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

Prohibited Related Party Transactions

Marginal note:Prohibited transactions

• 413 (1) Except as provided in this Part, an association shall not, directly or indirectly, enter into any transaction with a related party of the association.

• Marginal note:Transaction of entity

  (2) Without limiting the generality of subsection (1), an association is deemed to have indirectly entered into a transaction in respect of which this Part applies where the transaction is entered into by an entity that is controlled by the association.

• Marginal note:Exception

  (3) Subsection (2) does not apply where an entity that is controlled by an association is a financial institution incorporated or formed under the laws of a province and is subject to regulation and supervision, satisfactory to the Minister, regarding transactions with related parties of the association.

• Marginal note:Idem

  (4) Subsection (2) does not apply in respect of transactions entered into by an entity that is controlled by an association if the transaction is a prescribed transaction or is one of a class of prescribed transactions.

Permitted Related Party Transactions

Marginal note:Nominal value transactions

414 Notwithstanding anything in this Part, an association may enter into a transaction with a related party of the association if the value of the transaction is nominal or immaterial to the association when measured by criteria that have been established by the conduct review committee of the association and approved in writing by the Superintendent.

Marginal note:Secured loans

415 An association may make a loan to or a guarantee on behalf of a related party of the association or take an assignment of or otherwise acquire a loan to a related party of the association if

• (a) the loan or guarantee is fully secured by securities of or guaranteed by the Government of Canada or the government of a province; or

• (b) the loan is a loan made to a related party who is a natural person on the security of a mortgage of the principal residence of that related party.

Marginal note:Deposits

416 An association may enter into a transaction with a related party of the association if the transaction consists of a deposit by the association with a financial institution that is a direct clearer or a member of a clearing group under the by-laws of the Canadian Payments Association and the deposit is made for clearing purposes.

Marginal note:Borrowing, etc., from related party

417 An association may borrow money from, take deposits from, or issue debt obligations to, a related party of the association.

Marginal note:Acquisition of assets

• 418 (1) An association may purchase or otherwise acquire from a related party of the association

  • (a) securities of, or securities guaranteed by, the Government of Canada or the government of a province;

  • (b) assets fully secured by securities of, or securities guaranteed by, the Government of Canada or the government of a province; or

  • (c) goods for use in the ordinary course of business.

• Marginal note:Sale of assets

  (2) Subject to section 406, an association may sell any assets of the association to a related party of the association if

  • (a) the consideration for the assets is fully paid in money; and

  • (b) there is an active market for those assets.

• Marginal note:Asset transactions with financial institutions

  (3) Notwithstanding any of the provisions of subsections (1) and (2), an association may, in the normal course of business and pursuant to arrangements that have been approved by the Superintendent in writing, acquire or dispose of any assets, other than real property, from or to a related party of the association that is a financial institution.

• Marginal note:Asset transactions in restructuring

  (3.1) Despite any of the provisions of subsections (1) and (2), an association may acquire any assets from, or dispose of any assets to, a related party of the association as part of, or in the course of, a restructuring, if the acquisition or disposition has been approved in writing by the Superintendent.

• Marginal note:Goods or space for use in business

  (4) An association may lease assets

  • (a) from a related party of the association for use in the ordinary course of business of the association, or

  • (b) to a related party of the association,

  if the lease payments are made in money.

• Marginal note:Approval under section 233.5

  (5) An association may acquire any assets from, or dispose of any assets to, a related party of the association under a sale agreement that is approved by the Minister under section 233.5.

Marginal note:Services

• 419 (1) An association may enter into a transaction with a related party of the association if the transaction

  • (a) subject to subsection (2), consists of a written contract for the purchase by the association of services used in the ordinary course of business;

  • (a.1) in the case of a retail association, involves, subject to subsection (4), the provision of services, other than loans or guarantees, normally provided to the public by the association in the ordinary course of business;

  • (b) consists of a written contract with a financial institution or an entity in which the association is permitted to have a substantial investment pursuant to section 390 that is a related party of the association

    • (i) for the networking of any services provided by the association or the financial institution or entity, or

    • (ii) for the referral of any person by the association to the financial institution or entity, or for the referral of any person by the financial institution or entity to the association;

  • (c) consists of a written contract for such pension or benefit plans or their management or administration as are incidental to directorships or to the employment of officers or employees of the association or its subsidiaries; or

  • (d) involves the provision by the association of management, advisory, accounting, information processing or other services in relation to any business of the related party.

• Marginal note:Order concerning management by employees

  (2) Where an association has entered into a contract pursuant to paragraph (1)(a) and the contract, when taken together with all other such contracts entered into by the association, results in all or substantially all of the management functions of the association being exercised by persons who are not employees of the association, the Superintendent may, by order, if the Superintendent considers that result to be inappropriate, require the association, within such time as may be specified in the order, to take all steps necessary to ensure that management functions that are integral to the carrying on of business by the association are exercised by employees of the association to the extent specified in the order.

• Marginal note:Exception

  (3) Despite subsection 413(2), an association is deemed not to have indirectly entered into a transaction in respect of which this Part applies if the transaction is entered into by an entity that is controlled by the association and the business of which is limited to the activity referred to in paragraph 390(2)(c) and the transaction is on terms and conditions at least as favourable to the association as market terms and conditions, as defined in subsection 425(2).

• Marginal note:Loans or guarantees not included

  (4) The provision of services, for the purposes of paragraph (1)(a.1), does not include the making of loans or guarantees.

Marginal note:Directors and officers and their interests

• 420 (1) Subject to subsection (2) and sections 421 and 422, an association may enter into any transaction with a related party of the association if the related party is

  • (a) a natural person who is a related party of the association only because the person is

    • (i) a director or senior officer of the association or of an entity that controls the association, or

    • (ii) the spouse or common-law partner, or a child who is less than eighteen years of age, of a director or senior officer of the association or of an entity that controls the association; or

  • (b) an entity that is a related party of the association only because the entity is controlled by

    • (i) a director or senior officer of the association or of an entity that controls the association, or

    • (ii) the spouse or common-law partner, or a child who is less than eighteen years of age, of a director or senior officer of the association or of an entity that controls the association.

• Marginal note:Loans to full-time senior officers

  (2) An association may, with respect to a related party of the association referred to in subsection (1) who is a full-time senior officer of the association, make, take an assignment of or otherwise acquire a loan to the related party only if the aggregate principal amount of all outstanding loans to the related party that are held by the association and its subsidiaries, together with the principal amount of the proposed loan, does not exceed the greater of twice the annual salary of the related party and $100,000.

• Marginal note:Exception

  (3) Subsection (2) does not apply in respect of

  • (a) loans referred to in paragraph 415(b), and

  • (b) margin loans referred to in section 422,

  and the amount of any such loans to a related party of an association shall not be included in determining, for the purposes of subsection (2), the aggregate principal amount of all outstanding loans made by the association to the related party.

• Marginal note:Preferred terms — loan to senior officer

  (4) Notwithstanding section 425, an association may make a loan, other than a margin loan, to a senior officer of the association on terms and conditions more favourable to the officer than market terms and conditions, as defined in subsection 425(2), if those terms and conditions of the loan have been approved by the conduct review committee of the association.

• Marginal note:Preferred terms — loan to spouse or common-law partner of senior officer

  (4.1) Despite section 425, an association may make a loan referred to in paragraph 415(b) to the spouse or common-law partner of a senior officer of the association on terms and conditions more favourable than market terms and conditions, as defined in subsection 425(2), by the association if those terms and conditions have been approved by the conduct review committee of the association.

• Marginal note:Preferred terms — other financial services

  (5) Despite section 425, an association may offer financial services, other than loans or guarantees, to a senior officer of the association, or to the spouse or common-law partner, or to a child who is less than eighteen years of age, of a senior officer of the association, on terms and conditions more favourable than market terms and conditions, as defined in subsection 425(2), if

  • (a) the financial services are offered by the association to employees of the association on those favourable terms and conditions; and

  • (b) the conduct review committee of the association has approved the practice of making those financial services available on those favourable terms and conditions to senior officers of the association or to the spouses or the common-law partners, or to the children under eighteen years of age, of senior officers of the association.

Marginal note:Board approval required

• 421 (1) Except with the concurrence of at least two thirds of the directors present at a meeting of the board of directors of the association, an association shall not, with respect to a related party of the association referred to in subsection 420(1),

  • (a) make, take an assignment of or otherwise acquire a loan to the related party, including a margin loan referred to in section 422,

  • (b) make a guarantee on behalf of the related party, or

  • (c) make an investment in the securities of the related party

  if, immediately following the transaction, the aggregate of

  • (d) the principal amount of all outstanding loans to the related party that are held by the association and its subsidiaries, other than

    • (i) loans referred to in paragraph 415(b), and

    • (ii) where the related party is a full-time senior officer of the association, loans to the related party that are permitted by subsection 420(2),

  • (e) the sum of all outstanding amounts guaranteed by the association and its subsidiaries on behalf of the related party, and

  • (f) where the related party is an entity, the book value of all investments by the association and its subsidiaries in the securities of the entity

  would exceed 2 per cent of the regulatory capital of the association.

• Marginal note:Limit on transactions with directors, officers and their interests

  (2) An association shall not, with respect to a related party of the association referred to in subsection 420(1),

  • (a) make, take an assignment of or otherwise acquire a loan to the related party, including a margin loan referred to in section 422,

  • (b) make a guarantee on behalf of the related party, or

  • (c) make an investment in the securities of the related party

  if, immediately following the transaction, the aggregate of

  • (d) the principal amount of all outstanding loans to all related parties of the association referred to in subsection 420(1) that are held by the association and its subsidiaries, other than

    • (i) loans referred to in section 415, and

    • (ii) loans permitted by subsection 420(2),

  • (e) the sum of all outstanding amounts guaranteed by the association and its subsidiaries on behalf of all related parties of the association referred to in subsection 420(1), and

  • (f) the book value of all investments by the association and its subsidiaries in the securities of all entities that are related parties of the association referred to in subsection 420(1)

  would exceed 50 per cent of the regulatory capital of the association.

• Marginal note:Exclusion of de minimis transactions

  (3) Loans, guarantees and investments that are referred to in section 414 shall not be included in calculating the aggregate of loans, guarantees and investments referred to in subsections (1) and (2).