Insurance Companies Act (S.C. 1991, c. 47)

Marginal note:Payment

235 Notwithstanding anything in this Act, a company may, with the approval of the Superintendent, pay for shares purchased or otherwise acquired pursuant to a mutualization proposal by

• (a) making a promissory note that is, or issuing debt securities that are, payable at a fixed or determinable future time not later than ten years after the date of its making or their issue; or

• (b) issuing shares that a mutual company may issue.

Marginal note:Conversion into mutual company

• 236 (1) Where a company purchases or otherwise acquires all of its common shares pursuant to a mutualization proposal,

  • (a) the company shall cancel those shares; and

  • (b) the directors of the company shall apply to the Minister for the issue of letters patent to effect the conversion of the company into a mutual company.

• Marginal note:Issue of letters patent

  (2) On receipt of an application referred to in subsection (1), the Minister shall issue letters patent to effect the conversion of the company into a mutual company.

• Marginal note:Effect of letters patent

  (3) Letters patent issued pursuant to subsection (2) become effective on the day stated in the letters patent.

Conversion into Company with Common Shares

Marginal note:Definitions

236.1 The following definitions apply in sections 237 to 237.2.

conversion proposal

conversion proposal means a proposal to convert a mutual company into a company with common shares. (proposition de transformation)

converting company

converting company has the meaning given to that expression by the regulations. (société en transformation)

eligible policyholder

eligible policyholder has the meaning given to that expression by the regulations. (souscripteur admissible)

letters patent of conversion

letters patent of conversion means letters patent issued under paragraph 237(1)(b). (lettres patentes de transformation)

Marginal note:Conversion into company with common shares

• 237 (1) On the application of a mutual company made in accordance with the regulations, the Minister may, on the recommendation of the Superintendent,

  • (a) approve a conversion proposal; and

  • (b) issue letters patent of conversion to effect the conversion proposal.

• Marginal note:Special meeting of eligible policyholders

  (1.1) Before an application is made under subsection (1), the directors of the company must call a special meeting of eligible policyholders to obtain

  • (a) approval of the conversion proposal;

  • (b) confirmation of any by-law or of any amendment to or repeal of a by-law that is necessary to implement the conversion proposal; and

  • (c) authorization to make the application.

• Marginal note:Notice of meeting and policyholder list

  (1.2) A company shall, in respect of a special meeting,

  • (a) send, not less than 45 days and not more than 75 days before the meeting, to each eligible policyholder a notice of the time and place of the meeting, describing the conversion proposal in sufficient detail to permit a policyholder to form a reasoned judgment about the terms of the proposal and its impact on both policyholders and the company, together with the prescribed information in respect of the conversion proposal; and

  • (b) prepare, not less than 45 days before the meeting, a list, which may be in electronic form, of all eligible policyholders.

• Marginal note:Application of subsection 149(5)

  (1.3) Subsection 149(5) applies, with any modifications that the circumstances require, in respect of the list of eligible policyholders.

• Marginal note:Entitlement to notice and right to vote

  (1.4) Only eligible policyholders are entitled to notice of and to vote at a special meeting.

• Marginal note:Special resolution

  (1.5) Any approval, confirmation or authorization referred to in subsection (1.1) must be given by special resolution of the eligible policyholders.

• Marginal note:Regulations

  (2) The Governor in Council may make regulations

  • (a) respecting the application referred to in subsection (1), including the form of the application and the information to be contained in the application, and authorizing the Superintendent to require additional information in order to make a recommendation;

  • (a.01) respecting the process that precedes the calling of a special meeting under subsection (1.1), including the development of a conversion proposal, and respecting the calling of that meeting;

  • (a.1) respecting the conversion proposal, including the information to be contained in the conversion proposal, and authorizing the Superintendent to approve the measures to be taken by the converting company in respect of any proposed amendment to the conversion proposal;

  • (a.2) respecting the value of a converting company for the purposes of the regulations and authorizing the Superintendent to specify a day at which the value shall be estimated by the converting company;

  • (b) concerning the fair and equitable treatment of policyholders under a conversion proposal;

  • (c) governing the ownership of shares issued by a mutual company that has been converted into a company with common shares, including limiting the circumstances in which the Minister may give approval under subsection 407(1);

  • (c.1) respecting the authorization by the Superintendent of the sending of a notice of a special meeting referred to in subsection (1.1), including

    • (i) prescribing the information to be submitted by the converting company in support of an authorization,

    • (ii) authorizing the Superintendent to consider information in addition to that referred to in subparagraph (i), and

    • (iii) authorizing the Superintendent to require that information, in addition to the prescribed information referred to in paragraph (1.2)(a), be sent with a notice;

  • (c.2) authorizing the Superintendent to

    • (i) require the converting company to hold one or more information sessions for eligible policyholders and to take other measures to assist eligible policyholders in forming a reasoned judgment on the conversion proposal, and

    • (ii) set the rules under which the information sessions must be held;

  • (c.3) respecting restrictions on any fee, compensation or other consideration that may be paid, in respect of the conversion of a mutual company into a company with common shares, to any director, officer or employee of the company or to any entity with which a director, officer or employee of the company is associated;

  • (c.4) prohibiting, during the period set out in the regulations, the issuance or provision of shares, share options or rights to acquire shares, of a company that has been converted from a mutual company into a company with common shares to

    • (i) any director, officer or employee of the company, or

    • (ii) any person who was a director, officer or employee of the company during the year preceding the effective date of conversion of the company; and

  • (d) generally, respecting the conversion of a mutual company into a company with common shares.

• Marginal note:Regulations made under paragraph (2)(a.01)

  (2.1) Regulations made under paragraph (2)(a.01) may provide for court intervention in the process referred to in that paragraph, including the circumstances in which the court is to be seized of any matter in relation to that process, and may govern the court’s powers and procedures in that regard. They may also govern authorizations by the Superintendent in respect of notices to be sent in the context of that process.

• Marginal note:Exemption by Superintendent

  (3) A regulation made under subsection (2) may provide that the Superintendent may, on such terms and conditions as the Superintendent considers appropriate, exempt a company from prescribed requirements of that regulation.

• Marginal note:Exemption by Minister

  (4) The Minister may, on such terms and conditions as the Minister considers appropriate, exempt a company from any requirement of this Act or the regulations if

  • (a) the company is a mutual company applying for the approval of a proposal to convert the company into a company with common shares; and

  • (b) the Minister is of the opinion that the company is, or is about to be, in financial difficulty and that the exemption would help to facilitate an improvement in the financial condition of the company.

Marginal note:Effect of letters patent of conversion

• 237.1 (1) Letters patent of conversion become effective on the day stated in the letters patent of conversion, and on that day

  • (a) the company ceases to be a mutual company; and

  • (b) the policyholders of the company cease to have any rights with respect to or any interest in the company as a mutual company.

• Marginal note:Consideration for shares

  (2) For the purposes of subsection 69(1) and section 70, shares issued by a company under a conversion proposal are deemed to be fully paid for in money and the amount of consideration received by the company for those shares is deemed to be equal to the book value of the company immediately after the effective date of its conversion, determined in accordance with the accounting principles referred to in subsection 331(4) and calculated without taking into account any amounts remaining at that time in the participating accounts that the company maintains under section 456.

Marginal note:Distribution prohibited

• 237.2 (1) A mutual company shall not take any action or series of actions directed toward the distribution of all or part of its property to its policyholders or shareholders or the provision of any other benefit to its policyholders or shareholders, other than as provided in subsections 237(1) to (1.2), until a conversion proposal has been approved by the Minister under subsection 237(1).

• Marginal note:Exception

  (2) Nothing in subsection (1) prevents

  • (a) the directors of the company from declaring a dividend on shares or a policy dividend, bonus or other benefit payable to policyholders in the ordinary course of business; or

  • (b) the company from paying or otherwise satisfying a dividend, bonus or other benefit referred to in paragraph (a).

• Marginal note:Non-application

  (3) This section does not apply to a company that is insolvent within the meaning of the Winding-up and Restructuring Act.

Amendments — By-laws

Marginal note:By-laws

• 238 (1) The directors of a company may make, amend or repeal any by-laws, in the manner set out in subsections (2) and (3) and sections 239 to 244, to

  • (a) change the maximum number, if any, of shares of any class that the company is authorized to issue;

  • (b) create new classes of shares;

  • (c) change the designation of any or all of the company’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 company’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) change the rights of policyholders to vote at meetings of shareholders or policyholders, subject to subsection 153(1);

  • (i.1) change the name of the company;

  • (j) increase or decrease the number of directors, the minimum or maximum number of directors, the number of directors who are to be elected by the shareholders or the number of directors who are to be elected by the policyholders, subject to subsections 167(1) and 173(4) and (4.1) and section 176; or

  • (k) change the province in which the head office of the company is situated.

• Marginal note:Shareholder or policyholder 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 policyholders entitled to vote, and the shareholders and policyholders may, by special resolution, confirm, amend or reject the by-law, amendment or repeal.

• Marginal note:Right to vote

  (2.1) The by-laws of a company may provide that each participating share, as defined in section 83.01, of a mutual company carries the right to vote on a proposed addition or amendment to the by-laws to do anything referred to in any of paragraphs (1)(a) to (h), (j) and (k). Where that right is provided for in the by-laws, each of those shares carries that right even if they do not otherwise carry the right to vote.

• Marginal note:Separate vote

  (2.2) The holders of shares who are entitled under subsection (2.1) to vote on a proposed addition or amendment referred to in that subsection are entitled to vote on it separately from policyholders.

• 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 and policyholders under subsection (2) and, in the case of a by-law respecting a change to the name of the company, approved by the Superintendent.

• Marginal note:Letters patent

  (4) If the name of a company or the province in Canada in which the head office of the company is situated is changed under this section, the Superintendent may issue letters patent to amend the company’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

• 239 (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 company, 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.