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Bank Act (S.C. 1991, c. 46)

Full Document:  

Act current to 2019-08-15 and last amended on 2019-06-21. Previous Versions

PART XVBank Holding Companies (continued)

DIVISION 6Corporate Governance (continued)

Directors and Officers (continued)

Marginal note:Court may set aside or require accounting

 If a director or officer of a bank holding company fails to comply with any of sections 789 to 792, a court, on application of the bank holding company or any of its shareholders, may set aside the contract or transaction on any terms that the court thinks fit and may require the director or officer to account to the bank holding company for any profit or gain realized on it.

  • 2001, c. 9, s. 183
  • 2005, c. 54, s. 112
Liability, Exculpation and Indemnification

Marginal note:Director liability

  •  (1) Directors of a bank holding company who vote for or consent to a resolution of the directors authorizing the issue of a share contrary to subsection 709(1) or the issue of subordinated indebtedness contrary to section 723 for a consideration other than money are jointly and severally, or solidarily, liable to the bank holding company to make good any amount by which the consideration received is less than the fair equivalent of the money that the bank holding company would have received if the share or subordinated indebtedness had been issued for money on the date of the resolution.

  • Marginal note:Further liability

    (2) Directors of a bank holding company who vote for or consent to a resolution of the directors authorizing any of the following are jointly and severally, or solidarily, liable to restore to the bank holding company any amounts so distributed or paid and not otherwise recovered by the bank holding company and any amounts in relation to any loss suffered by the bank holding company:

    • (a) a redemption or purchase of shares contrary to section 715;

    • (b) a reduction of capital contrary to section 718;

    • (c) a payment of a dividend contrary to section 722; or

    • (d) a payment of an indemnity contrary to section 799.

  • 2001, c. 9, s. 183
  • 2005, c. 54, s. 113(E)

Marginal note:Contribution

  •  (1) A director who has satisfied a judgment in relation to the director’s liability under section 794 is entitled to contribution from the other directors who voted for or consented to the unlawful act on which the judgment was founded.

  • Marginal note:Recovery

    (2) A director who is liable under section 794 is entitled to apply to a court for an order compelling a shareholder or other person to pay or deliver to the director any money or property that was paid or distributed to the shareholder or other person contrary to section 715, 718, 722 or 799.

  • Marginal note:Court order

    (3) Where an application is made to a court under subsection (2), the court may, where it is satisfied that it is equitable to do so,

    • (a) order a shareholder or other person to pay or deliver to a director any money or property that was paid or distributed to the shareholder or other person contrary to section 715, 718, 722 or 799;

    • (b) order a bank holding company to return or issue shares to a person from whom the bank holding company has purchased, redeemed or otherwise acquired shares; or

    • (c) make any further order it thinks fit.

  • 2001, c. 9, s. 183

Marginal note:Limitation

 An action to enforce a liability imposed by section 794 may not be commenced after two years from the date of the resolution authorizing the action complained of.

  • 2001, c. 9, s. 183

Marginal note:Directors liable for wages

  •  (1) Subject to subsections (2) and (3), the directors of a bank holding company are jointly and severally, or solidarily, liable to each employee of the bank holding company for all debts not exceeding six months wages payable to the employee for services performed for the bank holding company while they are directors.

  • Marginal note:Conditions precedent

    (2) A director is not liable under subsection (1) unless

    • (a) the bank holding company has been sued for the debt within six months after it has become due and execution has been returned unsatisfied in whole or in part;

    • (b) the bank holding company has commenced liquidation and dissolution proceedings or has been dissolved and a claim for the debt has been proven within six months after the earlier of the date of commencement of the liquidation and dissolution proceedings and the date of dissolution; or

    • (c) the bank holding company has made an assignment or a bankruptcy order has been made against it under the Bankruptcy and Insolvency Act and a claim for the debt has been proved within six months after the assignment or bankruptcy order.

  • Marginal note:Limitations

    (3) A director is not liable under subsection (1) unless the director is sued for a debt referred to in that subsection while a director or within two years after the director has ceased to be a director.

  • Marginal note:Amount due after execution

    (4) Where execution referred to in paragraph (2)(a) has issued, the amount recoverable from a director is the amount remaining unsatisfied after execution.

  • Marginal note:Subrogation of director

    (5) Where a director of a bank holding company pays a debt referred to in subsection (1) that is proven in liquidation and dissolution or bankruptcy proceedings, the director is entitled to any preference that the employee would have been entitled to and, where a judgment has been obtained, the director is entitled to an assignment of the judgment.

  • Marginal note:Contribution entitlement

    (6) A director of a bank holding company who has satisfied a claim under this section is entitled to a contribution from the other directors of the bank holding company who are liable for the claim.

  • 2001, c. 9, s. 183
  • 2004, c. 25, s. 186
  • 2005, c. 54, s. 114(E)

Marginal note:Defence — due diligence

  •  (1) A director, officer or employee of a bank holding company is not liable under section 794 or 797 and has fulfilled their duty under subsection 748(2) if they exercised the care, diligence and skill that a reasonably prudent person would have exercised in comparable circumstances, including reliance in good faith on

    • (a) financial statements of the bank holding company that were represented to them by an officer of the bank holding company or in a written report of the auditor of the bank holding company fairly to reflect the financial condition of the bank holding company; or

    • (b) a report of a person whose profession lends credibility to a statement made by them.

  • Marginal note:Defence — good faith

    (2) A director or officer of a bank holding company has fulfilled their duty under subsection 748(1) if they relied in good faith on

    • (a) financial statements of the bank holding company that were represented to them by an officer of the bank holding company or in a written report of the auditor of the bank holding company fairly to reflect the financial condition of the bank holding company; or

    • (b) a report of a person whose profession lends credibility to a statement made by them.

  • 2001, c. 9, s. 183
  • 2005, c. 54, s. 115

Marginal note:Indemnification

  •  (1) A bank holding company may indemnify a director or officer of the bank holding company, a former director or officer of the bank holding company or another person who acts or acted, at the bank holding company’s request, as a director or officer of or in a similar capacity for another entity against all costs, charges and expenses, including an amount paid to settle an action or satisfy a judgment, reasonably incurred by them in respect of any civil, criminal, administrative, investigative or other proceeding in which they are involved because of that association with the bank holding company or other entity.

  • Marginal note:Advances

    (2) A bank holding company may advance amounts to the director, officer or other person for the costs, charges and expenses of a proceeding referred to in subsection (1). They shall repay the amounts if they do not fulfil the conditions set out in subsection (3).

  • Marginal note:No indemnification

    (3) A bank holding company may not indemnify a person under subsection (1) unless

    • (a) the person acted honestly and in good faith with a view to the best interests of, as the case may be, the bank holding company or the other entity for which they acted at the bank holding company’s request as a director or officer or in a similar capacity; and

    • (b) in the case of a criminal or administrative action or proceeding that is enforced by a monetary penalty, the person had reasonable grounds for believing that their conduct was lawful.

  • Marginal note:Indemnification — derivative actions

    (4) A bank holding company may with the approval of a court indemnify a person referred to in subsection (1) or advance amounts to them under subsection (2) — in respect of an action by or on behalf of the bank holding company or other entity to procure a judgment in its favour to which the person is made a party because of the association referred to in subsection (1) with the bank holding company or other entity — against all costs, charges and expenses reasonably incurred by them in connection with that action if they fulfil the conditions set out in subsection (3).

  • Marginal note:Right to indemnity

    (5) Despite subsection (1), a person referred to in that subsection is entitled to be indemnified by the bank holding company in respect of all costs, charges and expenses reasonably incurred by them in connection with the defence of any civil, criminal, administrative, investigative or other proceeding to which the person is subject because of the association referred to in subsection (1) with the bank holding company or other entity described in that subsection if the person

    • (a) was not judged by the court or other competent authority to have committed any fault or omitted to do anything that they ought to have done; and

    • (b) fulfils the conditions set out in subsection (3).

  • Marginal note:Heirs and personal representatives

    (6) A bank holding company may, to the extent referred to in subsections (1) to (5) in respect of the person, indemnify the heirs or personal representatives of any person whom the bank holding company may indemnify under those subsections.

  • 2001, c. 9, s. 183
  • 2005, c. 54, s. 115
 
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