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Northern Ontario Loan Insurance Regulations (SOR/88-503)

Regulations are current to 2020-11-17

Northern Ontario Loan Insurance Regulations

SOR/88-503

APPROPRIATION ACTS

APPROPRIATION ACT NO. 1, 1980-81

APPROPRIATION ACT NO. 4, 1981-82

APPROPRIATION ACT NO. 2, 1988-89

Registration 1988-09-23

Regulations Respecting the Provision of Loan Insurance in Northern Ontario

P.C. 1988-2234 1988-09-23

Her Excellency the Governor General in Council, on the recommendation of the Minister of Regional Industrial Expansion and the Treasury Board, pursuant to Industry, Trade and Commerce Vote 1a of Appropriation Act No. 1, 1980-81Footnote *, as extended by Industry, Trade and Commerce Vote 1e of Appropriation Act No. 4, 1981-82Footnote ** and Regional Industrial Expansion Vote L20 of Appropriation Act No. 2, 1988-89Footnote ***, is pleased hereby to make the annexed Regulations respecting the provision of loan insurance in Northern Ontario.

Short Title

 These Regulations may be cited as the Northern Ontario Loan Insurance Regulations.

Interpretation

  •  (1) In these Regulations,

    applicant

    applicant means an individual, partnership, cooperative or body corporate, or any trustee or legal representative thereof, who makes an application pursuant to subsection 3(1), but does not include a government, municipality or agency thereof or a legal entity owned or controlled by a government, municipality or agency or any subsidiary thereof, or any combination thereof; (requérant)

    capital costs

    capital costs means capital costs that are determined in accordance with generally accepted accounting principles to be necessary to carry out a project, other than

    • (a) goodwill,

    • (b) motor vehicles not used exclusively on a project site or between two or more project sites,

    • (c) aircraft, and

    • (d) the portion of the cost of any asset which exceeds fair market value; (coûts en immobilisations)

    designated region

    designated region means that area of Ontario north of and including the census divisions of Parry Sound and Nipissing as shown in the Statistics Canada publication 1981 Census of Canada, Reference Maps, Census divisions and subdivisions; (région désignée)

    disbursement

    disbursement means any amount paid by a lender to an applicant under a loan agreement; (versement)

    eligible sector

    eligible sector means a sector set out in the schedule; (secteur admissible)

    formal demand

    formal demand means a demand in writing made by a lender to an applicant for the repayment of the outstanding amount under a loan agreement; (demande officielle)

    lender

    lender means a bank, credit union, caisse populaire or any other cooperative society, a trust company, a loan company, an insurance company or a pension fund, or a non-bank affiliate of a foreign bank as defined in section 303 of the Bank Act but does not include a government, municipality or agency thereof or an institution that is controlled by the Government of Canada, the government of a province, a municipality or by any agency thereof, or any combination thereof; (prêteur)

    loan agreement

    loan agreement means any agreement entered into by a lender and an applicant whereby the lender agrees to grant to the applicant a loan to finance the applicant’s project and for which a loan insurance agreement is made; (convention de prêt)

    loan insurance agreement

    loan insurance agreement means any agreement entered into by the Minister and a lender whereby the Minister agrees to provide loan insurance to the lender in respect of one or more loans granted under one or more loan agreements; (convention d’assurance-prêt)

    Minister

    Minister means the Minister of Industry, Science and Technology; (ministre)

    project

    project means

    • (a) the establishment, expansion, modernization or renovation of a commercial operation located in the designated region in eligible sector 11, or

    • (b) the establishment, expansion or modernization of a commercial operation located in the designated region in any other eligible sector. (projet)

  • (2) For the purposes of the definition project in subsection (1), the establishment of a commercial operation includes the purchase of the assets of a facility if, at the time an applicant makes an application under these Regulations,

    • (a) the operation of the facility has ceased or is about to cease;

    • (b) the cessation or imminent cessation of the operation of the facility is due to circumstances beyond the control of its owner; and

    • (c) the purchase of the assets of the facility is an arm’s length transaction by the applicant in good faith who is unrelated to the present owner or the immediate predecessor of that owner, and the purchase has not been undertaken for the sole purpose of an application under these Regulations.

  • SOR/91-337, s. 1

Insurance

  •  (1) An applicant requiring that the Minister enter into a loan insurance agreement shall apply in writing to the Minister on or before March 31, 1992 and shall provide a detailed description of the project and any other information that is necessary to effectively evaluate the application.

  • (2) The Minister may enter into a loan insurance agreement where

    • (a) the loan agreement is for an amount of not more than $15,000,000 and not less than $100,000 and the term of the loan does not exceed 15 years;

    • (b) the total amount of the loan is to be used to finance the applicant’s project;

    • (c) subject to section 4, the loan is to be used to finance only capital costs;

    • (d) the applicant is unable to obtain a loan on commercially acceptable terms, without a loan insurance agreement;

    • (e) the project would not likely be carried out within the proposed time or scope or in the proposed location, as described in an application made pursuant to subsection (1), without a loan insurance agreement;

    • (f) an application made pursuant to subsection (1) includes pro forma financial statements for each year in which loan insurance is required by the lender;

    • (g) the project and the applicant’s commercial operations, as the case may be, are or are expected to be commercially viable, subject to reasonable commercial risk;

    • (h) an application made pursuant to subsection (1) indicates it is likely that the applicant will have equity representing a minimum of 20 per cent of the capital costs for the project;

    • (i) the lender acquires an enforceable security for the purpose of securing the repayment of the loan under the loan agreement in a form consistent with standard banking practices;

    • (j) the project would constitute a significant contribution to the economic benefit of the designated region and of Canada; and

    • (k) all other requirements of these Regulations are met.

 A loan insurance agreement may be entered into in respect of a loan for working capital if, without loan insurance, the project would not be viable.

 Subject to section 6, a loan insurance agreement may be entered into in respect of a project in eligible sector 11 if the project is of a quality and scope likely to attract tourists from outside the designated region.

 A loan insurance agreement may be entered into in respect of a project in eligible sector 11 that is a tourism facility designed to serve food or beverages if that facility

  • (a) constitutes part of or supports another tourism facility; or

  • (b) is of a sufficiently thematic or original nature as to constitute a tourism attraction in its own right.

  • SOR/91-337, s. 2(F)

 No loan insurance agreement shall be entered into in respect of a loan granted for a merger, refinancing or an acquisition, except in respect of a project referred to in subsection 2(2).

Coverage

 A loan insurance agreement shall insure 85 per cent or less of the amount of a loan disbursed pursuant to a loan agreement.

Insurance Fee

  •  (1) Where a loan insurance agreement is entered into, an insurance fee is payable in advance by the lender to the Minister in accordance with the following formulae:

    • (a) fee payable at the time of the first disbursement:

      A × B × 0.01

    • (b) fee payable at the time of each subsequent disbursement:

      A × B × C ÷ 365 × 0.01

    • (c) fee payable on each anniversary of the date of the first disbursement until the earlier of the date of formal demand and the date the loan is repaid:

      A × D × 0.01

      where

      “A”
      is the percentage of the loan that is insured under the loan insurance agreement,
      “B”
      is the amount of the disbursement,
      “C”
      is the number of days remaining between the date of the disbursement and the next anniversary date of the first disbursement, and
      “D”
      is the outstanding amount of the loan under the loan agreement on the anniversary date.
  • (2) An insurance fee paid by the lender under subsection (1) is not refundable.

 
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