PART VICorporate Governance (continued)
Directors and Officers (continued)
Conflicts of Interest (continued)
Marginal note:Director to abstain
203 (1) A director who is required to make a disclosure under subsection 202(1) shall not be present at any meeting of directors, or of a committee of directors, while the contract or transaction is being considered or vote on any resolution to approve it unless the contract or transaction
(a) relates primarily to their remuneration as a director, officer, employee or agent of the bank, an entity controlled by the bank or an entity in which the bank has a substantial investment;
(b) is for indemnity under section 212 or insurance under section 213; or
(c) is with an affiliate of the bank.
(2) Any director who knowingly contravenes subsection (1) ceases to hold office as director and is not eligible, for a period of five years after the date on which the contravention occurred, for election or appointment as a director of any financial institution that is incorporated or formed by or under an Act of Parliament.
Marginal note:Validity of acts
(3) An act of the board of directors of a bank, or of a committee of the board of directors, is not invalid because a person acting as a director had ceased under subsection (2) to hold office as a director.
- 1991, c. 46, s. 203
- 1997, c. 15, s. 26
- 2005, c. 54, s. 40
Marginal note:General notice
204 (1) For the purposes of subsection 202(1), a general notice to the directors declaring that a director or officer is to be regarded as interested for any of the following reasons in a contract or transaction entered into with a party is a sufficient declaration of interest in relation to any contract or transaction with that party:
(a) the director or officer is a director or officer of a party referred to in paragraph 202(1)(b) or (c) or a person acting in a similar capacity;
(b) the director or officer has a material interest in the party; or
(c) there has been a material change in the nature of the director’s or officer’s interest in the party.
Marginal note:Access to disclosures
(2) The shareholders and members of the bank may examine the portions of any minutes of meetings of directors or committees of directors that contain disclosures under subsection 202(1), or the portions of any other documents that contain those disclosures, during the usual business hours of the bank.
- 1991, c. 46, s. 204
- 2001, c. 9, s. 77.1(F)
- 2005, c. 54, s. 41
- 2010, c. 12, s. 1991
Marginal note:Avoidance standards
205 (1) A contract or transaction for which disclosure is required under subsection 202(1) is not invalid and a director or officer is not accountable to the bank or its shareholders or members for any profit realized from it by reason only of the director’s or officer’s interest in the contract or transaction or the fact that the director was present or was counted to determine whether a quorum existed at the meeting of directors, or of a committee of directors, that considered it if
(2) Even if the conditions set out in subsection (1) are not met, a director or officer acting honestly and in good faith is not accountable to the bank or its shareholders or members for any profit realized from a contract or transaction for which disclosure was required and the contract or transaction is not invalid by reason only of the director’s or officer’s interest in it if
(a) the contract or transaction is approved or confirmed by special resolution at
(b) disclosure of the interest was made to the shareholders or, in the case of a federal credit union, to the members and shareholders, if any, in a manner sufficient to indicate its nature before the contract or transaction was approved or confirmed; and
(c) the contract or transaction was reasonable and fair to the bank at the time that it was approved or confirmed.
- 1991, c. 46, s. 205
- 2005, c. 54, s. 41
- 2010, c. 12, s. 1992
Marginal note:Court may set aside or require accounting
206 If a director or officer of a bank fails to comply with any of sections 202 to 205, a court, on application of the bank or any of its shareholders or members, 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 for any profit or gain realized on it.
- 1991, c. 46, s. 206
- 2005, c. 54, s. 41
- 2010, c. 12, s. 1992
Liability, Exculpation and Indemnification
Marginal note:Director’s liability
207 (1) Directors of a bank who vote for or consent to a resolution of the directors authorizing the issue of a share contrary to subsection 65(1), the issue of a membership share contrary to subsection 79.1(2) or the issue of subordinated indebtedness contrary to section 80 for a consideration other than money are jointly and severally, or solidarily, liable to the bank to make good any amount by which the consideration received is less than the fair equivalent of the money that the bank would have received if the share, membership share or subordinated indebtedness had been issued for money on the date of the resolution.
Marginal note:Further liability
(2) Directors of a bank 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 any amounts so distributed or paid and not otherwise recovered by the bank and any amounts in relation to any loss suffered by the bank:
(a) a redemption or purchase of shares or membership shares contrary to section 71;
(b) a reduction of capital contrary to section 75;
(c) a payment of a dividend or patronage allocation contrary to section 79;
(d) a payment of an indemnity contrary to section 212; or
(e) any transaction contrary to Part XI.
- 1991, c. 46, s. 207
- 2005, c. 54, s. 42(E)
- 2010, c. 12, s. 1992
208 (1) A director who has satisfied a judgment in relation to the director’s liability under section 207 is entitled to contribution from the other directors who voted for or consented to the unlawful act on which the judgment was founded.
(2) A director who is liable under section 207 is entitled to apply to a court for an order compelling a shareholder, member or other person to pay or deliver to the director
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, member or other person to pay or deliver to a director any money or property that was paid or distributed to the shareholder, member or other person contrary to section 71, 75, 79 or 212 or any amount referred to in paragraph (2)(b);
(b) order a bank to return or issue shares or membership shares to a person from whom the bank has purchased, redeemed or otherwise acquired shares or membership shares; or
(c) make any further order it thinks fit.
- 1991, c. 46, s. 208
- 2010, c. 12, s. 1993
209 An action to enforce a liability imposed by section 207 may not be commenced after two years from the date of the resolution authorizing the action complained of.
Marginal note:Directors liable for wages
210 (1) Subject to subsections (2) and (3), the directors of a bank are jointly and severally, or solidarily, liable to each employee of the bank for all debts not exceeding six months wages payable to the employee for services performed for the bank while they are directors.
Marginal note:Conditions precedent
(2) A director is not liable under subsection (1) unless
(a) the bank 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 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) a winding-up order has been issued in respect of the bank under the Winding-up and Restructuring Act and a claim for the debt has been allowed or proven within six months after the issue of the winding-up order.
(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 pays a debt referred to in subsection (1) that is proven in liquidation and dissolution or winding-up 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 who has satisfied a claim under this section is entitled to a contribution from the other directors of the bank who are liable for the claim.
- 1991, c. 46, s. 210
- 1996, c. 6, s. 167
- 2005, c. 54, s. 43(E)
- Date modified: