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

Marginal note:Defence — due diligence

• 220 (1) A director, officer or employee of a company is not liable under section 216 or 219 or subsection 539(1) and has fulfilled their duty under subsection 166(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 company that were represented to them by an officer of the company or in a written report of the auditor of the company fairly to reflect the financial condition of the 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 company has fulfilled their duty under subsection 166(1) if they relied in good faith on

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

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

Marginal note:Indemnification

• 221 (1) A company may indemnify a director or officer of the company, a former director or officer of the company or another person who acts or acted, at the 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 company or other entity.

• Marginal note:Advances

  (2) A 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 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 company or the other entity for which they acted at the 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 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 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 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 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 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 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 company may indemnify under those subsections.

Marginal note:Directors’ and officers’ insurance

222 A company may purchase and maintain insurance for the benefit of any person referred to in section 221 against any liability incurred by the person

• (a) in the capacity of a director or an officer of the company, except where the liability relates to a failure to act honestly and in good faith with a view to the best interests of the company; or

• (b) in the capacity of a director or officer of another entity or while acting in a similar capacity for another entity, if they act or acted in that capacity at the company’s request, except if the liability relates to a failure to act honestly and in good faith with a view to the best interests of the entity.

Marginal note:Application to court for indemnification

• 223 (1) A company or a person referred to in section 221 may apply to a court for an order approving an indemnity under that section and the court may so order and make any further order it thinks fit.

• Marginal note:Notice to Superintendent

  (2) An applicant under subsection (1) shall give the Superintendent written notice of the application and the Superintendent is entitled to appear and to be heard at the hearing of the application in person or by counsel.

• Marginal note:Other notice

  (3) On an application under subsection (1), the court may order notice to be given to any interested person and that person is entitled to appear and to be heard in person or by counsel at the hearing of the application.

DIVISION IIIFundamental Changes

Amendments — Letters Patent

Marginal note:Incorporating instrument

224 On the application of a company or society duly authorized by special resolution, the Minister may approve a proposal to add, change or remove any provision that is permitted by this Act to be set out in the incorporating instrument of the company or society.

Marginal note:Letters patent to amend

• 225 (1) On receipt of an application referred to in section 224, the Minister may issue letters patent to effect the proposal.

• Marginal note:Effect of letters patent

  (2) Letters patent issued pursuant to subsection (1) become effective on the day stated in the letters patent.

Mutualization

Marginal note:Mutualization

• 226 (1) On the application of a company that has common shares but does not have securities that are not convertible into common shares until after, or options or rights to acquire those shares that are not exercisable until after, the time of the application, the Minister may approve a proposal to convert the company into a mutual company by the purchase, or other acquisition, for the purpose of cancellation of those shares, securities, options and rights.

• Marginal note:Definitions

  (2) In sections 227 to 236,

  common share

  common share includes

  • (a) a security currently convertible into a common share, and

  • (b) a currently exercisable option or a right to acquire a common share or a security referred to in paragraph (a); (action ordinaire)

  mutualization proposal

  mutualization proposal means a proposal referred to in subsection (1). (proposition de mutualisation)

• Marginal note:Saving

  (3) Nothing in this section or sections 227 to 236 limits the powers of companies under subsection 75(1).

Marginal note:Contents of mutualization proposal

• 227 (1) Every mutualization proposal shall set out the terms and means of effecting the conversion, and, in particular,

  • (a) the manner in which all issued and outstanding shares of the company, other than shares that may be issued by a mutual company, are to be purchased or otherwise acquired for the purpose of cancellation;

  • (b) the price to be paid for those shares;

  • (c) the nature of the consideration to be paid for those shares;

  • (d) the amount of any dividends to be paid to the holders of those shares after their purchase or other acquisition;

  • (e) the period within which the company intends to purchase or otherwise acquire those shares;

  • (f) the anticipated date when the company will become a mutual company; and

  • (g) the proposed by-laws of the converted company.

• Marginal note:Idem

  (2) The mutualization proposal shall also contain such other information and evidence as the Minister may require.

Marginal note:Shareholder and policyholder approval

• 228 (1) The directors of a company that makes a mutualization proposal shall, before applying to the Minister for approval of the proposal, submit it for approval to a meeting of the shareholders and policyholders entitled to vote and, subject to subsection (3), to the holders of each class or series of shares.

• Marginal note:Right to vote

  (2) Each share of a company that makes a mutualization proposal carries the right to vote in respect of the proposal whether or not it otherwise carries the right to vote.

• Marginal note:Class vote

  (3) The holders of shares of a class or series of shares of a company that makes a mutualization proposal are entitled to vote separately as a class or series in respect of the proposal.

• Marginal note:Policyholder vote

  (4) Policyholders who are entitled to vote are entitled to vote separately from shareholders in respect of a mutualization proposal.

• Marginal note:Special resolution

  (5) Subject to subsections (3) and (4), a mutualization proposal is approved when the shareholders and the policyholders who are entitled to vote have approved the proposal by special resolution.

Marginal note:Application to Minister

• 229 (1) A company shall, within three months after the approval of a mutualization proposal in accordance with section 228, apply to the Minister for approval of the proposal.

• Marginal note:Criteria for approval

  (2) In determining whether to approve a mutualization proposal, the Minister shall consider all matters that the Minister considers relevant and may not approve the proposal unless satisfied that

  • (a) the proposal was approved by the shareholders and policyholders pursuant to section 228;

  • (b) the conversion of the company into a mutual company may reasonably be expected to be achieved under the terms of the proposal and in accordance with this section and sections 230 to 236;

  • (c) there are no reasonable grounds for believing that the conversion would cause the company to be in contravention of subsection 515(1), any regulation made under subsection 515(2) or any order made under subsection 515(3);

  • (d) the stated capital of the company has ceased to be an important factor in safeguarding the interests of the policyholders of the company, having regard to the quality and amount of the assets of the company, the surplus of the company relative to its liabilities, the nature of the business carried on by the company and any other considerations deemed by the Minister to be relevant;

  • (e) the price fixed by the directors for the purchase or other acquisition of the common shares of the company under the proposal is fair and reasonable in the circumstances; and

  • (f) the proposal is in the best interests of the financial system in Canada.

Marginal note:Effect of Minister’s approval

• 230 (1) Where the Minister approves a mutualization proposal made by a company,

  • (a) the company may not issue any shares other than a share that may be issued by a mutual company;

  • (b) the company may solicit offers from the holders of the shares of the company that are to be purchased or otherwise acquired to effect the conversion of the company but shall not purchase or otherwise acquire those shares until the approval of the Superintendent under section 234 is obtained; and

  • (c) any change in the proposal must be approved by the shareholders and policyholders and by the Minister.

• Marginal note:Application of ss. 228 to 230

  (2) Sections 228 to 230 apply with such modifications as the circumstances require in respect of changes in mutualization proposals.

Marginal note:Register to be kept

231 A company shall prepare and maintain a register recording the offers for sale of shares under the terms of a mutualization proposal in the order in which those offers are received by the company, showing, in respect of each offer,

• (a) the date of receipt by the company of the offer;

• (b) the name and address of the shareholder making the offer;

• (c) the number of shares so offered by the shareholder making the offer;

• (d) the price at which each of the shares so offered may be purchased or otherwise acquired;

• (e) the date of purchase, if any, of each of the shares so offered and the number of shares purchased; and

• (f) the date of withdrawal, if any, of the offer and the number of shares affected by the withdrawal.

Marginal note:Application to Superintendent

232 A company that holds binding offers from the holders of at least ninety per cent of each class of shares for the purchase or other acquisition of those shares pursuant to a mutualization proposal shall apply to the Superintendent for approval of the purchase or other acquisition of the shares.

Marginal note:Criteria for approval

233 The Superintendent shall approve the purchase or other acquisition of shares pursuant to a mutualization proposal if the Superintendent is satisfied that

• (a) the purchase or other acquisition of shares would not cause the company to be in contravention of subsection 515(1), any regulation made under subsection 515(2) or any order made under subsection 515(3); and

• (b) the stated capital of the shares has, in the opinion of the Superintendent, ceased to be an important factor in safeguarding the interests of the policyholders of the company, having regard to the quality and amount of the assets of the company, the surplus of the company relative to its liabilities, the nature of the business carried on by the company and any other considerations deemed by the Superintendent to be relevant.

Marginal note:Effect of Superintendent’s approval

234 Where the Superintendent approves the purchase or other acquisition of shares of a company pursuant to a mutualization proposal, the company

• (a) shall, within the period set out in the mutualization proposal, purchase or otherwise acquire the shares for the purchase or other acquisition of which pursuant to the proposal the company holds binding offers; and

• (b) may acquire the remaining shares in accordance with Division X, which applies in respect of that acquisition with such modifications as the circumstances require, as if each reference in that Division to

  • (i) the “offeree company” or the “offeror” were a reference to the “company”,

  • (ii) a “dissenting offeree” were a reference to a holder of a share of the company who has not offered to sell his or her share under the terms of the mutualization proposal,

  • (iii) an “offeree who accepted the take-over bid” were a reference to a holder of a share of the company who has offered to sell his or her share under the terms of the mutualization proposal, and

  • (iv) the “date of the take-over bid” or the “date of termination of the take-over bid” were a reference to the date on which the Superintendent approves the purchase or other acquisition of the shares of the company pursuant to a mutualization proposal.