ACOA Loan Insurance Regulations (SOR/90-289)

Short Title

1 These Regulations may be cited as the ACOA Loan Insurance Regulations.

Interpretation

2 In these Regulations,

applicant

applicant means an individual, partnership, cooperative or body corporate, or any trustee or legal representative thereof, that makes an application for loan insurance pursuant to section 3, but does not include the federal government, a provincial or municipal government or an agency thereof or a legal entity owned or controlled by that government or agency; (demandeur)

capital costs

capital costs means, in respect of a project, the capital costs, not exceeding $20,000,000, as determined in accordance with generally accepted accounting principles, that are necessary to carry out the project, other than

• (a) the value of goodwill,

• (b) the cost of motor vehicles that are not used exclusively on a project site or between two or more project sites, and

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

claim

claim means a claim by a lender to the Agency for a payment pursuant to a loan insurance agreement; (réclamation)

Fisheries Alternatives Program

Fisheries Alternatives Program[Repealed, SOR/95-470, s. 3]

formal demand

formal demand means a demand 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, a credit union, a caisse populaire or any other cooperative credit 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 subsection 303(1) of the Bank Act, but does not include the federal government, a provincial or municipal government or any 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; (convention de prêt)

loan insurance

loan insurance means loan insurance provided under these Regulations; (assurance-prêt)

loan insurance agreement

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

project

project means a commercial activity in Atlantic Canada described in subsection 4(1). (opérations)

Application

3 An applicant may make an application, which shall be in writing, for loan insurance to the Agency and shall provide therein a detailed description of the project and any other information that the Agency considers necessary to evaluate the application effectively.

Projects

• 4 (1) No loan insurance shall be provided by the Agency in respect of a project unless that project consists of

  • (a) the establishment, expansion or modernization of a commercial enterprise that carries out activities described in the schedule;

  • (b) the establishment, expansion or modernization of a commercial enterprise that carries out activities that are not described in the schedule but represent a strategic investment for the economic benefit of Atlantic Canada; or

  • (c) the purchase of the assets of an existing commercial enterprise, where at the time of the application

    • (i) the existing commercial enterprise has ceased or is about to cease operating as a result of circumstances beyond the control of its present owner, and

    • (ii) the purchase is an arm’s length transaction and is by an applicant that is unrelated to the present owner or to the owner’s immediate predecessor and has not been contrived solely for the purpose of making an application for loan insurance pursuant to section 3.

• (2) No loan insurance shall be provided in respect of projects relating to

  • (a) the wholesale or retail trade industries, the real estate industry, government service industries and services of a personal or social nature; or

  • (b) mergers, refinancing or acquisitions, except in respect of a project referred to in paragraph (1)(c).

• 5 (1) The Agency may approve an application for loan insurance referred to in section 3 where

  • (a) the applicant’s project is located in Atlantic Canada;

  • (b) the amount of the loan is not less than $100,000 and its term not more than 15 years;

  • (c) [Repealed, SOR/95-470, s. 6]

  • (d) the total amount of the loan is to be used to finance the project;

  • (e) the loan is to be applied only to capital costs;

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

  • (g) the applicant is unable to obtain a loan, or a loan on reasonable terms, without the loan insurance;

  • (h) the project would not likely be carried out within the proposed time or scope or in the proposed location without the loan insurance;

  • (i) the project or, where the project will form a part of the applicant’s existing commercial enterprise, the project together with the existing enterprise is or will become commercially viable within reasonable bounds of risk; and

  • (j) the project would constitute a significant contribution to the economic benefit of Atlantic Canada.

• (2) When an application for loan insurance is approved by the Agency, the Agency may enter into a loan insurance agreement with the lender.

6 [Repealed, SOR/95-470, s. 7]

7 Where a loan is made in respect of the establishment, expansion or modernization of a commercial enterprise designed to serve food or drink, no loan insurance shall be provided unless that commercial enterprise carries out activities that are described in the schedule under the heading “SECTOR 3: TOURISM”.

Insurance Coverage

8 The amount of loan insurance provided to a lender shall not exceed, on the date of a formal demand, 90 per cent of the principal amount outstanding on the loan that is owed by the applicant pursuant to a loan agreement.

Insurance Fee

9 Every lender shall pay to the Agency in advance an insurance fee that is calculated in accordance with the following formulas:

• (a) the fee payable on the date of the first disbursement,

  A × B × 0.01

• (b) the fee payable on the date of each subsequent disbursement,

  A × B × C/365 × 0.01, and

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

  A × D × 0.01

  where

  A

  is the percentage of the loan that the Agency 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 first disbursement under the loan agreement, and

  D

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

Payment

10 No claim made under a loan insurance agreement shall be paid until a formal demand has been made by the lender to the applicant and the lender has provided evidence to the Agency that the lender has taken all reasonable steps to protect the lender’s rights and to realize on the security for the loan made under the loan agreement.

11 A claim by a lender shall contain all of the information that is required by the Agency in order to determine the amount that is payable.

• 12 (1) The maximum amount payable by the Agency to a lender in respect of a claim shall be the lesser of

  • (a) the percentage stipulated in the loan insurance agreement, of the loss incurred by the lender, and

  • (b) the percentage, stipulated in the loan insurance agreement, of the principal amount outstanding on the loan on the date of the formal demand.

• (2) For the purpose of paragraph (1)(a), loss means the total of

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

  • (b) reasonable legal fees, disbursements and other expenses paid by the lender to collect or to endeavour to collect the amounts 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) to (c) calculated beginning on the date of the formal demand until the date the Agency pays the lender’s claim,

    • (i) at the rate stipulated in the loan agreement,

      • (A) for a period not exceeding 180 days beginning on the date of the formal demand, and

      • (B) for an additional period not exceeding 180 days, where the Agency and the lender have agreed to wait for the expiration of 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 period referred to in clause (i)(A) and, where applicable, the additional period referred to in clause (i)(B),

  less

  • (e) the total of

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

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

13 The Agency shall not consider any application for loan insurance that is received after September 30, 1996.

14 [Repealed, SOR/91-283, s. 6]