Atlantic Enterprise Loan Insurance Regulations (SOR/86-524)

Short Title

1 These Regulations may be cited as the Atlantic Enterprise Loan Insurance Regulations.

Interpretation

• 2 (1) In these Regulations,

  applicant

  applicant means an individual, partnership, cooperative or body corporate or any trustee or legal representative thereof, but does not include a government, a municipality or an agency thereof or a legal entity owned or controlled by that government, municipality or agency or any subsidiary thereof, who makes an application for loan insurance under these Regulations; (requérant)

  Atlantic project

  Atlantic project means an activity in the Province of Nova Scotia, New Brunswick, Prince Edward Island or Newfoundland, the capital costs of which do not exceed twenty million dollars

  • (a) for the establishment, expansion, modernization or renovation of a commercial operation in the tourism sector as described in item 11 of the schedule, or

  • (b) for the establishment, expansion or modernization of a commercial operation in any other eligible sector; (projet de l’Atlantique)

  capital costs

  capital costs means, in respect of a project or Atlantic project, the capital costs, determined in accordance with generally accepted accounting principles, that are necessary to carry out the project or Atlantic project, other than

  • (a) goodwill,

  • (b) motor vehicles not used exclusively on a project or Atlantic project site or between two or more project or Atlantic project sites, and

  • (c) the portion of the cost of any asset that exceeds fair market value; (coûts d’immobilisations)

  designated region

  designated region means the provinces of Nova Scotia, New Brunswick, Prince Edward Island and Newfoundland and the Gaspé Peninsula region of the Province of Quebec, that extends to the western and southern borders of Kamouraska County as shown in the Statistics Canada publication 1981 Census of Canada, Reference maps, Census divisions and subdivisions, and includes the Magdalen Islands; (région désignée)

  eligible sector

  eligible sector means a sector set out in the schedule; (secteur admissible)

  formal demand

  formal demand means a demand made by the lender for the repayment of the outstanding amount under the loan agreement; (demande officielle)

  lender

  lender means a bank and includes a bank to which the Quebec Savings Banks Act applies, a credit union, a caisse populaire or any other cooperative society, a trust company, a loan company, an insurance company, a pension fund, or a non-bank affiliate of a foreign bank as defined in section 303 of the Bank Act, but does not include an institution that is controlled by the Government of Canada, the government of a province or any municipality or agency thereof; (prêteur)

  loan agreement

  loan agreement means an agreement entered into by a lender and an applicant whereby the lender makes a loan to the applicant to finance the applicant’s project or Atlantic project; (convention de prêt)

  loan insurance agreement

  loan insurance agreement means an agreement entered into by the Minister and a lender whereby the Minister provides loan insurance to the lender under these Regulations on a loan made by the lender to an applicant; (convention d’assurance-prêt)

  Minister

  Minister means, in relation to a project, the Minister of Regional Industrial Expansion and, in relation to an Atlantic project, the Minister responsible for the Atlantic Canada Opportunities Agency; (ministre)

  project

  project means

  • (a) the establishment, expansion, modernization or renovation of a commercial operation in the tourism sector as described in the schedule, and located in the designated region, or

  • (b) the establishment, expansion or modernization of a commercial operation in any other eligible sector located in the designated region. (projet)

• (2) For the purposes of the definitions project and Atlantic project in subsection (1), the establishment of a commercial operation includes the purchase of the assets of an existing facility if, at the time of the application,

  • (a) the operation of the existing facility to be purchased has ceased or is about to cease;

  • (b) the cessation or imminent cessation of operation of the existing facility to be purchased is dictated by circumstances beyond the control of its owner; and

  • (c) the purchase of the assets of the existing facility is a bona fide arm’s length transaction by an applicant unrelated to the present owner or his immediate predecessor, and has not been contrived solely for the purpose of making an application under these Regulations.

Insurance

3 The Minister may provide insurance to a lender on a loan made by the lender to an applicant under a loan agreement if

• (a) the loan is for an amount of not less than $100,000 and the term of the loan does not exceed 15 years;

• (b) the total amount of the loan is to be used to finance a project or Atlantic project;

• (c) except as provided in section 4, the loan is to be applied only to capital costs;

• (d) the lender acquires enforceable security for the repayment of the loan by way of a security interest in a form consistent with standard banking practice;

• (e) the applicant is unable to obtain loan financing on reasonable terms without loan insurance provided to the lender by the Minister;

• (f) the project or Atlantic project would not be likely to be carried out within the proposed time or scope or in the proposed location if no loan insurance were provided to the lender by the Minister;

• (g) the project or Atlantic project and the applicant’s existing commercial operations are or will become commercially viable within reasonable bounds of risk;

• (h) in the case of a project, the project would constitute a significant contribution to the economic benefit of Canada and the designated region or, in the case of an Atlantic project, the Atlantic project would constitute a significant contribution to the economic benefit of Canada and the provinces of Nova Scotia, New Brunswick, Prince Edward Island and Newfoundland; and

• (i) all other requirements of these Regulations are met.

4 Notwithstanding paragraph 3(c), the Minister may, with the concurrence of the Minister of Finance, provide insurance on a loan for working capital necessary to carry out a project or Atlantic project if

• (a) all other requirements of section 3 are met; and

• (b) such insurance is essential to the viability of the project or Atlantic project.

• 5 (1) The Minister may insure a loan made in respect of a project in the tourism sector as described in item 11 of the schedule if the quality and scope of the project are such that it would attract international or interprovincial tourists.

• (2) The Minister may insure a loan made in respect of an Atlantic project in the tourism sector as described in item 11 of the schedule if the quality and scope of the Atlantic project are such that it would attract or provide services for tourists.

6 Where a loan is made in respect of the establishment, expansion, modernization or renovation of a facility designed to serve food or drink, no insurance shall be provided under these Regulations in respect of that loan unless that facility

• (a) constitutes part of or supports a tourism facility; or

• (b) is of a sufficiently thematic or unique nature to constitute a tourism attraction in its own right.

Coverage

7 Except as provided in section 8, the amount of insurance provided by the Minister to the lender shall not exceed 90 per cent of an amount disbursed pursuant to a loan agreement.

8 Where a project or Atlantic project is likely to be of exceptional benefit to Canada, the Minister may, with the concurrence of the Minister of Finance, insure up to 95 per cent of a loan disbursed pursuant to a loan agreement.

Application

• 9 (1) An applicant requiring insurance under these Regulations in order to obtain a loan from a lender shall apply in writing to the Minister and shall provide a detailed description of the project or Atlantic project and any other information relating to the application that is necessary in order for the Minister to effectively evaluate the application.

• (2) Where an application for insurance is approved by the Minister, the Minister shall enter into a loan insurance agreement with the lender.

Insurance Fee

• 10 (1) Where a loan insurance agreement is entered into, an insurance fee is payable in advance by the lender to the Minister in accordance with the following formulae:

  • (a) fee payable at the time of the first disbursement:

    A × B × 0.01

  • (b) fee payable at the time of each subsequent disbursement:

    A × B × C ÷ 365 × 0.01

  • (c) fee payable on each anniversary of the date of the first disbursement until the earlier of the date of formal demand and the date the loan is repaid:

    A × D × 0.01

    where

    A

    is the percentage of the loan that the Minister agrees to insure under the loan insurance agreement,

    B

    is the amount of the disbursement,

    C

    is the number of days remaining between the date of the disbursement and the next anniversary of the date of the first disbursement under the loan agreement,

    D

    is the amount of money disbursed and remaining outstanding under the loan agreement on the anniversary date in question.

• (2) An insurance fee paid under subsection (1) is not refundable in whole or in part.

Payment of Insurance

12 The Minister shall not pay a lender’s claim under a loan insurance agreement until a formal demand is made by the lender and the lender has provided evidence that the lender has taken all reasonable steps to protect the lender’s rights and realize on the security for the loan made under the loan agreement.

13 A claim by a lender shall contain all information that is reasonably necessary in order for the Minister to determine the amount of insurance payable.

• 14 (1) The maximum amount payable by the Minister to a lender shall be the lesser of

  • (a) the insured percentage (as stipulated in the loan insurance agreement) of the loss incurred under a loan agreement; and

  • (b) the amount of insurance in force at the time of the formal demand.

• (2) For the purpose of subsection (1), loss means the aggregate of

  • (a) the principal amount of a loan outstanding and the amount of unpaid interest at the date of the formal demand, less

    • (i) the net amount realized on the security provided for the loan, and

    • (ii) the portion of any other amount recovered by the lender after the date of the formal demand in excess of all other indebtedness of the applicant to the lender;

  • (b) reasonable legal fees, disbursements and other expenses paid by the lender to collect or to endeavour to collect any amount referred to in paragraph (a) or any portion thereof;

  • (c) disbursements made by the lender to protect any security provided for the loan; and

  • (d) interest on the amounts referred to in paragraphs (a), (b) and (c) from the date of the formal demand until the date of payment of the lender’s claim by the Minister

    • (i) at the rate charged by the lender at the date of the formal demand,

      • (A) for a period of up to l80 days from the date of the formal demand, and

      • (B) for an additional period not exceeding 180 days where the Minister and the lender have agreed that it is in the interest of all parties concerned to wait for that additional period before realizing on the security or any portion thereof, and

    • (ii) at one-half the rate referred to in subparagraph (i) for any period after the relevant period or periods referred to in that subparagraph.