Cooperative Credit Associations Act (S.C. 1991, c. 48)

Marginal note:Restriction on control and substantial investments

• 388 (1) Subject to subsections (2) to (4), no association shall acquire control of, or hold, acquire or increase a substantial investment in, any entity other than a permitted entity.

• Marginal note:Exception: indirect investments

  (2) An association may, subject to Part XII, acquire control of, or acquire or increase a substantial investment in, an entity other than a permitted entity by way of

  • (a) an acquisition of control of an entity referred to in any of paragraphs 390(1)(a) to (h), a specialized financing entity or a prescribed entity that controls or has a substantial investment in the entity; or

  • (b) an acquisition of shares or ownership interests in the entity by

    • (i) an entity referred to in any of paragraphs 390(1)(a) to (h), a specialized financing entity or a prescribed entity that is controlled by the association, or

    • (ii) an entity controlled by an entity referred to in any of paragraphs 390(1)(a) to (h), a specialized financing entity or a prescribed entity that is controlled by the association.

• Marginal note:Exception: temporary investments, realizations and loan workouts

  (3) An association may, subject to Part XII, acquire control of, or acquire or increase a substantial investment in, an entity by way of

  • (a) a temporary investment permitted by section 393;

  • (b) an acquisition of shares of a body corporate or of ownership interests in an unincorporated entity permitted by section 394; or

  • (c) a realization of security permitted by section 395.

• Marginal note:Exception: specialized financing regulations

  (4) A retail association may, subject to Part XII, acquire control of, or hold, acquire or increase a substantial investment in, an entity other than a permitted entity if it does so in accordance with regulations made under paragraph 389(d) concerning specialized financing.

• Marginal note:Exception: uncontrolled event

  (5) An association is deemed not to contravene subsection (1) if the association acquires control of, or acquires or increases a substantial investment in, an entity solely as the result of an event not within the control of the association.

• Marginal note:Non-application of subsection (2)

  (5.1) No association shall, under subsection (2), acquire control of, or acquire or increase a substantial investment in, an entity referred to in paragraph 390(1)(h).

• Marginal note:Holding

  (5.2) If an association holds a substantial investment in an entity referred to in paragraph 390(1)(h) that it acquired or increased under subsection (2) before the coming into force of subsection (5.1), the association may continue to hold that substantial investment.

• Marginal note:Application of other provision

  (6) Despite having acquired control of, or a substantial investment in, an entity under a particular provision of this Part, an association may continue to control the entity or hold the substantial investment in the entity as though it had made the acquisition under another provision of this Part so long as the conditions of that other provision are met.

• Marginal note:Timing of deemed acquisition

  (7) If an association decides to exercise its right under subsection (6), the association is deemed to be acquiring the control or the substantial investment under the other provision.

Marginal note:Regulations re limits

389 The Governor in Council may make regulations

• (a) respecting the determination of the amount or value of loans, investments and interests for the purposes of this Part;

• (b) respecting the loans and investments, and the maximum aggregate amount of all loans and investments, that may be made or acquired by an association and its prescribed subsidiaries to or in a person and any persons connected with that person;

• (c) specifying the classes of persons who are connected with any person for the purposes of paragraph (b); and

• (d) concerning specialized financing for the purposes of subsection 388(4).

Subsidiaries and Equity Investments

Marginal note:Permitted investments

• 390 (1) Subject to subsections (4) to (6) and Part XII, an association may acquire control of, or acquire or increase a substantial investment in,

  • (a) an association;

  • (b) a bank or a bank holding company as that expression is defined in section 2 of the Bank Act;

  • (c) a body corporate to which the Trust and Loan Companies Act applies;

  • (d) an insurance company, a fraternal benefit society or an insurance holding company incorporated or formed by or under the Insurance Companies Act;

  • (e) a trust, loan or insurance corporation incorporated or formed by or under an Act of the legislature of a province;

  • (f) a cooperative credit society incorporated or formed, and regulated, by or under an Act of the legislature of a province;

  • (g) an entity that is incorporated or formed by or under an Act of Parliament or of the legislature of a province and that is primarily engaged in dealing in securities; or

  • (h) an entity that is incorporated or formed, and regulated, otherwise than by or under an Act of Parliament or of the legislature of a province and that is primarily engaged outside Canada in a business that, if carried on in Canada, would be the business of banking, the business of a cooperative credit society, the business of insurance, the business of providing fiduciary services or the business of dealing in securities.

• Marginal note:Permitted investments

  (2) Subject to subsections (3) to (6) and Part XII, an association may acquire control of, or acquire or increase a substantial investment in, an entity, other than an entity referred to in any of paragraphs (1)(a) to (h), whose business is limited to one or more of the following:

  • (a) engaging in any financial service activity or in any other activity that a retail association is permitted to engage in under subsection 375(2) or section 376 or 377;

  • (b) acquiring or holding shares of, or ownership interests in, entities in which an association is permitted under this Part to hold or acquire;

  • (c) engaging in the provision of any services exclusively to any or all of the following, so long as the entity is providing those services to the association or any member of the association’s group:

    • (i) the association,

    • (ii) any member of the association’s group,

    • (iii) any entity that is primarily engaged in the business of providing financial services,

    • (iv) any permitted entity in which an entity referred to in subparagraph (iii) has a substantial investment, or

    • (v) any prescribed person, if it is doing so under prescribed terms and conditions, if any are prescribed;

  • (d) engaging in any activity that a retail association is permitted to engage in, other than an activity referred to in paragraph (a) or (e), that relates to

    • (i) the promotion, sale, delivery or distribution of a financial product or financial service that is provided by the association or any member of the association’s group, or

    • (ii) if a significant portion of the business of the entity involves an activity referred to in subparagraph (i), the promotion, sale, delivery or distribution of a financial product or financial service that is provided by any other entity that is primarily engaged in the business of providing financial services;

  • (e) engaging in the activities referred to in the definition closed-end fund, mutual fund distribution entity, mutual fund entity or real property brokerage entity in subsection 386(1); and

  • (f) engaging in prescribed activities, under prescribed terms and conditions, if any are prescribed.

• Marginal note:Restriction

  (3) An association may not acquire control of, or acquire or increase a substantial investment in, an entity whose business includes any activity referred to in any of paragraphs (2)(a) to (e) if the entity engages in the business of accepting deposit liabilities or if the activities of the entity include

  • (a) activities that an association is not permitted to engage in under any of sections 378, 382 and 382.1;

  • (b) dealing in securities, except as may be permitted under paragraph (2)(e) or as may be permitted either to an association under paragraph 376(1)(f) or to a retail association under subparagraph 376(1)(i)(ii);

  • (c) activities that an association is not permitted to engage in under section 381 if the entity engages in the activities of a finance entity or of any other entity as may be prescribed;

  • (d) acquiring control of or acquiring or holding a substantial investment in another entity unless

    • (i) in the case of an entity that is controlled by the association, the association itself would be permitted under this Part to acquire a substantial investment in the other entity, or

    • (ii) in the case of an entity that is not controlled by the association, the association itself would be permitted to acquire a substantial investment in the other entity under subsection (1) or (2) or 388(2), paragraph 388(3)(b) or (c) or subsection 388(4); or

  • (e) any prescribed activity.

• Marginal note:Exception

  (3.1) Despite paragraph (3)(a), an association may acquire control of, or acquire or increase a substantial investment in, any entity that acts as a trustee for a trust if the entity has been permitted under the laws of a province to act as a trustee for a trust and the following conditions are satisfied:

  • (a) the entity acts as a trustee only with respect to a closed-end fund or mutual fund entity; and

  • (b) if the entity engages in other business, that business is limited to engaging in one or more of the following:

    • (i) the activities of a mutual fund distribution entity,

    • (ii) any activity that an association is permitted to engage in under subsection 376(2), and

    • (iii) the provision of investment counselling services and portfolio management services.

• Marginal note:Control

  (4) Subject to subsection (8) and the regulations, an association may not acquire control of, or acquire or increase a substantial investment in,

  • (a) an entity referred to in any of paragraphs (1)(a) to (h), unless

    • (i) the association controls, within the meaning of paragraph 3(1)(e), the entity, or would thereby acquire control, within the meaning of that paragraph, of the entity, or

    • (ii) the association is permitted by regulations made under paragraph 396(a) to acquire or increase the substantial investment;

  • (b) an entity whose business includes one or more of the activities referred to in paragraph (2)(a) and that engages, as part of its business, in any financial intermediary activity that exposes the entity to material market or credit risk, including a finance entity, a factoring entity and a financial leasing entity, unless

    • (i) the association controls, within the meaning of paragraph 3(1)(e), the entity, or would thereby acquire control, within the meaning of that paragraph, of the entity, or

    • (ii) the association is permitted by regulations made under paragraph 396(a) to acquire or increase the substantial investment; or

  • (c) an entity whose business includes an activity referred to in paragraph (2)(b), including a specialized financing entity, unless

    • (i) the association controls, within the meaning of paragraph 3(1)(e), the entity, or would thereby acquire control, within the meaning of that paragraph, of the entity,

    • (ii) the association is permitted by regulations made under paragraph 396(a) to acquire or increase the substantial investment, or

    • (iii) subject to prescribed terms and conditions, if any are prescribed, the activities of the entity do not include the acquisition or holding of control of, or the acquisition or holding of shares or other ownership interests in, an entity referred to in paragraph (a) or (b) or an entity that is not a permitted entity.

• Marginal note:Minister’s approval

  (5) Subject to the regulations, an association may not, without the prior written approval of the Minister,

  • (a) acquire control of an entity referred to in any of paragraphs (1)(e) to (g) from a person who is not a member of the association’s group;

  • (b) acquire control of an entity referred to in paragraph (1)(h) or (4)(b), other than an entity whose activities are limited to the activities of one or more of the following entities, if the control is acquired from an entity referred to in any of paragraphs (1)(a) to (d) that is not a member of the association’s group:

    • (i) a factoring entity, or

    • (ii) a financial leasing entity;

  • (b.1) acquire control of an entity referred to in paragraph (1)(h) if

    A + B > C

    where

    A

    is the value of the entity’s consolidated assets, as it would have been reported in the entity’s annual financial statements if those statements had been prepared immediately before the acquisition,

    B

    is the aggregate of the values of the consolidated assets of all other entities referred to in paragraph (1)(h) that the association has acquired control of within the preceding 12 months, as the value for each entity would have been reported in its annual financial statements if those statements had been prepared immediately before the acquisition of control of that entity, and

    C

    is 10% of the value of the association’s consolidated assets, as shown in the association’s last annual statement that was prepared before its first acquisition of control of an entity referred to in paragraph (1)(h) within the preceding 12 months;

  • (c) acquire control of, or acquire or increase a substantial investment in, an entity whose business includes one or more of the activities referred to in paragraph (2)(d);

  • (d) acquire control of, or acquire or increase a substantial investment in, an entity that engages in Canada in an activity described in paragraph 376(1)(g);

  • (d.1) acquire control of, or acquire or increase a substantial investment in, an entity that engages in an activity described in paragraph 376(1)(h); or

  • (e) acquire control of, or acquire or increase a substantial investment in, an entity engaging in an activity prescribed for the purposes of paragraph (2)(f).

• Marginal note:Matters for consideration

  (5.1) In addition to any matters or conditions provided for in this Act that are relevant to the granting of an approval, the Minister may, in considering whether to grant the approval under paragraph (5)(b.1), take into account all matters that he or she considers relevant in the circumstances, including

  • (a) the stability of the financial system in Canada; and

  • (b) the best interests of the financial system in Canada.

• Marginal note:Superintendent’s approval

  (6) Subject to subsection (7) and the regulations, an association may not acquire control of, or acquire or increase a substantial investment in, an entity referred to in any of paragraphs (1)(e) to (g) and (4)(b) and (c), unless the association obtains the approval of the Superintendent.

• Marginal note:Exception

  (7) Subsection (6) does not apply in respect of a particular transaction if

  • (a) the association is acquiring control of an entity, other than a specialized financing entity, and the only reason for which the association would, but for this subsection, require approval for the acquisition is that the entity carries on activities referred to in paragraph (2)(b);

  • (b) the association is acquiring control of an entity whose activities are limited to the activities of a factoring entity or a financial leasing entity; or

  • (c) the Minister has approved the transaction under subsection (5) or is deemed to have approved it under subsection 391(1).

• Marginal note:Control not required

  (8) An association need not control an entity referred to in paragraph (1)(h), or an entity that is incorporated or formed otherwise than by or under an Act of Parliament or of the legislature of a province, if the laws or customary business practices of the country under the laws of which the entity was incorporated or formed do not permit the association to control the entity.

• Marginal note:Prohibition on giving up control in fact

  (9) An association that, under subsection (4), controls an entity may not, without the prior written approval of the Minister, give up control, within the meaning of paragraph 3(1)(e), of the entity while it continues to control the entity.

• Marginal note:Giving up control

  (10) An association that, under subsection (4), controls an entity may, with the prior written approval of the Superintendent, give up control of the entity while keeping a substantial investment in the entity if

  • (a) the association is permitted to do so by regulations made under paragraph 396(c); or

  • (b) the entity meets the conditions referred to in subparagraph (4)(c)(iii).

• Marginal note:Subsections do not apply

  (11) If an association controls, within the meaning of paragraph 3(1)(a), (b), (c) or (d), an entity, subsections (5) and (6) do not apply in respect of any subsequent increases by the association of its substantial investment in the entity so long as the association continues to control the entity.