Trust and Loan Companies Act (S.C. 1991, c. 45)

Marginal note:Transactions with holding companies

• 483.1 (1) Subject to subsection (2) and sections 483.2 and 483.3, if a widely held insurance holding company or a widely held bank holding company has a significant interest in any class of shares of a company, the company may enter into any transaction with the holding company or with any other related party of the company that is an entity in which the holding company has a substantial investment.

• Marginal note:Policies and procedures

  (2) The company shall adhere to policies and procedures established under subsection 199(3) when entering into the transaction.

Marginal note:Restriction

• 483.2 (1) If a company enters into a transaction with a related party of the company with whom the company may enter into transactions under subsection 483.1(1) and that is not a federal financial institution, the company shall not directly or indirectly make, take an assignment of or otherwise acquire a loan to the related party, make an acceptance, endorsement or other guarantee on behalf of the related party or make an investment in the securities of the related party if, immediately following the transaction, the aggregate financial exposure, as that expression is defined by the regulations, of the company would exceed

  • (a) in respect of all transactions of the company with the related party, the prescribed percentage of the company’s regulatory capital or, if no percentage is prescribed, five per cent of the company’s regulatory capital; or

  • (b) in respect of all transactions of the company with such related parties of the company, the prescribed percentage of the company’s regulatory capital or, if no percentage is prescribed, ten per cent of the company’s regulatory capital.

• Marginal note:Order

  (2) If the Superintendent is of the opinion that it is necessary for the protection of the interests of the depositors and creditors of a company, the Superintendent may, by order,

  • (a) reduce the limit in paragraph (1)(a) or (b) that would otherwise apply to the company; and

  • (b) impose limits on transactions by the company with related parties with whom the company may enter into transactions under subsection 483.1(1) that are federal financial institutions.

• Marginal note:Order

  (3) The Superintendent may, by order, increase the limit in paragraph (1)(a) or (b) that would otherwise apply to a company on transactions by the company with related parties that are financial institutions that are regulated in a manner acceptable to the Superintendent.

Marginal note:Assets transactions

• 483.3 (1) Despite subsection 482(3), a company shall not, without the approval of the Superintendent and its conduct review committee, directly or indirectly acquire assets from a related party of the company with whom the company may enter into transactions under subsection 483.1(1) that is not a federal financial institution, or directly or indirectly transfer assets to such a related party if

  A + B > C

  where

  A

  is the value of the assets;

  B

  is the total value of all assets that the company directly or indirectly acquired from, or directly or indirectly transferred to, that related party in the 12 months ending immediately before the acquisition or transfer, other than assets acquired by or transferred to the company under transactions permitted by section 478; and

  C

  is five per cent, or the percentage that may be prescribed, of the total value of the assets of the company, as shown in the last annual statement of the company prepared before the acquisition or transfer.

• Marginal note:Exception

  (2) The prohibition in subsection (1) does not apply in respect of assets purchased or otherwise acquired under subsection 482(1), assets sold under subsection 482(2) or any other assets as may be prescribed.

• Marginal note:Exception

  (3) The approval of the Superintendent is not required if

  • (a) the company purchases or sells assets under a sale agreement that is approved by the Minister under section 241; or

  • (b) the company or its subsidiary acquires shares of, or ownership interests in, an entity for which the approval of the Minister under Part VII or subsection 453(5) is required or the approval of the Superintendent under subsection 453(6) is required.

• Marginal note:Value of assets

  (4) For the purposes of “A” in subsection (1), the value of the assets is

  • (a) in the case of assets that are acquired, the purchase price of the assets or, if the assets are shares of, or ownership interests in, an entity the assets of which will be included in the annual statement of the company after the acquisition, the fair market value of the assets; and

  • (b) in the case of assets that are transferred, the book value of the assets as stated in the last annual statement of the company prepared before the transfer or, if the assets are shares of, or ownership interests in, an entity the assets of which were included in the last annual statement of the company before the transfer, the value of the assets as stated in the annual statement.

• Marginal note:Total value of all assets

  (5) For the purposes of subsection (1), the total value of all assets that the company or any of its subsidiaries has acquired during the period of twelve months referred to in subsection (1) is the purchase price of the assets or, if the assets are shares of, or ownership interests in, an entity the assets of which immediately after the acquisition were included in the annual statement of the company, the fair market value of the assets of the entity at the date of the acquisition.

• Marginal note:Total value of all assets

  (6) For the purposes of subsection (1), the total value of all assets that the company or any of its subsidiaries has transferred during the period of twelve months referred to in subsection (1) is the book value of the assets as stated in the last annual statement of the company prepared before the transfer or, if the assets are shares of, or ownership interests in, an entity the assets of which were included in the last annual statement of the company before the transfer, the value of the assets of the entity as stated in the annual statement.

Marginal note:Directors and officers and their interests

• 484 (1) Subject to subsection (2) and sections 485 and 486, a company may enter into any transaction with a related party of the company if the related party is

  • (a) a natural person who is a related party of the company only because the person is

    • (i) a director or senior officer of the company or of an entity that controls the company, or

    • (ii) the spouse or common-law partner, or a child who is less than eighteen years of age, of a director or senior officer of the company or of an entity that controls the company; or

  • (b) an entity that is a related party of the company only because the entity is controlled by

    • (i) a director or senior officer of the company or of an entity that controls the company, or

    • (ii) the spouse or common-law partner, or a child who is less than eighteen years of age, of a director or senior officer referred to in subparagraph (i).

• Marginal note:Loans to full-time senior officers

  (2) A company may, with respect to a related party of the company referred to in subsection (1) who is a full-time senior officer of the company, make, take an assignment of or otherwise acquire a loan to the related party only if the aggregate principal amount of all outstanding loans to the related party that are held by the company and its subsidiaries, together with the principal amount of the proposed loan, does not exceed the greater of twice the annual salary of the related party and $100,000.

• Marginal note:Exception

  (3) Subsection (2) does not apply in respect of

  • (a) loans referred to in paragraph 479(b), and

  • (b) margin loans referred to in section 486,

  and the amount of any such loans to a related party of a company shall not be included in determining, for the purposes of subsection (2), the aggregate principal amount of all outstanding loans made by the company to the related party.

• Marginal note:Preferred terms — loan to senior officer

  (4) Notwithstanding section 489, a company may make a loan, other than a margin loan, to a senior officer of the company on terms and conditions more favourable to the officer than those offered to the public by the company if those terms and conditions have been approved by the conduct review committee of the company.

• Marginal note:Preferred terms — loan to spouse or common-law partner

  (5) Notwithstanding section 489, a company may make a loan referred to in paragraph 479(b) to the spouse or common-law partner of a senior officer of the company on terms and conditions more favourable than those offered to the public by the company if those terms and conditions have been approved by the conduct review committee of the company.

• Marginal note:Preferred terms — other financial services

  (6) Notwithstanding section 489, a company may offer financial services, other than loans or guarantees, to a senior officer of the company, or to the spouse or common-law partner, or a child who is less than eighteen years of age, of a senior officer of the company, on terms and conditions more favourable than those offered to the public by the company if

  • (a) the financial services are offered by the company to employees of the company on those favourable terms and conditions; and

  • (b) the conduct review committee of the company has approved the practice of making those financial services available on those favourable terms and conditions to senior officers of the company or to the spouses or common-law partners, or the children under eighteen years of age, of senior officers of the company.

Marginal note:Board approval required

• 485 (1) Except with the concurrence of at least two thirds of the directors present at a meeting of the board of directors of the company, a company shall not, with respect to a related party of the company referred to in subsection 484(1),

  • (a) make, take an assignment of or otherwise acquire a loan to the related party, including a margin loan referred to in section 486,

  • (b) make a guarantee on behalf of the related party, or

  • (c) make an investment in the securities of the related party

  if, immediately following the transaction, the aggregate of

  • (d) the principal amount of all outstanding loans to the related party that are held by the company and its subsidiaries, other than

    • (i) loans referred to in paragraph 479(b), and

    • (ii) if the related party is a full-time senior officer of the company, loans to the related party that are permitted by subsection 484(2),

  • (e) the sum of all outstanding amounts guaranteed by the company and its subsidiaries on behalf of the related party, and

  • (f) where the related party is an entity, the book value of all investments by the company and its subsidiaries in the securities of the entity

  would exceed 2 per cent of the regulatory capital of the company.

• Marginal note:Limit on transactions with directors, officers and their interests

  (2) A company shall not, with respect to a related party of the company referred to in subsection 484(1),

  • (a) make, take an assignment of or otherwise acquire a loan to the related party, including a margin loan referred to in section 486,

  • (b) make a guarantee on behalf of the related party, or

  • (c) make an investment in the securities of the related party

  if, immediately following the transaction, the aggregate of

  • (d) the principal amount of all outstanding loans to all related parties of the company referred to in subsection 484(1) that are held by the company and its subsidiaries, other than

    • (i) loans referred to in section 479, and

    • (ii) loans permitted by subsection 484(2),

  • (e) the sum of all outstanding amounts guaranteed by the company and its subsidiaries on behalf of all related parties of the company referred to in subsection 484(1), and

  • (f) the book value of all investments by the company and its subsidiaries in the securities of all entities that are related parties of the company referred to in subsection 484(1)

  would exceed 50 per cent of the regulatory capital of the company.

• Marginal note:Exclusion of de minimis transactions

  (3) Loans, guarantees and investments that are referred to in section 478 shall not be included in calculating the aggregate of loans, guarantees and investments referred to in subsections (1) and (2).

Marginal note:Margin loans

486 The Superintendent may establish terms and conditions with respect to the making by a company of margin loans to a director or senior officer of the company.

Marginal note:Exemption by order

• 487 (1) A company may enter into a transaction with a related party of the company if the Superintendent, by order, has exempted the transaction from the provisions of section 477.

• Marginal note:Conditions for order

  (2) The Superintendent shall not make an order referred to in subsection (1) unless the Superintendent is satisfied that the decision of the company to enter into the transaction has not been and is not likely to be influenced in any significant way by a related party of the company and does not involve in any significant way the interests of a related party of the company.

Marginal note:Prescribed transactions

488 A company may enter into a transaction with a related party of the company if the transaction is a prescribed transaction or one of a class of prescribed transactions.

Restrictions on Permitted Transactions

Marginal note:Market terms and conditions

• 489 (1) Except as provided in subsections 484(4) to (6), any transaction entered into with a related party of the company shall be on terms and conditions that are at least as favourable to the company as market terms and conditions.

• Meaning of market terms and conditions

  (2) For the purposes of subsection (1), market terms and conditions means

  • (a) in respect of a service or a loan facility or a deposit facility offered to the public by the company in the ordinary course of business, terms and conditions that are no more or less favourable than those offered to the public by the company in the ordinary course of business; and

  • (b) in respect of any other transaction,

    • (i) terms and conditions, including those relating to price, rent or interest rate, that might reasonably be expected to apply in a similar transaction in an open market under conditions requisite to a fair transaction between parties who are at arm’s length and who are acting prudently, knowledgeably and willingly, or

    • (ii) if the transaction is one that would not reasonably be expected to occur in an open market between parties who are at arm’s length, terms and conditions, including those relating to price, rent or interest rate, that would reasonably be expected to provide the company with fair value, having regard to all the circumstances of the transaction, and that would be consistent with the parties to the transaction acting prudently, knowledgeably and willingly.

490 and 491 [Repealed, 1997, c. 15, s. 404]