Cooperative Credit Associations Act (S.C. 1991, c. 48)

Portfolio Limits

Marginal note:Exclusion from portfolio limits

• 397 (1) Subject to subsection (3), the value of all loans, investments and interests acquired by an association and any of its prescribed subsidiaries under section 394 or as a result of a realization of a security interest is not to be included in calculating the value of loans, investments and interests of the association and its prescribed subsidiaries under sections 398 to 402

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

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

• Marginal note:Extension

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

• Marginal note:Exception

  (3) Subsection (1) does not apply in respect of an investment or interest described in that subsection if the investment or interest is defined by a regulation made under section 403 to be an interest in real property and

  • (a) the association or the subsidiary acquired the investment or interest as a result of the realization of a security interest securing a loan that was defined by a regulation made under section 403 to be an interest in real property; or

  • (b) the association or the subsidiary acquired the investment or interest under section 394 as a result of a default referred to in that section in respect of a loan that was defined by a regulation made under section 403 to be an interest in real property.

Commercial Loans

Marginal note:Lending limit: regulatory capital of $25 million or less

398 An association with twenty-five million dollars or less of regulatory capital shall not, and shall not permit its prescribed subsidiaries to,

• (a) make or acquire a commercial loan, or

• (b) acquire control of a permitted entity that holds commercial loans,

if the aggregate value of all commercial loans held by the association and its prescribed subsidiaries exceeds, or the acquisition or making of the commercial loan or the acquisition of control of the entity would cause the aggregate value of all commercial loans held by the association and its prescribed subsidiaries to exceed, 5% of the total assets of the association.

Marginal note:Lending limit: regulatory capital over $25 million

399 An association with more than twenty-five million dollars of regulatory capital may

• (a) make or acquire commercial loans, or

• (b) acquire control of a permitted entity that holds commercial loans,

if the aggregate value of all commercial loans held by the association and its prescribed subsidiaries would thereby exceed 5% of the total assets of the association only with the prior approval in writing of the Superintendent and in accordance with any terms and conditions that the Superintendent may specify.

Marginal note:Meaning of total assets

400 For the purposes of sections 398 and 399, total assets, in respect of an association, has the meaning given to that expression by the regulations.

Real Property

Marginal note:Limit on total property interest

401 An association shall not, and shall not permit its prescribed subsidiaries to, purchase or otherwise acquire an interest in real property or make an improvement to any real property in which the association or any of its prescribed subsidiaries has an interest if the aggregate value of all interests of the association in real property exceeds, or the acquisition of the interest or the making of the improvement would cause that aggregate value to exceed, the prescribed percentage of the regulatory capital of the association.

Equities

Marginal note:Limits on equity acquisitions

402 An association shall not, and shall not permit its prescribed subsidiaries to,

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

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

if the aggregate value of

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

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

beneficially owned by the association and its prescribed subsidiaries exceeds, or the purchase or acquisition would cause that aggregate value to exceed, the prescribed percentage of the regulatory capital of the association.

Miscellaneous

Marginal note:Regulations

403 For the purposes of this Part, the Governor in Council may make regulations

• (a) defining the interests of an association in real property;

• (b) determining the method of valuing those interests; or

• (c) exempting classes of associations from the application of sections 397 to 402.

Marginal note:Divestment order

• 404 (1) The Superintendent may, by order, direct an association to dispose of, within any period that the Superintendent considers reasonable, any loan, investment or interest made or acquired in contravention of this Part.

• Marginal note:Divestment order

  (2) If, in the opinion of the Superintendent,

  • (a) an investment by an association or any entity it controls in shares of a body corporate or in ownership interests in an unincorporated entity enables the association to control the body corporate or the unincorporated entity, or

  • (b) the association or any entity it controls has entered into an arrangement whereby it or its nominee may veto any proposal put before

    • (i) the board of directors of a body corporate, or

    • (ii) a similar group or committee of an unincorporated entity,

    or whereby no proposal may be approved except with the consent of the association, the entity it controls or the nominee,

  the Superintendent may, by order, require the association, within any period that the Superintendent considers reasonable, to do all things necessary to ensure that the association no longer controls the body corporate or unincorporated entity or has the ability to veto or otherwise defeat any proposal referred to in paragraph (b).

• Marginal note:Divestment order

  (3) If

  • (a) an association

    • (i) fails to provide or obtain within a reasonable time the undertakings referred to in subsection 392(1), (2) or (4), or

    • (ii) is in default of an undertaking referred to in subsection 392(1) or (2) and the default is not remedied within ninety days after the day of receipt by the association of a notice from the Superintendent of the default, or

  • (b) a permitted entity referred to in subsection 392(4) is in default of an undertaking referred to in subsection 392(4) and the default is not remedied within ninety days after the day of receipt by the association of a notice from the Superintendent of the default,

  the Superintendent may, by order, require the association, within any period that the Superintendent considers reasonable, to do all things necessary to ensure that the association no longer has a substantial investment in the entity to which the undertaking relates.

• Marginal note:Exception

  (4) Subsection (2) does not apply in respect of an entity in which an association has a substantial investment permitted by this Part.

Marginal note:Deemed temporary investment

405 If an association controls or has a substantial investment in an entity as permitted by this Part and the association becomes aware of a change in the business or affairs of the entity that, if the change had taken place before the acquisition of control or of the substantial investment, would have caused the entity not to be a permitted entity or would have been such that approval for the acquisition would have been required under subsection 390(5) or (6), the association is deemed to have acquired, on the day the association becomes aware of the change, a temporary investment in respect of which section 393 applies.

Marginal note:Asset transactions

• 406 (1) An association shall not, and shall not permit its subsidiaries to, without the approval of the Superintendent, acquire assets from a person or transfer assets to a person if

  A + B > C

  where

  A

  is the value of the assets;

  B

  is the total value of all assets that the association and its subsidiaries acquired from or transferred to that person in the twelve months ending immediately before the acquisition or transfer; and

  C

  is ten per cent of the total value of the assets of the association, as shown in the last annual statement of the association prepared before the acquisition or transfer.

• Marginal note:Approval of series of transactions

  (1.1) The Superintendent may, for the purposes of subsection (1), approve a transaction or series of transactions relating to the acquisition or transfer of assets that may be entered into with a person, or with persons of any class of persons, regardless of whether those persons are known at the time of the granting of the approval or not.

• Marginal note:Exception

  (2) Subsection (1) does not apply in respect of a transaction or series of transactions between an association and a member of the association.

• Marginal note:Exception

  (3) Subsection (1) does not apply in respect of

  • (a) an asset that is a debt obligation referred to in subparagraphs (b)(i) to (vi) of the definition commercial loan in subsection 386(1);

  • (b) assets acquired or transferred under a transaction or series of transactions by an association with another financial institution as a result of the association’s participation in one or more syndicated loans with that financial institution;

  • (c) assets purchased or sold under a sale agreement that is approved by the Minister under section 233.5;

  • (d) shares of, or ownership interests in, an entity for which the approval of the Minister under Part VIII or subsection 390(5) is required or the approval of the Superintendent under subsection 390(6) is required;

  • (e) assets, other than real property, acquired or disposed of under an arrangement that has been approved by the Superintendent under subsection 418(3); or

  • (f) assets acquired or disposed of with the approval of the Superintendent under subsection 418(3.1).

• (4) [Repealed, 2007, c. 6, s. 176]

• Marginal note:Value of assets

  (5) For the purposes of “A” in subsection (1), the value of the assets is

  • (a) in the case of assets that are acquired, the purchase price of the assets or, if the assets are shares of, or ownership interests in, an entity the assets of which will be included in the annual statement of the association after the acquisition, the fair market value of the assets; and

  • (b) in the case of assets that are transferred, the value of the assets as reported in the last annual statement of the association prepared before the transfer or, if the value of the assets is not reported in that annual statement, the value of the assets as it would be reported in the annual statement of the association if the annual statement had been prepared, in accordance with the accounting principles referred to in subsection 292(4), immediately before the transfer.

• Marginal note:Total value of all assets

  (6) For the purposes of subsection (1), the total value of all assets that the association or any of its subsidiaries has acquired during the period of twelve months referred to in subsection (1) is the purchase price of the assets or, if the assets are shares of, or ownership interests in, an entity the assets of which immediately after the acquisition were included in the annual statement of the association, the fair market value of the assets of the entity at the date of the acquisition.

• Marginal note:Total value of all assets

  (7) For the purposes of subsection (1), the total value of all assets that the association or any of its subsidiaries has transferred during the 12-month period referred to in subsection (1) is the total of the value of each of those assets as reported in the last annual statement of the association prepared before the transfer of the asset or, if the value of any of those assets is not reported in that annual statement, as it would be reported in the annual statement of the association if the annual statement had been prepared, in accordance with the accounting principles referred to in subsection 292(4), immediately before the transfer of the asset.