Northern Ontario Loan Insurance Regulations (SOR/88-503)

Short Title

1 These Regulations may be cited as the Northern Ontario 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, who makes an application pursuant to subsection 3(1), but does not include a government, municipality or agency thereof or a legal entity owned or controlled by a government, municipality or agency or any subsidiary thereof, or any combination thereof; (requérant)

  capital costs

  capital costs means capital costs that are determined in accordance with generally accepted accounting principles to be necessary to carry out a project, other than

  • (a) goodwill,

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

  • (c) aircraft, and

  • (d) the portion of the cost of any asset which exceeds fair market value; (coûts en immobilisations)

  designated region

  designated region means that area of Ontario north of and including the census divisions of Parry Sound and Nipissing as shown in the Statistics Canada publication 1981 Census of Canada, Reference Maps, Census divisions and subdivisions; (région désignée)

  disbursement

  disbursement means any amount paid by a lender to an applicant under a loan agreement; (versement)

  eligible sector

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

  formal demand

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

  lender

  lender means a bank, credit union, caisse populaire or any other cooperative society, a trust company, a loan company, an insurance company or 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 a government, municipality or agency thereof or an institution that is controlled by the Government of Canada, the government of a province, a municipality or by any agency thereof, or any combination thereof; (prêteur)

  loan agreement

  loan agreement means any agreement entered into by a lender and an applicant whereby the lender agrees to grant to the applicant a loan to finance the applicant’s project and for which a loan insurance agreement is made; (convention de prêt)

  loan insurance agreement

  loan insurance agreement means any agreement entered into by the Minister and a lender whereby the Minister agrees to provide loan insurance to the lender in respect of one or more loans granted under one or more loan agreements; (convention d’assurance-prêt)

  Minister

  Minister means the Minister of Industry, Science and Technology; (ministre)

  project

  project means

  • (a) the establishment, expansion, modernization or renovation of a commercial operation located in the designated region in eligible sector 11, or

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

• (2) For the purposes of the definition project in subsection (1), the establishment of a commercial operation includes the purchase of the assets of a facility if, at the time an applicant makes an application under these Regulations,

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

  • (b) the cessation or imminent cessation of the operation of the facility is due to circumstances beyond the control of its owner; and

  • (c) the purchase of the assets of the facility is an arm’s length transaction by the applicant in good faith who is unrelated to the present owner or the immediate predecessor of that owner, and the purchase has not been undertaken for the sole purpose of an application under these Regulations.

Insurance

• 3 (1) An applicant requiring that the Minister enter into a loan insurance agreement shall apply in writing to the Minister on or before March 31, 1992 and shall provide a detailed description of the project and any other information that is necessary to effectively evaluate the application.

• (2) The Minister may enter into a loan insurance agreement where

  • (a) the loan agreement is for an amount of not more than $15,000,000 and 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 the applicant’s project;

  • (c) subject to section 4, the loan is to be used to finance only capital costs;

  • (d) the applicant is unable to obtain a loan on commercially acceptable terms, without a loan insurance agreement;

  • (e) the project would not likely be carried out within the proposed time or scope or in the proposed location, as described in an application made pursuant to subsection (1), without a loan insurance agreement;

  • (f) an application made pursuant to subsection (1) includes pro forma financial statements for each year in which loan insurance is required by the lender;

  • (g) the project and the applicant’s commercial operations, as the case may be, are or are expected to be commercially viable, subject to reasonable commercial risk;

  • (h) an application made pursuant to subsection (1) indicates it is likely that the applicant will have equity representing a minimum of 20 per cent of the capital costs for the project;

  • (i) the lender acquires an enforceable security for the purpose of securing the repayment of the loan under the loan agreement in a form consistent with standard banking practices;

  • (j) the project would constitute a significant contribution to the economic benefit of the designated region and of Canada; and

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

4 A loan insurance agreement may be entered into in respect of a loan for working capital if, without loan insurance, the project would not be viable.

5 Subject to section 6, a loan insurance agreement may be entered into in respect of a project in eligible sector 11 if the project is of a quality and scope likely to attract tourists from outside the designated region.

6 A loan insurance agreement may be entered into in respect of a project in eligible sector 11 that is a tourism facility designed to serve food or beverages if that facility

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

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

7 No loan insurance agreement shall be entered into in respect of a loan granted for a merger, refinancing or an acquisition, except in respect of a project referred to in subsection 2(2).

Coverage

8 A loan insurance agreement shall insure 85 per cent or less of the amount of a loan disbursed pursuant to a loan agreement.

Insurance Fee

• 9 (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 is insured 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 date of the first disbursement, and

    “D”

    is the outstanding amount of the loan under the loan agreement on the anniversary date.

• (2) An insurance fee paid by the lender under subsection (1) is not refundable.

Payment of a Claim

10 The Minister shall not pay a claim made by a lender under a loan insurance agreement unless the lender

• (a) makes a formal demand; and

• (b) submits evidence to the Minister that establishes that the lender has

  • (i) taken all reasonable steps to protect the lender’s rights and realize on the security provided in respect of the loan, and

  • (ii) suffered a loss as referred to in section 11.

• 11 (1) The maximum amount payable to a lender pursuant to a loan insurance agreement shall be the lesser of

  • (a) the amount representing the percentage of insurance, as stipulated in the loan insurance agreement, that is applied to the loss suffered; and

  • (b) the insured amount at the time of the formal demand.

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

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

  • (b) reasonable legal fees, costs and other expenses paid by the lender for the purpose of collecting any amount referred to in paragraph (a),

  • (c) costs incurred and paid by the lender to protect any security provided in respect of the loan disbursed under the loan agreement, and

  • (d) interest on the amounts referred to in paragraphs (a), (b) and (c), to be calculated 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 under the loan agreement at the date of the formal demand

      • (A) for a period of up to 180 days after the date of the formal demand, and

      • (B) for an additional period not exceeding 180 days where the Minister and the lender agree to realize on the security during that additional period, and

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

  less

  • (e) any amount

    • (i) realized on the security provided in respect of the loan, and

    • (ii) recovered by the lender after the date of the formal demand in excess of the aggregate amount of all other loans granted by the lender to the applicant.

Stock Options and Capital Shares

• 12 (1) The Minister may, on behalf of Her Majesty in right of Canada, acquire a stock option as a condition of entering into a loan insurance agreement if the total amount of the loan provided for by the loan agreement is $500,000 or more and the expected rate of return associated with the project justifies the acquisition of the stock option.

• (2) Where, pursuant to subsection (1), the Minister acquires a stock option, the Minister may exercise, assign or sell the stock option where the exercise, assignment or sale is of benefit to Her Majesty in right of Canada.

• (3) Where the Minister on behalf of Her Majesty in right of Canada acquires capital stock under a stock option, the Minister shall, within two years after the day on which the capital stock is acquired, sell the capital stock to benefit Her Majesty in right of Canada.

• (4) Where the Minister receives an offer to purchase a stock option or capital stock acquired under a stock option and the acceptance of the offer would be of benefit to Her Majesty in right of Canada, the Minister shall in writing notify the applicant of the offer.

• (5) Where the applicant intends to purchase the stock option or the capital stock at the price and on the terms and conditions specified in the offer referred to in subsection (4), the applicant shall so advise the Minister within seven business days following the day on which the applicant is notified of the offer.

• (6) Where an applicant advises the Minister pursuant to subsection (5), the Minister shall sell the stock option or capital stock to the applicant.