Insurance Companies Act (S.C. 1991, c. 47)

Marginal note:Related party of company

• 518 (1) For the purposes of this Part, a person is a related party of a company where the person

  • (a) is a person who has a significant interest in a class of shares of the company;

  • (b) is a director or senior officer of the company or of a body corporate that controls the company or is acting in a similar capacity in respect of an unincorporated entity that controls the company;

  • (c) is the spouse or common-law partner, or a child who is less than eighteen years of age, of a person described in paragraph (a) or (b);

  • (d) is an entity that is controlled by a person referred to in any of paragraphs (a) to (c);

  • (e) is an entity in which a person who controls the company has a substantial investment;

  • (f) is an entity in which the spouse or common-law partner, or a child who is less than eighteen years of age, of a person who controls the company has a substantial investment; or

  • (g) is a person, or a member of a class of persons, designated under subsection (4) or (5) as, or deemed under subsection (6) to be, a related party of the company.

  • (h) [Repealed, 1997, c. 15, s. 277]

• Marginal note:Exception — subsidiaries and substantial investments of companies

  (2) If an entity in which a company has a substantial investment would, but for this subsection, be a related party of the company only because a person who controls the company controls the entity or has a substantial investment in the entity, and the person does not control the entity or have a substantial investment in the entity otherwise than through the person’s controlling interest in the company, the entity is not a related party of the company.

• Marginal note:Deeming

  (3) The holding body corporate of a company is deemed not to be a person referred to in paragraph (1)(a) if the holding body corporate is a foreign company.

• Marginal note:Designated related party

  (4) For the purposes of this Part, the Superintendent may, with respect to a particular company, designate as a related party of the company

  • (a) any person or class of persons whose direct or indirect interest in or relationship with the company or a related party of the company might reasonably be expected to affect the exercise of the best judgment of the company in respect of a transaction; or

  • (b) any person who is a party to any agreement, commitment or understanding referred to in section 9 if the company referred to in that section is the particular company.

• Marginal note:Idem

  (5) Where a person is designated as a related party of a company pursuant to subsection (4), the Superintendent may also designate any entity in which the person has a substantial investment and any entity controlled by such an entity to be a related party of the company.

• Marginal note:Deemed related party

  (6) Where, in contemplation of a person becoming a related party of a company, the company enters into a transaction with the person, the person is deemed for the purposes of this Part to be a related party of the company in respect of that transaction.

• Marginal note:Holders of exempted shares

  (7) The Superintendent may, by order, designate a class of non-voting shares of a company for the purpose of this subsection. If a class of non-voting shares of a company is so designated, a person is deemed, notwithstanding paragraph (1)(a), not to be a related party of the company if the person would otherwise be a related party of the company only because the person has a significant interest in that class.

• Marginal note:Determination of substantial investment

  (8) For the purpose of determining whether an entity or a person has a substantial investment for the purposes of paragraph (1)(e) or (f), the references to “control” and “controlled” in section 10 shall be construed as references to “control, within the meaning of section 3, determined without regard to paragraph 3(1)(d)” and “controlled, within the meaning of section 3, determined without regard to paragraph 3(1)(d)”, respectively.

• Marginal note:Determination of control

  (9) For the purposes of paragraph (1)(d), controlled means “controlled, within the meaning of section 3, determined without regard to paragraph 3(1)(d)”.

Marginal note:Non-application of Part

• 519 (1) This Part does not apply in respect of any transaction entered into prior to the coming into force of this Part but, after the coming into force of this Part, any modification of, addition to, or renewal or extension of a prior transaction is subject to this Part.

• Marginal note:Idem

  (2) This Part does not apply in respect of

  • (a) assets of a segregated fund maintained pursuant to section 451 if

    • (i) all the policies in respect of which the fund is maintained are held by one person or all the amounts in respect of which it is maintained are retained on the direction of one person, or

    • (ii) the assets of the fund reflect the securities upon which a generally recognized market index is based and the weighting of those securities in that index;

  • (b) the issue by the company of shares of any class when fully paid for in money or when issued

    • (i) in accordance with any provisions for the conversion of other issued and outstanding securities of the company into shares of that class,

    • (ii) as a share dividend,

    • (iii) in exchange for shares of a body corporate that has been continued as a company under Part III,

    • (iv) in accordance with the terms of an amalgamation under Part VI,

    • (v) by way of consideration in accordance with the terms of a sale agreement under Part VI, or

    • (vi) with the approval in writing of the Superintendent, in exchange for shares of another body corporate;

  • (c) the payment of dividends or policy dividends or bonuses by a company;

  • (d) transactions that consist of the payment or provision by a company to persons who are related parties of the company of salaries, fees, stock options, policy premiums, pension benefits, incentive benefits or other benefits or remuneration in their capacity as directors, officers or employees of the company;

  • (e) transactions approved by the Minister under subsection 715(1) of this Act or subsection 678(1) of the Bank Act; or

  • (f) if a company is controlled by a widely held insurance holding company or a widely held bank holding company, transactions approved by the Superintendent that are entered as part of, or in the course of, a restructuring of the holding company or of any entity controlled by it.

• Marginal note:Exception

  (3) Nothing in paragraph (2)(d) exempts from the application of this Part the payment by a company of fees or other remuneration to a person for

  • (a) the provision of services referred to in paragraph 528(1)(a); or

  • (b) duties outside the ordinary course of business of the company.

• Marginal note:Exception for holding body corporate

  (4) A holding body corporate of a company is not a related party of the company if the holding body corporate is a Canadian financial institution that is referred to in any of paragraphs (a) to (d) of the definition financial institution in subsection 2(1).

• Marginal note:Substantial investment — related party exception

  (5) Where a holding body corporate of a company is, because of subsection (4), not a related party of the company, any entity in which the holding body corporate has a substantial investment is not a related party of the company if no related party of the company has a substantial investment in the entity otherwise than through the control of the holding body corporate.

Meaning of transaction

• 520 (1) For the purposes of this Part, entering into a transaction with a related party of a company includes

  • (a) making a guarantee on behalf of the related party;

  • (b) making an investment in any securities of the related party;

  • (c) taking an assignment of or otherwise acquiring a loan made by a third party to the related party;

  • (d) taking a security interest in the securities of the related party; and

  • (e) causing the company to be reinsured by the related party against any risk undertaken by the company under its policies.

• Marginal note:Interpretation

  (2) For the purposes of this Part, the fulfilment of an obligation under the terms of any transaction, including the payment of interest on a loan or deposit and the making of a payment or an advance under a policy, is part of the transaction, and not a separate transaction.

• Meaning of loan

  (3) For the purposes of this Part, loan includes a deposit, a financial lease, a conditional sales contract, a repurchase agreement and any other similar arrangement for obtaining funds or credit, but does not include investments in securities or the making of an acceptance, endorsement or other guarantee.

• Marginal note:Security of a related party

  (4) For the purposes of this Part, security of a related party includes an option, transferable by delivery, to demand delivery of a specified number or amount of shares of the related party at a fixed price within a specified time.

Prohibited Related Party Transactions

Marginal note:Prohibited transactions

• 521 (1) Except as provided in this Part, a company shall not, directly or indirectly, enter into any transaction with a related party of the company.

• Marginal note:Transaction of entity

  (2) Without limiting the generality of subsection (1), a company is deemed to have indirectly entered into a transaction in respect of which this Part applies where the transaction is entered into by an entity that is controlled by the company.

• Marginal note:Exception

  (3) Subsection (2) does not apply where an entity that is controlled by a company is a financial institution incorporated or formed under the laws of a province and is subject to regulation and supervision, satisfactory to the Minister, regarding transactions with related parties of the company.

• Marginal note:Idem

  (4) Subsection (2) does not apply in respect of transactions entered into by an entity that is controlled by a company if the transaction is a prescribed transaction or is one of a class of prescribed transactions.

Permitted Related Party Transactions

Marginal note:Nominal value transactions

522 Notwithstanding anything in this Part, a company may enter into a transaction with a related party of the company if the value of the transaction is nominal or immaterial to the company when measured by criteria that have been established by the conduct review committee of the company and approved in writing by the Superintendent.

Marginal note:Reinsurance

• 523 (1) A company may, subject to subsection (2) and to Division III of Part VI, cause itself to be reinsured by a related party of the company against any risk undertaken by the company under its policies.

• Marginal note:Restriction re related parties

  (2) Except with the approval of the Superintendent, a company may cause itself to be reinsured in respect of risks undertaken under its policies by a related party of the company only if the related party is

  • (a) a company; or

  • (b) a foreign company that, in Canada, reinsures those risks.

• Marginal note:Exception

  (3) The approval of the Superintendent under subsection (2) is not required if the reinsurance transaction was approved by the Minister or the Superintendent under subsection 254(2) or (2.01).

Marginal note:Risks of related party

524 A company may, subject to Division III of Part VI, reinsure any risks undertaken by a related party of the company.

Marginal note:Secured loans

525 A company may make a loan to or a guarantee on behalf of a related party of the company or take an assignment of or otherwise acquire a loan to a related party of the company if

• (a) the loan or guarantee is fully secured by securities of or guaranteed by the Government of Canada or the government of a province; or

• (b) the loan is a loan permitted by section 469 made to a related party who is a natural person on the security of a mortgage of the principal residence of that related party.

Marginal note:Borrowing, etc., from related party

• 526 (1) A company may borrow money from or issue debt obligations to a related party of the company.

• Marginal note:Segregated funds

  (2) A company may issue policies to a related party of the company or accept or retain on the direction of a policyholder or beneficiary who is a related party amounts that are payable as

  • (a) policy dividends or bonuses, or

  • (b) policy proceeds on the surrender or maturity of the policy or on the death of the person whose life is insured

  where the liabilities of the company in respect of the policies or the amounts accepted or retained vary in amount depending on the market value of a specified group of assets.

Marginal note:Acquisition of assets

• 527 (1) A company may purchase or otherwise acquire from a related party of the company

  • (a) securities of or guaranteed by the Government of Canada or the government of a province;

  • (b) assets fully secured by securities of or guaranteed by the Government of Canada or the government of a province; or

  • (c) goods for use in the ordinary course of business.

• Marginal note:Sale of assets

  (2) Subject to section 512, a company may sell any assets of the company to a related party of the company if

  • (a) the consideration for the assets is fully paid in money; and

  • (b) there is an active market for those assets.

• Marginal note:Asset transactions with financial institutions

  (3) Notwithstanding any of the provisions of subsections (1) and (2), a company may, in the normal course of business and pursuant to arrangements that have been approved by the Superintendent in writing, acquire or dispose of any assets, other than real property, from or to a related party of the company that is a financial institution.

• Marginal note:Asset transactions in restructuring

  (4) Notwithstanding any of the provisions of subsections (1) and (2), a company may acquire any assets from, or dispose of any assets to, a related party of the company as part of, or in the course of, a restructuring, if the acquisition or disposition has been approved in writing by the Superintendent.

• Marginal note:Idem

  (5) A company may lease assets

  • (a) from a related party of the company for use in the ordinary course of business of the company, or

  • (b) to a related party of the company,

  if the lease payments are made in money.

• Marginal note:Approval under subsection 254(2) or (2.01)

  (6) A company or society may acquire any assets from, or dispose of any assets to, a related party of the company under a transaction that is approved by the Minister or the Superintendent under subsection 254(2) or (2.01).