Specialized Financing (Retail Associations) Regulations (SOR/2001-430)

Interpretation

Marginal note:Definitions

• 1 (1) The following definitions apply in these Regulations.

  Act

  Act means the Cooperative Credit Associations Act. (Loi)

  balance sheet value

  balance sheet value, in respect of the shares and ownership interests held by an entity, means the value reported on its balance sheet on an unconsolidated basis. (valeur au bilan)

  book value

  book value[Repealed, SOR/2008-168, s. 11]

  specialized financing entity of the retail association

  specialized financing entity of the retail association means a specialized financing entity that is controlled by the retail association or in which the retail association holds a substantial investment. (entité de l’association de détail s’occupant de financement spécial)

  subsidiary

  subsidiary, in respect of a retail association, does not include a subsidiary that is a specialized financing entity of the retail association. (filiale)

• Definition of specialized financing entity

  (2) In these Regulations and for the purpose of the definition specialized financing entity in subsection 386(1) of the Act, specialized financing entity means an entity that acquires or holds shares of, or ownership interests in, entities that a retail association may acquire control of, or hold, acquire or increase a substantial investment in, under subsection 388(4) of the Act.

General

Marginal note:Application

2 These Regulations apply to specialized financing activities under subsection 388(4) of the Act and to the ownership by a retail association of shares of, or ownership interests in, a specialized financing entity under paragraph 390(2)(b) of the Act.

Conditions

Marginal note:Limits on investments

3 A retail association shall not, by way of specialized financing activities, acquire control of, or hold, acquire or increase a substantial investment in,

• (a) an entity referred to in any of paragraphs 390(1)(a) to (h) of the Act;

• (b) an entity that is primarily engaged in the leasing of motor vehicles in Canada for the purpose of extending credit to a customer or financing a customer’s acquisition of a motor vehicle;

• (c) an entity that is primarily engaged in providing temporary possession of personal property, including motor vehicles, to customers in Canada for a purpose other than to finance the customer’s acquisition of the property; or

• (d) an entity that acts as an insurance broker or agent in Canada.

Marginal note:Length of investment

4 A retail association shall not, by way of specialized financing activities, hold control of, or hold a substantial investment in, an entity for more than 13 consecutive years.

Marginal note:Maximum authorized investment

5 A retail association shall not, by way of specialized financing activities, acquire control of, or hold, acquire or increase a substantial investment in, an entity if the aggregate balance sheet value of the shares and ownership interests that the retail association, any subsidiary of the retail association and any specialized financing entity of the retail association hold or would hold in the entity is more than $250 million.

Marginal note:Limit of 10% of regulatory capital

6 A retail association shall not, by way of specialized financing activities, acquire control of, or hold, acquire or increase a substantial investment in, an entity if the sum of the following exceeds 10% of the retail association’s regulatory capital:

• (a) the aggregate balance sheet value of the shares and ownership interests that the retail association and its subsidiaries, whether individually or jointly, would acquire in the entity,

• (b) the aggregate value of outstanding loans made by the retail association and its subsidiaries, whether individually or jointly, to the specialized financing entities of the retail association, and

• (c) the aggregate balance sheet value of the shares and ownership interests held by the retail association and its subsidiaries, whether individually or jointly, in the specialized financing entities of the retail association, in the entities controlled by the retail association by way of specialized financing activities, and in the entities in which the retail association holds a substantial investment by way of specialized financing activities.

Marginal note:Limit of 25% of regulatory capital — investment in a specialized financing entity

• 7 (1) A retail association shall not, by way of specialized financing activities, acquire control of, or hold, acquire or increase a substantial investment in, an entity controlled by a specialized financing entity of the retail association or an entity in which the specialized financing entity of the retail association holds a substantial investment, if the sum of the following exceeds or would exceed 25% of the retail association’s regulatory capital:

  • (a) the aggregate balance sheet value of the shares and ownership interests held by the retail association and its subsidiaries, whether individually or jointly, in the specialized financing entity of the retail association, in the entities controlled by the specialized financing entity of the retail association and in the entities in which that specialized financing entity holds a substantial investment, and

  • (b) the aggregate value of outstanding loans that the retail association and its subsidiaries, whether individually or jointly, have made to the specialized financing entity of the retail association, to the entities controlled by the specialized financing entity of the retail association and to the entities in which that specialized financing entity holds a substantial investment.

• Marginal note:Limit of 25% of regulatory capital — investment in an entity

  (2) A retail association shall not, by way of specialized financing activities, acquire control of, or hold, acquire or increase a substantial investment in, an entity, other than by way of an investment of a specialized financing entity controlled by the retail association, if the sum of the following exceeds 25% of the retail association’s regulatory capital:

  • (a) the aggregate balance sheet value of the shares and ownership interests that the retail association and its subsidiaries, whether individually or jointly, would acquire in the entity,

  • (b) the aggregate balance sheet value of the shares and ownership interests held by the retail association and its subsidiaries, whether individually or jointly, in the entities controlled by the retail association by way of specialized financing activities and in the entities in which the retail association holds a substantial investment by way of specialized financing activities, other than entities that the retail association has acquired control of, or a substantial investment in, by way of an investment of a specialized financing entity of the retail association, and

  • (c) the aggregate value of outstanding loans that the retail association and its subsidiaries, whether individually or jointly, have made to the entities controlled by the retail association by way of specialized financing activities and to the entities in which the retail association holds a substantial investment by way of specialized financing activities, other than entities that the retail association has acquired control of, or a substantial investment in, by way of an investment of a specialized financing entity of the retail association.

Acquisition of Specialized Financing Entities

Definition of non-controlling interest

• 8 (1) In this section, non-controlling interest means an equity interest, in a specialized financing entity of the retail association controlled by a specialized financing entity, that is held by a person other than the retail association or an entity controlled by the retail association.

• Marginal note:Ownership restrictions

  (2) A retail association shall not acquire or hold control of, or hold, acquire or increase a substantial investment in, a specialized financing entity if

  • (a) the value of the outstanding debt obligations, other than those payable to the retail association or to entities controlled by the retail association, of the specialized financing entity and any specialized financing entity of the retail association controlled by the specialized financing entity, as reported on their respective balance sheets on an unconsolidated basis, exceeds twice the value of the sum of the following, namely,

    • (i) the value of the excess of assets over liabilities of the specialized financing entity as reported on its balance sheet on an unconsolidated basis, and

    • (ii) the value of the non-controlling interests as reported on the balance sheet of the specialized financing entity on a consolidated basis;

  • (b) the specialized financing entity controls or holds shares of, or ownership interests in, any of the entities referred to in paragraphs 3(a) to (d);

  • (c) the aggregate balance sheet value of the shares and ownership interests, other than shares or ownership interests held by the specialized financing entity in a specialized financing entity of the retail association that it controls, that the retail association, the specialized financing entity, the subsidiaries of the retail association and the other specialized financing entities of the retail association hold, or would hold, in an entity that the specialized financing entity holds control of, or a substantial investment in, is more than $250 million;

  • (d) the sum of the values under paragraphs 6(a) to (c) exceeds or would exceed 10% of the retail association’s regulatory capital; or

  • (e) the sum of the values under paragraphs 7(1)(a) and (b) exceeds or would exceed 25% of the retail association’s regulatory capital.

• Marginal note:13 year limit

  (3) A retail association shall not hold control of, or a substantial investment in, a specialized financing entity of the retail association if either the specialized financing entity of the retail association or the specialized financing entity of the retail association and one or more of the following entities, one after another, have held control of, or a substantial investment in, an entity, other than an entity described in subsection (4), for more than 13 consecutive years:

  • (a) the retail association; or

  • (b) any other specialized financing entity of the retail association.

• Marginal note:Exception

  (4) A specialized financing entity of the retail association controlled by the specialized financing entity of the retail association shall not be considered for the purpose of subsection (3).

• Marginal note:Prior periods not included

  (5) If a specialized financing entity of the retail association held control of, or a substantial investment in, an entity for a period before becoming the specialized financing entity of the retail association, that period shall not be considered for the purpose of subsection (3).

Marginal note:Control not required

9 Subsection 390(4) of the Act does not apply to a retail association’s acquisition or increase of a substantial investment in an entity by way of specialized financing activities in accordance with these Regulations.

Marginal note:Approvals not required

10 Subsections 390(5) and (6) of the Act do not apply to a retail association’s acquisition of control of, or its acquisition or increase of a substantial investment in, an entity by way of specialized financing activities in accordance with these Regulations.

Repeal

Marginal note:Repeal

11 [Repeal]

Coming into Force

Marginal note:Coming into force

Footnote ^*12 These Regulations come into force on the day on which sections 389, 396 and 463 of the Cooperative Credit Associations Act, as enacted by sections 314 and 339 of the Financial Consumer Agency of Canada Act, chapter 9 of the Statutes of Canada, 2001, come into force.

• Return to footnote ^*[Note: Regulations in force October 24, 2001, see SI/2001-102.]