2) Notwithstanding subsections 166(2) and (3) and paragraphs 168(1)(f) and 172(1)(a), where a plan to rectify the non-compliance referred to in subsection 170(1) has not been approved by the Superintendent by the end of the forty-five day period referred to in that subsection, the board of directors shall, until their successors are elected or appointed, consist solely of the persons who were the incumbent directors immediately before the meeting at which the purported election or appointment referred to in that subsection occurred.

• Marginal note:Directors to call meeting

  (3) Where subsection (1) or (2) applies, the board of directors referred to in that subsection shall without delay call a special meeting of shareholders to fill the vacancies, where paragraph 170(2)(a) applies, or elect a new board of directors, where subsection 170(1) or paragraph 170(2)(b) applies.

• Marginal note:Shareholder may call meeting

  (4) Where the directors fail to call a special meeting required by subsection (3), the meeting may be called by any shareholder.

Marginal note:Ceasing to hold office

• 172 (1) A director ceases to hold office

  • (a) at the close of the annual meeting at which the director’s term of office expires;

  • (b) when the director dies or resigns;

  • (c) when the director becomes disqualified under section 160 or ineligible to hold office pursuant to subsection 203(2);

  • (d) when the director is removed under section 173; or

  • (e) when the director is removed from office under section 647 or 647.1.

• Marginal note:Date of resignation

  (2) The resignation of a director of a bank becomes effective at the time a written resignation is sent to the bank by the director or at the time specified in the resignation, whichever is later.

Marginal note:Removal of director

• 173 (1) Subject to paragraph 168(1)(g), the shareholders of a bank may by resolution at a special meeting remove any director or all the directors from office.

• Marginal note:Exception

  (2) Where the holders of any class or series of shares of a bank have the exclusive right to elect one or more directors, a director so elected may be removed only by a resolution at a meeting of the shareholders of that class or series.

• Marginal note:Vacancy by removal

  (3) Subject to paragraphs 168(1)(b) to (e), a vacancy created by the removal of a director may be filled at the meeting of the shareholders at which the director is removed or, if not so filled, may be filled under section 177 or 178.

Marginal note:Statement of director

• 174 (1) A director who

  • (a) resigns,

  • (b) receives a notice or otherwise learns of a meeting of shareholders called for the purpose of removing the director from office, or

  • (c) receives a notice or otherwise learns of a meeting of directors or shareholders at which another person is to be appointed or elected to fill the office of director, whether because of the director’s resignation or removal or because the director’s term of office has expired or is about to expire,

  is entitled to submit to the bank a written statement giving the reasons for the resignation or the reasons why the director opposes any proposed action or resolution.

• Marginal note:Statement re disagreement

  (2) Where a director resigns as a result of a disagreement with the other directors or the officers of a bank, the director shall submit to the bank and the Superintendent a written statement setting out the nature of the disagreement.

Marginal note:Circulation of statement

• 175 (1) A bank shall without delay on receipt of a director’s statement referred to in subsection 174(1) relating to a matter referred to in paragraph 174(1)(b) or (c), or a director’s statement referred to in subsection 174(2), send a copy of it to each shareholder entitled to receive a notice of meetings and to the Superintendent, unless the statement is included in or attached to a management proxy circular required by subsection 156.05(1).

• Marginal note:Immunity for statement

  (2) No bank or person acting on its behalf incurs any liability by reason only of circulating a director’s statement in compliance with subsection (1).

Marginal note:Shareholders filling vacancy

176 The by-laws of a bank may provide that a vacancy among the directors is to be filled only

• (a) by a vote of the shareholders; or

• (b) by a vote of the holders of any class or series of shares having an exclusive right to elect one or more directors if the vacancy occurs among the directors elected by the holders of that class or series.

Marginal note:Directors filling vacancy

• 177 (1) Despite section 183 but subject to subsection (2) and sections 176 and 178, a quorum of directors may fill a vacancy among the directors except a vacancy resulting from a change in the by-laws by which the number or the minimum or maximum number of directors is increased or from a failure to elect the number or minimum number of directors provided for in the by-laws.

• Marginal note:Where composition fails

  (2) Notwithstanding sections 176 and 183, where by reason of a vacancy the number of directors or the composition of the board of directors fails to meet any of the requirements of section 159, subsection 163(1) and section 164, the directors who, in the absence of any by-law, would be empowered to fill that vacancy shall do so forthwith.

Marginal note:Class vacancy

178 Notwithstanding section 183, where the holders of any class or series of shares of a bank have an exclusive right to elect one or more directors and a vacancy occurs among those directors, then, subject to section 176,

• (a) the remaining directors elected by the holders of that class or series of shares may fill the vacancy except one resulting from an increase in the number or the minimum or maximum number of directors for that class or series or from a failure to elect the number or minimum number of directors provided for in the by-laws for that class or series;

• (b) if there are no such remaining directors and, by reason of the vacancy, the number of directors or the composition of the board of directors fails to meet any of the requirements of section 159, subsection 163(1) and section 164, the other directors may fill that vacancy; and

• (c) if there are no such remaining directors and paragraph (b) does not apply, any holder of shares of that class or series may call a meeting of the holders thereof for the purpose of filling the vacancy.

Marginal note:Unexpired term

• 179 (1) Unless the by-laws otherwise provide, a director elected or appointed to fill a vacancy holds office for the unexpired term of the director’s predecessor in office.

• Marginal note:Affiliation

  (2) Notwithstanding subsection 163(3), the affiliation of a person to be elected or appointed to fill a vacancy shall be determined as at the date of the person’s election or appointment and that person shall be deemed to continue to be affiliated or unaffiliated, as the case may be, until the next annual meeting of the shareholders.

Marginal note:Additional directors

• 179.1 (1) The directors of a bank may appoint one or more additional directors where the by-laws of the bank allow them to do so and the by-laws determine the minimum and maximum numbers of directors.

• Marginal note:Term of office

  (2) A director appointed under subsection (1) holds office for a term expiring not later than the close of the next annual meeting of shareholders of the bank.

• Marginal note:Limit on number appointed

  (3) The total number of directors appointed under subsection (1) may not exceed one third of the number of directors elected at the previous annual meeting of shareholders of the bank.

Meetings of the Board

Marginal note:Meetings required

• 180 (1) The directors shall meet at least four times during each financial year.

• Marginal note:Place for meetings

  (2) The directors may meet at any place unless the by-laws provide otherwise.

• Marginal note:Notice for meetings

  (3) The notice for the meetings must be given as required by the by-laws.

Marginal note:Notice of meeting

• 181 (1) A notice of a meeting of directors shall specify each matter referred to in section 198 that is to be dealt with at the meeting but, unless the by-laws otherwise provide, need not otherwise specify the purpose of or the business to be transacted at the meeting.

• Marginal note:Waiver of notice

  (2) A director may in any manner waive notice of a meeting of directors and the attendance of a director at a meeting of directors is a waiver of notice of that meeting except where the director attends the meeting for the express purpose of objecting to the transaction of any business on the grounds that the meeting is not lawfully called.

• Marginal note:Adjourned meeting

  (3) Notice of an adjourned meeting of directors is not required to be given if the time and place of the adjourned meeting was announced at the original meeting.

Marginal note:Quorum

• 182 (1) Subject to section 183, the number of directors referred to in subsection (2) constitutes a quorum at any meeting of directors or a committee of directors and, notwithstanding any vacancy among the directors, a quorum of directors may exercise all the powers of the directors.

• Marginal note:Idem

  (2) The number of directors constituting a quorum at any meeting of directors or a committee of directors shall be

  • (a) a majority of the minimum number of directors required by this Act for the board of directors or a committee of directors; or

  • (b) such greater number of directors than the number calculated pursuant to paragraph (a) as may be established by the by-laws of the bank.

• Marginal note:Director continues to be present

  (3) A director who is present at a meeting of directors or of a committee of directors but is not, in accordance with subsection 203(1), present at any particular time during the meeting is considered to be present for the purposes of this section.

Marginal note:Resident Canadian majority

• 183 (1) The directors of a bank shall not transact business at a meeting of directors or of a committee of directors unless

  • (a) in the case of a bank that is a subsidiary of a foreign bank, at least one half of the directors present are resident Canadians; or

  • (b) in any other case, a majority of the directors present are resident Canadians.

• Marginal note:Exception

  (2) Notwithstanding subsection (1), the directors of a bank may transact business at a meeting of directors or of a committee of directors without the required proportion of directors present who are resident Canadians if

  • (a) a director who is a resident Canadian unable to be present approves, in writing or by telephonic, electronic or other communications facilities, the business transacted at the meeting; and

  • (b) there would have been present the required proportion of directors who are resident Canadians had that director been present at the meeting.

Marginal note:Presence of unaffiliated director

• 183.1 (1) The directors of a bank shall not transact business at a meeting of directors unless at least one of the directors who is not affiliated with the bank is present.

• Marginal note:Exception

  (2) Despite subsection (1), the directors of a bank may transact business at a meeting of directors if a director who is not affiliated with the bank and who is not able to be present approves, in writing or by telephonic, electronic or other communications facilities, the business transacted at the meeting.

• Marginal note:Exception

  (3) Subsection (1) does not apply if all the voting shares of the bank, other than directors’ qualifying shares, if any, are beneficially owned by a Canadian financial institution incorporated by or under an Act of Parliament.

Marginal note:Electronic meeting

• 184 (1) Subject to the by-laws of a bank, a meeting of directors or of a committee of directors may be held by means of such telephonic, electronic or other communications facilities as permit all persons participating in the meeting to communicate adequately with each other during the meeting.

• Marginal note:Deemed present

  (2) A director participating in a meeting by any means referred to in subsection (1) is deemed for the purposes of this Act to be present at that meeting.

Marginal note:Resolution outside board meeting

• 184.1 (1) A resolution in writing signed by all the directors entitled to vote on that resolution at a meeting of directors is as valid as if it had been passed at a meeting of directors.

• Marginal note:Filing directors’ resolution

  (2) A copy of the resolution referred to in subsection (1) shall be kept with the minutes of the proceedings of the directors.

• Marginal note:Resolution outside committee meeting

  (3) A resolution in writing signed by all the directors entitled to vote on that resolution at a meeting of a committee of directors, other than a resolution of the audit committee in carrying out its duties under subsection 194(3) or a resolution of the conduct review committee in carrying out its duties under subsection 195(3), is as valid as if it had been passed at a meeting of that committee.

• Marginal note:Filing committee resolution

  (4) A copy of the resolution referred to in subsection (3) shall be kept with the minutes of the proceedings of that committee.

• Marginal note:Evidence

  (5) Unless a ballot is demanded, an entry in the minutes of a meeting that the chairperson declared a resolution to be carried or defeated is in the absence of evidence to the contrary proof of that fact without proof of the number or proportion of votes recorded in favour of or against the resolution.

Marginal note:Dissent of director

• 185 (1) A director of a bank who is present at a meeting of directors or a committee of directors is deemed to have consented to any resolution passed or action taken at that meeting unless

  • (a) the director requests that the director’s dissent be entered or the director’s dissent is entered in the minutes of the meeting;

  • (b) the director sends a written dissent to the secretary of the meeting before the meeting is adjourned; or

  • (c) the director sends the director’s dissent by registered mail or delivers it to the head office of the bank immediately after the meeting is adjourned.

• Marginal note:Loss of right to dissent

  (2) A director of a bank who votes for or consents to a resolution is not entitled to dissent under subsection (1).

• Marginal note:Dissent of absent director

  (3) A director of a bank who is not present at a meeting at which a resolution is passed or action taken is deemed to have consented thereto unless, within seven days after the director becomes aware of the resolution, the director

  • (a) causes the director’s dissent to be placed with the minutes of the meeting; or

  • (b) sends the director’s dissent by registered mail or delivers it to the head office of the bank.

Marginal note:Record of attendance

• 186 (1) A bank shall keep a record of the attendance at each meeting of directors and each committee meeting of directors.

• Marginal note:Statement to shareholders

  (2) A bank shall attach to the notice of each annual meeting it sends to its shareholders a statement showing, in respect of the financial year immediately preceding the meeting, the total number of directors’ meetings and directors’ committee meetings held during the financial year and the number of those meetings attended by each director.

Marginal note:Meeting required by Superintendent

• 187 (1) Where in the opinion of the Superintendent it is necessary, the Superintendent may, by notice in writing, require a bank to hold a meeting of directors of the bank to consider the matters set out in the notice.

• Marginal note:Attendance of Superintendent

  (2) The Superintendent may attend and be heard at a meeting referred to in subsection (1).

By-laws

Marginal note:By-laws

• 188 (1) Unless this Act otherwise provides, the directors of a bank may by resolution make, amend or repeal any by-law that regulates the business or affairs of the bank.

• Marginal note:Shareholder approval

  (2) The directors shall submit a by-law, or an amendment to or a repeal of a by-law, that is made under subsection (1) to the shareholders at the next meeting of shareholders, and the shareholders may, by resolution, confirm or amend the by-law, amendment or repeal.

• Marginal note:Effective date of by-law

  (3) Unless this Act otherwise provides, a by-law, or an amendment to or a repeal of a by-law, is effective from the date of the resolution of the directors under subsection (1) until it is confirmed, confirmed as amended or rejected by the shareholders under subsection (2) or until it ceases to be effective under subsection (4) and, where the by-law is confirmed, or confirmed as amended, it continues in effect in the form in which it was so confirmed.

• Marginal note:Effect where no shareholder approval

  (4) If a by-law, or an amendment to or a repeal of a by-law, is rejected by the shareholders, or is not submitted to the shareholders by the directors as required under subsection (2), the by-law, amendment or repeal ceases to be effective from the date of its rejection or the date of the next meeting of shareholders, as the case may be, and no subsequent resolution of the directors to make, amend or repeal a by-law having substantially the same purpose or effect is effective until it is confirmed, or confirmed as amended, by the shareholders.

Marginal note:Shareholder proposal of by-law

189 A shareholder entitled to vote at an annual meeting of shareholders may, in accordance with sections 143 and 144, make a proposal to make, amend or repeal a by-law.

Marginal note:By-laws of existing bank

190 Subject to section 191, where a by-law of a bank that was in existence immediately prior to the day this section comes into force was in effect immediately prior to that day, the by-law continues in effect until amended or repealed, unless it is contrary to a provision of this Act.

Marginal note:By-laws re remuneration

• 191 (1) A by-law of a bank respecting the remuneration of the directors of the bank, as directors, that is in effect on the coming into force of this section ceases to have effect on the day on which the first annual meeting is held following the coming into force of this section.

• Marginal note:Existing by-laws

  (2) A by-law made by the directors of a bank under section 45 of the Bank Act, being chapter B-1 of the Revised Statutes of Canada, 1985, as that section read immediately prior to the day this section comes into force, and not confirmed by the shareholders of the bank in accordance with that section on or before the day this section comes into force, continues to have effect, unless it is contrary to the provisions of this Act, until the first meeting of the shareholders following the day this section comes into force.

• Marginal note:Shareholder approval

  (3) A by-law referred to in subsection (2) shall be submitted to the shareholders at the first meeting of shareholders following the coming into force of this section.

• Marginal note:Application of ss. 188(3) and (4) and 189

  (4) Subsections 188(3) and (4) and section 189 apply in respect of a by-law referred to in this section as if it were a by-law made under section 188.

Marginal note:Deemed by-laws

• 192 (1) Any matter that,

  • (a) immediately prior to the day this section comes into force, was provided for in the incorporating instrument of a bank that was in existence immediately prior to that day, or

  • (b) immediately prior to the day a body corporate is continued as a bank under this Act, was provided for in the incorporating instrument of the body corporate,

  and that, under this Act, would be provided for in the by-laws of a bank, is deemed to be provided for in the by-laws of the bank.

• Marginal note:By-law prevails

  (2) Where a by-law of the bank made in accordance with sections 188 and 189 amends or repeals any matter referred to in subsection (1), the by-law prevails.

Committees of the Board

Marginal note:Committees

193 The directors of a bank may appoint from their number, in addition to the committees referred to in subsection 157(2), such other committees as they deem necessary and, subject to section 198, delegate to those committees such powers of the directors, and assign to those committees such duties, as the directors consider appropriate.

Marginal note:Audit committee

• 194 (1) The audit committee of a bank shall consist of at least three directors.

• Marginal note:Membership

  (2) A majority of the members of the audit committee must consist of directors who are not persons affiliated with the bank and none of the members of the audit committee may be officers or employees of the bank or a subsidiary of the bank.

• Marginal note:Duties of audit committee

  (3) The audit committee of a bank shall

  • (a) review the annual statement of the bank before the annual statement is approved by the directors;

  • (b) review such returns of the bank as the Superintendent may specify;

  • (c) require the management of the bank to implement and maintain appropriate internal control procedures;

  • (c.1) review, evaluate and approve those procedures;

  • (d) review such investments and transactions that could adversely affect the well-being of the bank as the auditor or auditors or any officer of the bank may bring to the attention of the committee;

  • (e) meet with the auditor or auditors to discuss the annual statement and the returns and transactions referred to in this subsection; and

  • (f) meet with the chief internal auditor of the bank, or the officer or employee of the bank acting in a similar capacity, and with management of the bank, to discuss the effectiveness of the internal control procedures established for the bank.

• Marginal note:Report

  (4) In the case of the annual statement and returns of a bank that under this Act must be approved by the directors of the bank, the audit committee of the bank shall report thereon to the directors before the approval is given.

• Marginal note:Required meeting of directors

  (5) The audit committee of a bank may call a meeting of the directors of the bank to consider any matter of concern to the committee.

• Marginal note:Transitional

  (6) Subsection (2), in so far as it relates to the affiliation of directors with the bank, does not apply in respect of a bank that was in existence immediately prior to the day that subsection comes into force until the day that is three years after the day that subsection comes into force.

Marginal note:Conduct review committee

• 195 (1) The conduct review committee of a bank shall consist of at least three directors.

• Marginal note:Membership

  (2) A majority of the members of the conduct review committee of a bank must consist of directors who are not persons affiliated with the bank and none of the members of the conduct review committee may be officers or employees of the bank or a subsidiary of the bank.

• Marginal note:Duties of conduct review committee

  (3) The conduct review committee of a bank shall

  • (a) require the management of the bank to establish procedures for complying with Part XI;

  • (b) review those procedures and their effectiveness in ensuring that the bank is complying with Part XI;

  • (b.1) if a widely held bank holding company or a widely held insurance holding company has a significant interest in any class of shares of the bank,

    • (i) establish policies for entering into transactions referred to in subsection 495.1(1), and

    • (ii) review transactions referred to in subsection 495.3(1); and

  • (c) review the practices of the bank to ensure that any transactions with related parties of the bank that may have a material effect on the stability or solvency of the bank are identified.

• Marginal note:Bank report to Superintendent

  (4) A bank shall report to the Superintendent on the mandate and responsibilities of the conduct review committee and the procedures referred to in paragraph (3)(a).

• Marginal note:Committee report to directors

  (5) After each meeting of the conduct review committee of the bank, the committee shall report to the directors of the bank on matters reviewed by the committee.

• Marginal note:Directors’ report to Superintendent

  (6) Within ninety days after the end of each financial year, the directors of a bank shall report to the Superintendent on what the conduct review committee did during the year in carrying out its responsibilities under subsection (3).

• (7) [Repealed, 1997, c. 15, s. 23]

Directors and Officers — Authority

Marginal note:Chief executive officer

• 196 (1) The directors of a bank shall appoint from their number a chief executive officer who must be ordinarily resident in Canada and, subject to section 198, may delegate to that officer any of the powers of the directors.

• (2) [Repealed, 1997, c. 15, s. 24]

Marginal note:Appointment of officers

• 197 (1) The directors of a bank may, subject to the by-laws, designate the offices of the bank, appoint officers thereto, specify the duties of those officers and delegate to them powers, subject to section 198, to manage the business and affairs of the bank.

• Marginal note:Directors as officers

  (2) Subject to section 164, a director of a bank may be appointed to any office of the bank.

• Marginal note:Two or more offices

  (3) Two or more offices of a bank may be held by the same person.

Marginal note:Limits on power to delegate

198 The directors of a bank may not delegate any of the following powers, namely, the power to

• (a) submit to the shareholders a question or matter requiring the approval of the shareholders;

• (b) fill a vacancy among the directors, on a committee of directors or in the office of auditor, or appoint additional directors;

• (c) issue or cause to be issued securities, including an issue of shares of a series that is authorized in accordance with section 62, except in accordance with any authorization made by the directors;

• (d) declare a dividend;

• (e) authorize the redemption or other acquisition by the bank pursuant to section 71 of shares issued by the bank;

• (f) authorize the payment of a commission on a share issue;

• (g) approve a management proxy circular;

• (h) except as provided in this Act, approve the annual statement of the bank and any other financial statements issued by the bank; or

• (i) adopt, amend or repeal by-laws.

Marginal note:Remuneration of directors, officers and employees

• 199 (1) Subject to this section and the by-laws, the directors of a bank may fix the remuneration of the directors, officers and employees of the bank.

• Marginal note:By-law required

  (2) No remuneration shall be paid to a director as director until a by-law fixing the aggregate of all amounts that may be paid to all directors in respect of directors’ remuneration during a fixed period of time has been confirmed by special resolution.

Marginal note:Validity of acts

• 200 (1) An act of a director or an officer of a bank is valid notwithstanding a defect in the director’s qualification or an irregularity in the director’s election or in the appointment of the director or officer.

• Marginal note:Idem

  (2) An act of the board of directors of a bank is valid notwithstanding a defect in the composition of the board or an irregularity in the election of the board or in the appointment of a member of the board.

Marginal note:Right to attend meetings

201 A director of a bank is entitled to attend and to be heard at every meeting of shareholders.

Conflicts of Interest

Marginal note:Disclosure of interest

• 202 (1) A director or officer of a bank shall disclose to the bank, in writing or by requesting to have it entered in the minutes of a meeting of directors or a meeting of a committee of directors, the nature and extent of any interest they have in a material contract or material transaction with the bank, whether entered into or proposed, if they

  • (a) are a party to the contract or transaction;

  • (b) are a director or officer of a party to the contract or transaction or a person acting in a similar capacity; or

  • (c) have a material interest in a party to the contract or transaction.

• Marginal note:Time of disclosure — director

  (2) The disclosure shall be made in the case of a director

  • (a) at the meeting of directors, or of a committee of directors, at which the proposed contract or transaction is first considered;

  • (b) if at the time of the meeting referred to in paragraph (a) the director was not interested in the proposed contract or transaction, at the first one after they become interested in it;

  • (c) if the director becomes interested after a contract or transaction is entered into, at the first one after they become interested; or

  • (d) if a person who is interested in a contract or transaction becomes a director, at the first one after they become a director.

• Marginal note:Time of disclosure — officer

  (3) The disclosure shall be made in the case of an officer who is not a director

  • (a) immediately after they become aware that the contract, transaction, proposed contract or proposed transaction is to be considered or has been considered at a meeting of directors or of a committee of directors;

  • (b) if they become interested after the contract or transaction is entered into, immediately after they become interested; or

  • (c) if a person who is interested in a contract or transaction becomes an officer, immediately after they become an officer.

• Marginal note:Time of disclosure — contract not requiring approval

  (4) If the material contract or material transaction, whether entered into or proposed, is one that in the ordinary course of the bank’s business would not require approval by the directors or shareholders, the director or officer shall disclose to the bank, in writing or by requesting to have it entered in the minutes of a meeting of directors or of a committee of directors, the nature and extent of their interest immediately after they become aware of the contract or transaction.

Marginal note:Director to abstain

• 203 (1) A director who is required to make a disclosure under subsection 202(1) shall not be present at any meeting of directors, or of a committee of directors, while the contract or transaction is being considered or vote on any resolution to approve it unless the contract or transaction

  • (a) relates primarily to their remuneration as a director, officer, employee or agent of the bank, an entity controlled by the bank or an entity in which the bank has a substantial investment;

  • (b) is for indemnity under section 212 or insurance under section 213; or

  • (c) is with an affiliate of the bank.

• Marginal note:Ineligibility

  (2) Any director who knowingly contravenes subsection (1) ceases to hold office as director and is not eligible, for a period of five years after the date on which the contravention occurred, for election or appointment as a director of any financial institution that is incorporated or formed by or under an Act of Parliament.

• Marginal note:Validity of acts

  (3) An act of the board of directors of a bank, or of a committee of the board of directors, is not invalid because a person acting as a director had ceased under subsection (2) to hold office as a director.

Marginal note:General notice

• 204 (1) For the purposes of subsection 202(1), a general notice to the directors declaring that a director or officer is to be regarded as interested for any of the following reasons in a contract or transaction entered into with a party is a sufficient declaration of interest in relation to any contract or transaction with that party:

  • (a) the director or officer is a director or officer of a party referred to in paragraph 202(1)(b) or (c) or a person acting in a similar capacity;

  • (b) the director or officer has a material interest in the party; or

  • (c) there has been a material change in the nature of the director’s or officer’s interest in the party.

• Marginal note:Access to disclosures

  (2) The shareholders of the bank may examine the portions of any minutes of meetings of directors or committees of directors that contain disclosures under subsection 202(1), or the portions of any other documents that contain those disclosures, during the usual business hours of the bank.

Marginal note:Avoidance standards

• 205 (1) A contract or transaction for which disclosure is required under subsection 202(1) is not invalid and a director or officer is not accountable to the bank or its shareholders for any profit realized from it by reason only of the director’s or officer’s interest in the contract or transaction or the fact that the director was present or was counted to determine whether a quorum existed at the meeting of directors, or of a committee of directors, that considered it if

  • (a) the director or officer disclosed their interest in accordance with section 202 and subsection 204(1);

  • (b) the directors approved the contract or transaction; and

  • (c) the contract or transaction was reasonable and fair to the bank at the time that it was approved.

• Marginal note:Confirmation by shareholders

  (2) Even if the conditions set out in subsection (1) are not met, a director or officer acting honestly and in good faith is not accountable to the bank or its shareholders for any profit realized from a contract or transaction for which disclosure was required and the contract or transaction is not invalid by reason only of the director’s or officer’s interest in it if

  • (a) the contract or transaction is approved or confirmed by special resolution at a meeting of shareholders;

  • (b) disclosure of the interest was made to the shareholders in a manner sufficient to indicate its nature before the contract or transaction was approved or confirmed; and

  • (c) the contract or transaction was reasonable and fair to the bank at the time that it was approved or confirmed.

Marginal note:Court may set aside or require accounting

206 If a director or officer of a bank fails to comply with any of sections 202 to 205, a court, on application of the bank or any of its shareholders, may set aside the contract or transaction on any terms that the court thinks fit and may require the director or officer to account to the bank for any profit or gain realized on it.

Liability, Exculpation and Indemnification

Marginal note:Director liability

• 207 (1) Directors of a bank who vote for or consent to a resolution of the directors authorizing the issue of a share contrary to subsection 65(1) or the issue of subordinated indebtedness contrary to section 80 for a consideration other than money are jointly and severally, or solidarily, liable to the bank to make good any amount by which the consideration received is less than the fair equivalent of the money that the bank would have received if the share or subordinated indebtedness had been issued for money on the date of the resolution.

• Marginal note:Further liability

  (2) Directors of a bank who vote for or consent to a resolution of the directors authorizing any of the following are jointly and severally, or solidarily, liable to restore to the bank any amounts so distributed or paid and not otherwise recovered by the bank and any amounts in relation to any loss suffered by the bank:

  • (a) a redemption or purchase of shares contrary to section 71;

  • (b) a reduction of capital contrary to section 75;

  • (c) a payment of a dividend contrary to section 79;

  • (d) a payment of an indemnity contrary to section 212; or

  • (e) any transaction contrary to Part XI.

Marginal note:Contribution

• 208 (1) A director who has satisfied a judgment in relation to the director’s liability under section 207 is entitled to contribution from the other directors who voted for or consented to the unlawful act on which the judgment was founded.

• Marginal note:Recovery

  (2) A director who is liable under section 207 is entitled to apply to a court for an order compelling a shareholder or other person to pay or deliver to the director

  • (a) any money or property that was paid or distributed to the shareholder or other person contrary to section 71, 75, 79 or 212; or

  • (b) an amount equal to the value of the loss suffered by the bank as a result of any transaction contrary to Part XI.

• Marginal note:Court order

  (3) Where an application is made to a court under subsection (2), the court may, where it is satisfied that it is equitable to do so,

  • (a) order a shareholder or other person to pay or deliver to a director any money or property that was paid or distributed to the shareholder or other person contrary to section 71, 75, 79 or 212 or any amount referred to in paragraph (2)(b);

  • (b) order a bank to return or issue shares to a person from whom the bank has purchased, redeemed or otherwise acquired shares; or

  • (c) make any further order it thinks fit.

Marginal note:Limitation

209 An action to enforce a liability imposed by section 207 may not be commenced after two years from the date of the resolution authorizing the action complained of.

Marginal note:Directors liable for wages

• 210 (1) Subject to subsections (2) and (3), the directors of a bank are jointly and severally, or solidarily, liable to each employee of the bank for all debts not exceeding six months wages payable to the employee for services performed for the bank while they are directors.

• Marginal note:Conditions precedent

  (2) A director is not liable under subsection (1) unless

  • (a) the bank has been sued for the debt within six months after it has become due and execution has been returned unsatisfied in whole or in part;

  • (b) the bank has commenced liquidation and dissolution proceedings or has been dissolved and a claim for the debt has been proven within six months after the earlier of the date of commencement of the liquidation and dissolution proceedings and the date of dissolution; or

  • (c) a winding-up order has been issued in respect of the bank under the Winding-up and Restructuring Act and a claim for the debt has been allowed or proven within six months after the issue of the winding-up order.

• Marginal note:Limitations

  (3) A director is not liable under subsection (1) unless the director is sued for a debt referred to in that subsection while a director or within two years after the director has ceased to be a director.

• Marginal note:Amount due after execution

  (4) Where execution referred to in paragraph (2)(a) has issued, the amount recoverable from a director is the amount remaining unsatisfied after execution.

• Marginal note:Subrogation of director

  (5) Where a director of a bank pays a debt referred to in subsection (1) that is proven in liquidation and dissolution or winding-up proceedings, the director is entitled to any preference that the employee would have been entitled to and, where a judgment has been obtained, the director is entitled to an assignment of the judgment.

• Marginal note:Contribution entitlement

  (6) A director of a bank who has satisfied a claim under this section is entitled to a contribution from the other directors of the bank who are liable for the claim.

Marginal note:Defence — due diligence

• 211 (1) A director, officer or employee of a bank is not liable under section 207 or 210 or subsection 506(1) and has fulfilled their duty under subsection 158(2) if they exercised the care, diligence and skill that a reasonably prudent person would have exercised in comparable circumstances, including reliance in good faith on

  • (a) financial statements of the bank that were represented to them by an officer of the bank or in a written report of the auditor or auditors of the bank fairly to reflect the financial condition of the bank; or

  • (b) a report of a person whose profession lends credibility to a statement made by them.

• Marginal note:Defence — good faith

  (2) A director or officer of a bank has fulfilled their duty under subsection 158(1) if they relied in good faith on

  • (a) financial statements of the bank that were represented to them by an officer of the bank or in a written report of the auditor or auditors of the bank fairly to reflect the financial condition of the bank; or

  • (b) a report of a person whose profession lends credibility to a statement made by them.

Marginal note:Indemnification

• 212 (1) A bank may indemnify a director or officer of the bank, a former director or officer of the bank or another person who acts or acted, at the bank’s request, as a director or officer of or in a similar capacity for another entity against all costs, charges and expenses, including an amount paid to settle an action or satisfy a judgment, reasonably incurred by them in respect of any civil, criminal, administrative, investigative or other proceeding in which they are involved because of that association with the bank or other entity.

• Marginal note:Advances

  (2) A bank may advance amounts to the director, officer or other person for the costs, charges and expenses of a proceeding referred to in subsection (1). They shall repay the amounts if they do not fulfil the conditions set out in subsection (3).

• Marginal note:No indemnification

  (3) A bank may not indemnify a person under subsection (1) unless

  • (a) the person acted honestly and in good faith with a view to the best interests of, as the case may be, the bank or the other entity for which they acted at the bank’s request as a director or officer or in a similar capacity; and

  • (b) in the case of a criminal or administrative action or proceeding that is enforced by a monetary penalty, the person had reasonable grounds for believing that their conduct was lawful.

• Marginal note:Indemnification — derivative actions

  (4) A bank may with the approval of a court indemnify a person referred to in subsection (1) or advance amounts to them under subsection (2) — in respect of an action by or on behalf of the bank or other entity to procure a judgment in its favour to which the person is made a party because of the association referred to in subsection (1) with the bank or other entity — against all costs, charges and expenses reasonably incurred by them in connection with that action if they fulfil the conditions set out in subsection (3).

• Marginal note:Right to indemnity

  (5) Despite subsection (1), a person referred to in that subsection is entitled to be indemnified by the bank in respect of all costs, charges and expenses reasonably incurred by them in connection with the defence of any civil, criminal, administrative, investigative or other proceeding to which the person is subject because of the association referred to in subsection (1) with the bank or other entity described in that subsection if the person

  • (a) was not judged by the court or other competent authority to have committed any fault or omitted to do anything that they ought to have done; and

  • (b) fulfils the conditions set out in subsection (3).

• Marginal note:Heirs and personal representatives

  (6) A bank may, to the extent referred to in subsections (1) to (5) in respect of the person, indemnify the heirs or personal representatives of any person whom the bank may indemnify under those subsections.

Marginal note:Directors’ and officers’ insurance

213 A bank may purchase and maintain insurance for the benefit of any person referred to in section 212 against any liability incurred by the person

• (a) in the capacity of a director or an officer of the bank, except where the liability relates to a failure to act honestly and in good faith with a view to the best interests of the bank; or

• (b) in the capacity of a director or officer of another entity or while acting in a similar capacity for another entity, if they act or acted in that capacity at the bank’s request, except if the liability relates to a failure to act honestly and in good faith with a view to the best interests of the entity.

Marginal note:Application to court for indemnification

• 214 (1) A bank or a person referred to in section 212 may apply to a court for an order approving an indemnity under that section and the court may so order and make any further order it thinks fit.

• Marginal note:Notice to Superintendent

  (2) An applicant under subsection (1) shall give the Superintendent written notice of the application and the Superintendent is entitled to appear and to be heard at the hearing of the application in person or by counsel.

• Marginal note:Other notice

  (3) On an application under subsection (1), the court may order notice to be given to any interested person and that person is entitled to appear and to be heard in person or by counsel at the hearing of the application.

Fundamental Changes

Amendments

Marginal note:Incorporating instrument

215 On the application of a bank duly authorized by special resolution, the Minister may approve a proposal to add, change or remove any provision that is permitted by this Act to be set out in the bank’s incorporating instrument.

Marginal note:Letters patent to amend

• 216 (1) On receipt of an application referred to in section 215, the Minister may issue letters patent to effect the proposal.

• Marginal note:Effect of letters patent

  (2) Letters patent issued pursuant to subsection (1) become effective on the day stated in the letters patent.

Marginal note:By-laws

• 217 (1) The directors of a bank may make, amend or repeal any by-laws, in the manner set out in subsections (2) and (3) and sections 218 to 222, to

  • (a) change the maximum number, if any, of shares of any class that the bank is authorized to issue;

  • (b) create new classes of shares;

  • (c) change the designation of any or all of the bank’s shares, and add, change or remove any rights, privileges, restrictions and conditions, including rights to accrued dividends, in respect of any or all of the bank’s shares, whether issued or unissued;

  • (d) change the shares of any class or series, whether issued or unissued, into a different number of shares of the same class or series or into the same or a different number of shares of other classes or series;

  • (e) divide a class of shares, whether issued or unissued, into series and fix the maximum number of shares, if any, in each series and the rights, privileges, restrictions and conditions attached thereto;

  • (f) authorize the directors to divide any class of unissued shares into series and fix the maximum number of shares, if any, in each series and the rights, privileges, restrictions and conditions attached thereto;

  • (g) authorize the directors to change the rights, privileges, restrictions and conditions attached to unissued shares of any series;

  • (h) revoke, diminish or enlarge any authority conferred under paragraphs (f) and (g);

  • (i) increase or decrease the number of directors or the minimum or maximum number of directors, subject to subsection 159(1) and section 168;

  • (i.1) change the name of the bank; or

  • (j) change the province in which the head office of the bank is situated.

• Marginal note:Shareholder approval

  (2) The directors shall submit a by-law, or an amendment to or a repeal of a by-law, that is made under subsection (1) to the shareholders, and the shareholders may, by special resolution, confirm, amend or reject the by-law, amendment or repeal.

• Marginal note:Effective date of by-law

  (3) A by-law, or an amendment to or a repeal of a by-law, made under subsection (1) is not effective until it is confirmed or confirmed as amended by the shareholders under subsection (2) and, in the case of a by-law respecting a change to the name of the bank, approved by the Superintendent.

• Marginal note:Letters patent

  (4) If the name of a bank or the province in Canada in which the head office of the bank is situated is changed under this section, the Superintendent may issue letters patent to amend the bank’s incorporating instrument accordingly.

• Marginal note:Effect of letters patent

  (5) Letters patent issued under subsection (4) become effective on the day stated in the letters patent.

Marginal note:Class vote

• 218 (1) The holders of shares of a class or, subject to subsection (2), of a series are, unless the by-laws otherwise provide in the case of an amendment to the by-laws referred to in paragraph (a), (b) or (e), entitled to vote separately as a class or series on a proposal to amend the by-laws to

  • (a) increase or decrease any maximum number of authorized shares of that class, or increase any maximum number of authorized shares of a class having rights or privileges equal or superior to the shares of that class;

  • (b) effect an exchange, reclassification or cancellation of all or part of the shares of that class;

  • (c) add, change or remove the rights, privileges, restrictions or conditions attached to the shares of that class and, without limiting the generality of the foregoing,

    • (i) remove or change prejudicially rights to accrued dividends or rights to cumulative dividends,

    • (ii) add, remove or change prejudicially redemption rights,

    • (iii) reduce or remove a dividend preference or a liquidation preference, or

    • (iv) add, remove or change prejudicially conversion privileges, options, voting, transfer or pre-emptive rights, or rights to acquire securities of the bank, or sinking fund provisions;

  • (d) increase the rights or privileges of any class of shares having rights or privileges equal or superior to the shares of that class;

  • (e) create a new class of shares equal or superior to the shares of that class;

  • (f) make any class of shares having rights or privileges inferior to the shares of that class equal or superior to the shares of that class; or

  • (g) effect an exchange or create a right of exchange of all or part of the shares of another class into the shares of that class.

• Marginal note:Right limited

  (2) The holders of a series of shares of a class are entitled to vote separately as a series under subsection (1) if that series is affected by an addition or amendment to the by-laws in a manner different from other shares of the same class.

• Marginal note:Right to vote

  (3) Subsections (1) and (2) apply whether or not the shares of a class otherwise carry the right to vote.

Marginal note:Separate resolutions

219 A proposed addition or amendment to the by-laws referred to in subsection 218(1) is adopted when the holders of the shares of each class or series entitled to vote separately thereon as a class or series have approved the addition or amendment by a special resolution.

Marginal note:Revoking resolution

220 Where a special resolution referred to in subsection 217(2) so states, the directors may, without further approval of the shareholders, revoke the special resolution.

Marginal note:Proposal to amend

• 221 (1) Subject to subsection (2), a director or a shareholder who is entitled to vote at an annual meeting of shareholders of a bank may, in accordance with sections 143 and 144, make a proposal to make an application referred to in section 215 or to make, amend or repeal the by-laws referred to in subsection 217(1) of the bank.

• Marginal note:Notice of amendment

  (2) Notice of a meeting of shareholders at which a proposal to amend the incorporating instrument or to make, amend or repeal the by-laws of a bank is to be considered must set out the proposal.

Marginal note:Rights preserved

222 No amendment to the incorporating instrument or by-laws of a bank affects an existing cause of action or claim or liability to prosecution in favour of or against the bank or its directors or officers, or any civil, criminal or administrative action or proceeding to which the bank or any of its directors or officers are a party.

Amalgamation

Marginal note:Application to amalgamate

• 223 (1) On the joint application of two or more bodies corporate incorporated by or under an Act of Parliament, including banks and bank holding companies, the Minister may issue letters patent amalgamating and continuing the applicants as one bank.

• Marginal note:Restriction

  (2) Despite subsection (1), if one of the applicants is a bank named in Schedule I as that Schedule read immediately before the day section 184 of the Financial Consumer Agency of Canada Act comes into force, other than a bank in respect of which the Minister has specified that subsection 378(1) no longer applies, the Minister shall not issue letters patent referred to in subsection (1) unless

  • (a) the amalgamated bank would be a widely held bank; or

  • (b) the amalgamated bank would be controlled by a widely held bank holding company that, at the time the application was made, controlled

    • (i) the applicant, or

    • (ii) any other applicant that is a bank named in Schedule I as that Schedule read immediately before the day section 184 of the Financial Consumer Agency of Canada Act comes into force, other than a bank in respect of which the Minister has specified that subsection 378(1) no longer applies.

• Marginal note:Restriction

  (3) Despite subsection (1), if the amalgamated bank would be a bank with equity of eight billion dollars or more, the Minister shall not issue letters patent referred to in that subsection unless the amalgamated bank is

  • (a) widely held;

  • (b) controlled, within the meaning of paragraphs 3(1)(a) and (d), by a widely held bank, or by a widely held bank holding company, that controlled one of the applicants at the time the application was made; or

  • (c) controlled, within the meaning of paragraph 3(1)(d), by a widely held insurance holding company, or by an eligible Canadian financial institution, as defined in subsection 370(1), other than a bank, or by an eligible foreign institution, as defined in subsection 370(1), that controlled one of the applicants at the time the application was made.

Marginal note:Amalgamation agreement

• 224 (1) Each applicant proposing to amalgamate shall enter into an amalgamation agreement.

• Marginal note:Contents of agreement

  (2) Every amalgamation agreement shall set out the terms and means of effecting the amalgamation and, in particular,

  • (a) the name of the amalgamated bank and the province in which its head office is to be situated;

  • (b) the name and place of ordinary residence of each proposed director of the amalgamated bank;

  • (c) the manner in which the shares of each applicant are to be converted into shares or other securities of the amalgamated bank;

  • (d) if any shares of an applicant are not to be converted into shares or other securities of the amalgamated bank, the amount of money or securities that the holders of those shares are to receive in addition to or in lieu of shares or other securities of the amalgamated bank;

  • (e) the manner of payment of money in lieu of the issue of fractional shares of the amalgamated bank or of any other body corporate that are to be issued in the amalgamation;

  • (f) the proposed by-laws of the amalgamated bank;

  • (g) details of any other matter necessary to perfect the amalgamation and to provide for the subsequent management and operation of the amalgamated bank; and

  • (h) the proposed effective date of the amalgamation.

• Marginal note:Cross ownership of shares

  (3) If shares of one of the applicants are held by or on behalf of another of the applicants, other than shares held in the capacity of a personal representative or by way of security, the amalgamation agreement must provide for the cancellation of those shares when the amalgamation becomes effective without any repayment of capital in respect thereof, and no provision shall be made in the agreement for the conversion of those shares into shares of the amalgamated bank.

Marginal note:Approval of agreement by Superintendent

225 An amalgamation agreement must be submitted to the Superintendent for approval and any approval of the agreement under subsection 226(4) by the holders of any class or series of shares of an applicant is invalid unless, before the date of the approval, the Superintendent has approved the agreement in writing.

Marginal note:Shareholder approval

• 226 (1) The directors of each applicant shall submit an amalgamation agreement for approval to a meeting of the holders of shares of the applicant bank or body corporate of which they are directors and, subject to subsection (3), to the holders of each class or series of such shares.

• Marginal note:Right to vote

  (2) Each share of an applicant carries the right to vote in respect of an amalgamation agreement whether or not it otherwise carries the right to vote.

• Marginal note:Separate vote for class or series

  (3) The holders of shares of a class or series of shares of each applicant are entitled to vote separately as a class or series in respect of an amalgamation agreement if the agreement contains a provision that, if it were contained in a proposed amendment to the by-laws or incorporating instrument of the applicant, would entitle those holders to vote separately as a class or series.

• Marginal note:Special resolution

  (4) Subject to subsection (3), an amalgamation agreement is approved when the shareholders of each applicant bank or body corporate have approved the amalgamation by special resolution.

• Marginal note:Termination

  (5) An amalgamation agreement may provide that, at any time before the issue of letters patent of amalgamation, the agreement may be terminated by the directors of an applicant notwithstanding that the agreement has been approved by the shareholders of all or any of the applicant banks or bodies corporate.

Marginal note:Vertical short-form amalgamation

• 227 (1) A bank may, without complying with sections 224 to 226, amalgamate with one or more bodies corporate that are incorporated by or under an Act of Parliament if the body or bodies corporate, as the case may be, are wholly-owned subsidiaries of the bank and

  • (a) the amalgamation is approved by a resolution of the directors of the bank and of each amalgamating subsidiary; and

  • (b) the resolutions provide that

    • (i) the shares of each amalgamating subsidiary will be cancelled without any repayment of capital in respect thereof,

    • (ii) the letters patent of amalgamation and the by-laws of the amalgamated bank will be the same as the incorporating instrument and the by-laws of the amalgamating bank that is the holding body corporate, and

    • (iii) no securities will be issued by the amalgamated bank in connection with the amalgamation.

• Marginal note:Horizontal short-form amalgamation

  (2) Two or more bodies corporate incorporated by or under an Act of Parliament may amalgamate and continue as one bank without complying with sections 224 to 226 if

  • (a) at least one of the applicants is a bank;

  • (b) the applicants are all wholly-owned subsidiaries of the same holding body corporate;

  • (c) the amalgamation is approved by a resolution of the directors of each of the applicants; and

  • (d) the resolutions provide that

    • (i) the shares of all applicants, except those of one of the applicants that is a bank, will be cancelled without any repayment of capital in respect thereof,

    • (ii) the letters patent of amalgamation and the by-laws of the amalgamated bank will be the same as the incorporating instrument and the by-laws of the amalgamating bank whose shares are not cancelled, and

    • (iii) the stated capital of the amalgamating banks and bodies corporate whose shares are cancelled will be added to the stated capital of the amalgamating bank whose shares are not cancelled.

Marginal note:Joint application to Minister

• 228 (1) Subject to subsection (2), unless an amalgamation agreement is terminated in accordance with subsection 226(5), the applicants shall, within three months after the approval of the agreement in accordance with subsection 226(4) or the approval of the directors in accordance with subsection 227(1) or (2), jointly apply to the Minister for letters patent of amalgamation continuing the applicants as one bank.

• Marginal note:Conditions precedent to application

  (2) No application for the issue of letters patent under subsection (1) may be made unless

  • (a) notice of intention to make such an application has been published at least once a week for a period of four consecutive weeks in the Canada Gazette and in a newspaper in general circulation at or near the place where the head office of each applicant is situated; and

  • (b) the application is supported by satisfactory evidence that the applicants have complied with the requirements of this Part relating to amalgamations.

• Marginal note:Application of sections 23 to 26

  (3) If two or more bodies corporate, none of which is a bank, apply for letters patent under subsection (1), sections 23 to 26 apply in respect of the application with any modifications that the circumstances require.

• Marginal note:Matters for consideration

  (4) Before issuing letters patent of amalgamation continuing the applicants as one bank, the Minister shall take into account all matters that the Minister considers relevant to the application, including

  • (a) the sources of continuing financial support for the amalgamated bank;

  • (b) the soundness and feasibility of the plans of the applicants for the future conduct and development of the business of the amalgamated bank;

  • (c) the business record and experience of the applicants;

  • (d) the reputation of the applicants for being operated in a manner that is consistent with the standards of good character and integrity;

  • (e) whether the amalgamated bank 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 operations and businesses of the applicants on the conduct of those operations and businesses;

  • (g) the opinion of the Superintendent regarding the extent to which the proposed corporate structure of the amalgamated bank and its affiliates may affect the supervision and regulation of the amalgamated bank, having regard to

    • (i) the nature and extent of the proposed financial services activities to be carried out by the amalgamated bank and its affiliates, and

    • (ii) the nature and degree of supervision and regulation applying to the proposed financial services activities to be carried out by the affiliates of the amalgamated bank; and

  • (h) the best interests of the financial system in Canada.