R.R.O. 1990, Reg. 733: GENERAL
under Loan and Trust Corporations Act, R.S.O. 1990, c. L.25
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| May 16, 2008 – July 31, 2008 | |
| June 13, 2005 – May 15, 2008 | |
| March 1, 2000 – June 12, 2005 |
Loan and Trust Corporations Act
Loi sur les sociétés de prêt et de fiducie
R.R.O. 1990, REGULATION 733
GENERAL
Historical version for the period June 13, 2005 to May 15, 2008.
Last amendment: O. Reg. 322/05.
This Regulation is made in English only.
CONTENTS
Sections | ||
GENERAL |
1-4 | |
DISCLOSURE TO BORROWERS IN LENDING TRANSACTIONS |
||
6 | ||
7 | ||
8-12 | ||
13-16 | ||
17-19 | ||
PUBLIC FILE OF REGISTERED CORPORATIONS |
20 | |
CUSTODY AND SAFEKEEPING OF SECURITIES, PROPERTY AND TRUST ASSETS |
||
21 | ||
22 | ||
23-26 | ||
27 | ||
28 | ||
29-29.3 | ||
FINANCIAL STATEMENTS |
||
30-33 | ||
34 | ||
35 | ||
36 | ||
37 | ||
38 | ||
CAPITAL BASE |
39-42 | |
RETAINED EARNINGS AND DEFICITS IN THE DEFINITION OF CAPITAL BASE |
||
43 | ||
44 | ||
45-46 | ||
47-48 | ||
49 | ||
50 | ||
51-52 | ||
53-56 | ||
57-68 | ||
69-75 | ||
76 | ||
77-78 | ||
TOTAL ASSETS |
79-80 | |
SELF DEALING |
81-82 | |
CLASSES OF ASSETS |
83-84 | |
PLEDGING ASSETS |
84.1-84.2 | |
LIQUIDITY |
85-88 | |
SUBORDINATED INDEBTEDNESS |
89-90 | |
COMMON TRUST FUNDS |
||
91-92 | ||
93-94 | ||
95 | ||
96 | ||
97 | ||
98-99 | ||
100 | ||
101 | ||
102-103 | ||
104 | ||
105 | ||
106 | ||
DEPOSIT AGENTS |
107-111 | |
LOANS TO DIRECTORS, OFFICERS AND EMPLOYEES |
112-114 | |
SUBSIDIARIES |
114.1-117 | |
DUTIES |
||
118-119 | ||
120-121 | ||
BORROWING OVER THE LIMIT |
||
122-123 | ||
124 | ||
DURATION OF AUTHORITY TO CARRY ON BUSINESS |
125 | |
INVESTMENTS |
||
126-127 | ||
128-130 | ||
131 | ||
132 | ||
133 | ||
134 | ||
135 | ||
136 | ||
137 | ||
138-140 | ||
141-143 | ||
144-145 | ||
146-147 | ||
148 | ||
Indirect Interests — Real Estate, Share and Ownership Interests |
149 | |
150 | ||
151 | ||
152 |
PART I
GENERAL
1. In this Regulation
“co-operative credit society” means a body corporate organized and operated on co-operative principles, one of whose principal purposes is to provide financial services to its members;
“entity” means a body corporate, trust, partnership, fund, unincorporated association or organization, Her Majesty in right of Canada or of a province of Canada, an agency of Her Majesty in either of such rights and the government of a foreign country or any political subdivision thereof and any agency thereof;
“financial institution” means,
(a) a corporation incorporated by or under the laws of Ontario, of Canada or of any other province or territory of Canada,
(b) a bank,
(c) an insurance company,
(d) a co-operative credit society incorporated and regulated by or under the laws of Canada or of any province or territory of Canada, including a credit union or caisse populaire,
(e) a securities dealer, or
(f) a foreign institution;
“foreign institution” means an entity that is,
(a) engaged in the business of banking, the trust, loan or insurance business, the business of a co-operative credit society or the business of dealing in securities or is otherwise engaged primarily in the business of providing financial services, and
(b) incorporated or formed otherwise than by or under the laws of Canada or a province or territory of Canada;
“insurance company” means an insurance company incorporated by or under the laws of Ontario, of Canada or of any other province or territory of Canada;
“real estate corporation” means a body corporate that is primarily engaged in holding, managing or otherwise dealing with real estate or shares of a body corporate or ownership interests in an unincorporated entity that is also primarily engaged in holding, managing or otherwise dealing with real estate;
“real estate holding vehicle” means a limited partnership or a trust that is primarily engaged in holding, managing or otherwise dealing with real estate or shares of a body corporate or ownership interests in an unincorporated entity that is also primarily engaged in holding, managing or otherwise dealing with real estate;
“securities dealer” means an entity that is incorporated by or under the laws of Canada or a province or territory of Canada that is primarily engaged in dealing in securities, including portfolio management and investment counselling;
“specialized financing corporation” means a body corporate that is primarily engaged in providing specialized business management, in making investments or in providing financing or advisory services. O. Reg. 413/97, s. 1.
2. Revoked: O. Reg. 413/97, s. 1.
3. Revoked: O. Reg. 413/97, s. 1.
4. Revoked: O. Reg. 413/97, s. 1.
PART II (s. 5) Revoked: O. Reg. 413/97, s. 1.
PART III
DISCLOSURE TO BORROWERS IN LENDING TRANSACTIONS
6. (1) In this Part,
“annual percentage rate” means, in relation to interest payable on a loan or credit, the interest expressed as a rate per annum;
“cost of borrowing” means, in relation to a loan or credit,
(a) the interest on the loan or credit,
(b) administration costs, including any service, transaction or activity charge,
(c) loan fees, finders fees, brokerage fees, renewal fees for a renewed loan, application fees, placement fees, closing costs, discharge fees and similar charges, and
(d) any other charges in connection with the loan or credit that are payable by the borrower to the registered corporation or to a person from whom the registered corporation receives a benefit, directly or indirectly, but excludes any amount that the registered corporation is required to pay to persons that are not restricted parties;
“credit” means an arrangement for obtaining loans and includes a line of credit and credit made available to a person through the use of a payment, credit or charge card issued by a registered corporation;
“loan” means any money lent, whether secured or unsecured, and includes an advance, a lease, a loan to a lessee or conditional purchaser and a mortgage;
“prepayment” means, in relation to a loan, a payment other than a payment made on a date or according to a mechanism that is specified in the loan contract and includes a payment that is a prepayment as defined by the loan contract;
“principal amount” means, in relation to a loan, the amount of money lent that remains unpaid on a given day.
(2) For the purposes of this Part, a renewal of a loan, whether or not it is made pursuant to an option in the original loan, is deemed to be a separate loan. R.R.O. 1990, Reg. 733, s. 6.
7. This Part does not apply in respect of loans made or credit made available by a registered corporation,
(a) to a body corporate, partnership, limited partnership or joint venture; or
(b) in an amount that exceeds $250,000,
unless the loan or credit is secured or guaranteed, in whole or in part, by a principal or secondary residence of an individual. R.R.O. 1990, Reg. 733, s. 7.
Disclosure Requirements for Loans
8. (1) A registered corporation that proposes to make a loan or enters into a loan commitment shall disclose to the borrower the terms and conditions of the loan required by subsection 10 (1) on a disclosure statement.
(2) A registered corporation shall give a borrower a disclosure statement under subsection (1) not less than five business days before the borrower is required to accept the offer respecting the proposed loan.
(3) If, at or after the time a registered corporation gives a borrower a disclosure statement under subsection (1), the registered corporation gives the borrower another document disclosing terms and conditions of the proposed loan, the terms and conditions in the disclosure statement shall be deemed to be the terms and conditions of the proposed loan. R.R.O. 1990, Reg. 733, s. 8.
9. At the time a loan contract is entered into, a registered corporation shall disclose to the borrower the terms and conditions of the loan required by subsection 10 (1),
(a) as part of the written loan contract between the registered corporation and the borrower;
(b) in a promissory note to be signed by the borrower; or
(c) in a separate statement that is attached to the loan contract. R.R.O. 1990, Reg. 733, s. 9.
10. (1) Every registered corporation shall disclose under subsection 8 (1) or section 9 to a borrower,
(a) the gross amount of the loan;
(b) the net amount of the loan to be advanced;
(c) the amount of prepaid interest, if any, that the registered corporation may deduct from the principal amount;
(d) the term of the loan;
(e) the interest on the loan as of the date the loan is made, expressed as an annual percentage rate, and the method of calculating the rate;
(f) if the annual percentage rate of interest on the loan is not fixed, the manner of determining the annual percentage rate;
(g) the components of the cost of borrowing, other than the interest on the loan, itemized and expressed in dollars and cents;
(h) a description and itemized estimate of costs to be paid in respect of the loan to persons other than the registered corporation, including, where applicable, legal fees, registration fees and mortgage insurance fees;
(i) the method of applying each payment in respect of the loan to the accumulated cost of borrowing and to the principal amount;
(j) whether and in what circumstances prepayments are permitted;
(k) if prepayments are permitted under the terms of the loan or otherwise, the conditions for making any prepayment, the costs and penalties, if any, imposed as a result of a prepayment and the method of applying a prepayment to the accumulated cost of borrowing and to the principal amount;
(l) if prepayments are permitted under the terms of the loan and the borrower makes a prepayment, the method of calculating any rebate on the cost of borrowing; and
(m) particulars of any charge or penalty payable by the borrower upon a failure to make payments under the loan as they come due.
(2) The annual percentage rate of interest on a loan that is disclosed to a borrower shall be accurate to within one-eighth of 1 per cent. R.R.O. 1990, Reg. 733, s. 10 (1, 2).
(3) A registered corporation that makes an offer to renew a loan shall disclose to the borrower, not less than 21 days before the loan matures,
(a) the amount of any renewal fee, placement fee, bonus or similar charge to be imposed upon renewal of the loan; and
(b) despite subsection 8 (2), the terms and conditions of the proposed renewed loan. R.R.O. 1990, Reg. 733, s. 10 (3); O. Reg. 413/97, s. 2 (1).
(4) A registered corporation shall disclose to a borrower under a loan contract, not less than 21 days before the loan matures, particulars of any fee, bonus, penalty or similar charge payable to the registered corporation upon the discharge of the loan, setting out the terms of the loan contract that entitle the registered corporation to the fee, bonus, penalty or similar charge. R.R.O. 1990, Reg. 733, s. 10 (4); O. Reg. 413/97, s. 2 (2).
11. (1) If the annual percentage rate of interest on a loan is variable, the registered corporation shall give the borrower notice of any change in the annual percentage rate being charged during the term of the loan within one month after the change occurs.
(2) Subsection (1) does not apply if the change in the annual percentage rate of interest on the loan is made by reference to a corresponding change in a rate that is readily ascertainable by a reasonable borrower. R.R.O. 1990, Reg. 733, s. 11.
12. A registered corporation that acquires a loan contract from a third party shall forthwith disclose to the borrower any fee, bonus, penalty or similar charge that is or may be payable by the borrower during the term or upon discharge of the loan. R.R.O. 1990, Reg. 733, s. 12.
13. (1) A registered corporation that makes credit available to a person shall disclose to the person the terms and conditions of the credit required by section 14.
(2) A registered corporation shall disclose to a person at the time it makes credit available to the person the terms and conditions of the credit,
(a) as part of a written contract or proposed contract between the registered corporation and the person; or
(b) in a separate statement that is attached to the written contract or proposed contract. R.R.O. 1990, Reg. 733, s. 13.
14. Every registered corporation shall disclose under subsection 13 (1),
(a) the maximum aggregate amount of credit available at one time to the person under the credit;
(b) the annual percentage rate of interest, and the method of calculating the rate;
(c) if the annual percentage rate of interest is not fixed, the manner of determining the annual percentage rate;
(d) the components of the cost of borrowing, other than interest, itemized and expressed in dollars and cents;
(e) the term of each period for which a statement of account is furnished in respect of the credit;
(f) the minimum payment, or the method of calculating the minimum payment, required for each period;
(g) the manner, if any, in which the person may discharge the person’s obligations in respect of the credit without incurring any fee, bonus, penalty or similar charge;
(h) the maximum liability of the person for the unauthorized use of any card that is issued to the person in connection with the credit, in the event that the card is lost or stolen; and
(i) particulars of any charge or penalty payable by the person upon a failure to make payments in respect of the credit as they come due. R.R.O. 1990, Reg. 733, s. 14.
15. A registered corporation shall give a person to whom credit is made available notice of any change in an item disclosed pursuant to section 14, at least thirty days before the change becomes effective. R.R.O. 1990, Reg. 733, s. 15.
16. (1) Despite section 15, if the annual percentage rate of interest on the credit is variable, the registered corporation shall give the person notice of any change in the annual percentage rate being charged for the credit within one month after the change occurs.
(2) Subsection (1) does not apply if the change in the annual percentage rate of interest on the credit is made by reference to a corresponding change in a rate that is readily ascertainable by a reasonable borrower. R.R.O. 1990, Reg. 733, s. 16.
17. If a registered corporation is unable, using reasonable efforts, to ascertain the amount of any component of the cost of borrowing, the registered corporation shall disclose in its place an estimated amount, clearly identified as such, based on the best available information. R.R.O. 1990, Reg. 733, s. 17.
18. No registered corporation may provide additional information with respect to a lending transaction that tends to contradict or obscure the information that it is required under this Part to disclose. R.R.O. 1990, Reg. 733, s. 18.
19. Any disclosure or notice that is required under this Part is sufficiently made or given if it is in writing and given to the person required to be notified or if it is sent by ordinary first class mail to the person’s latest address in the records of the registered corporation making the disclosure. R.R.O. 1990, Reg. 733, s. 19.
PART IV
PUBLIC FILE OF REGISTERED CORPORATIONS
20. For the purpose of subsection 139 (1) of the Act, the following information is prescribed to be contained in the Superintendent’s file on each registered corporation:
1. Particulars of the corporation’s charter or letters patent, supplementary letters patent and all other constating documents.
2. Particulars of any orders in council issued with respect to the corporation.
3. Particulars of any orders issued under the Act with respect to the corporation, unless the order provides otherwise.
4. Particulars of any consents issued under the Act with respect to the corporation and with respect to its holding bodies corporate under section 63 of the Act.
5. Particulars of any amalgamation agreements and agreements that provide for the purchase or sale of substantially all assets of or to the corporation, as the case may be.
6. Particulars respecting the continuation of registration in a jurisdiction other than jurisdiction of incorporation.
7. Particulars respecting the registration of the corporation including the details of any notations made by the Superintendent in the Loan Corporations’ Register or Trust Corporations’ Register, as the case may be, pursuant to the Act.
8. Particulars of any powers of attorney and all undertakings of the corporation required under the Act or regulations.
9. Particulars of any court orders or certificates of conviction issued against the corporation as a result of proceedings commenced under the Act or regulations.
10. Particulars of the surrender of charter, winding up and other dissolution documents.
11. Information concerning whether the corporation’s deposits are insured by a public agency approved by the Superintendent.
12. A list of current officers and directors of the corporation according to the records filed with the Superintendent. R.R.O. 1990, Reg. 733, s. 20.
PART V
CUSTODY AND SAFEKEEPING OF SECURITIES, PROPERTY AND TRUST ASSETS
21. (1) Sections 21 to 26 apply to securities, property and other assets held by a provincial corporation as collateral for a loan or as an acquisition for its own account.
(2) Despite subsection (1), if a provincial corporation enters into a securities lending arrangement with a financial institution or securities dealer, sections 21 to 26 apply in respect of any securities received by the provincial corporation as a result of the arrangement but do not apply in respect of any securities lent by the provincial corporation under the arrangement. O. Reg. 413/97, s. 3.
22. (1) Documents evidencing ownership of securities, property or other assets that are held by a provincial corporation as collateral for a loan or for its own account shall be placed in the possession of a corporation, a bank or the Bank of Canada.
(2) Despite subsection (1), documents evidencing ownership of assets not retained in Canada that are acquired by a provincial corporation for its own account may be placed in the possession of an institution in a jurisdiction outside Canada that is,
(a) recognized by the laws of the jurisdiction as a bank or an equivalent to a bank; and
(b) empowered by the laws of the jurisdiction to act as a custodian, and that is regulated by a system similar to that of Ontario.
(3) There shall be an agreement in writing between a provincial corporation and a custodian mentioned in subsection (1) or (2) governing the custody of securities, property and other assets that sets out the obligations of the custodian and the cost, if any, of the services to be provided to the provincial corporation.
(4) In this section,
“assets not retained in Canada” means,
(a) bonds, debentures and other forms of indebtedness of a body corporate that is incorporated outside Canada,
(b) shares of a body corporate that is incorporated outside Canada, unless the shares are listed on a Canadian stock exchange,
(c) real estate located outside Canada,
(d) loans that are secured by real estate or leaseholds outside Canada, and
(e) mutual fund shares or units that are traded only by dealers who are not registered with a securities commission in Canada. O. Reg. 413/97, s. 3.
23. A provincial corporation holding securities or property as collateral for a loan shall obtain from the borrower an assignment of the borrower’s rights in the securities or property and shall obtain,
(a) in the case of securities, a power of attorney and proof of the assignability of the securities; and
(b) in the case of property, proof of the ownership rights of the borrower. O. Reg. 413/97, s. 3.
24. A provincial corporation holding securities or government debt instruments for its own account shall, within 15 days after settlement, forward the securities for registration in the name of the provincial corporation or its nominee. O. Reg. 413/97, s. 3.
25. (1) Canadian money market instruments that are purchased by a provincial corporation for its own account may be held in bearer form or in registered form accompanied by a power of attorney appointing the provincial corporation.
(2) Securities and government debt instruments other than Canadian money market instruments that the provincial corporation intends to dispose of within 90 days after acquisition may be held by the provincial corporation in bearer form or in registered form accompanied by a power of attorney appointing the provincial corporation.
(3) Section 23 or 24, as the case may be, applies to a provincial corporation that does not dispose of securities or government debt instruments described in subsection (2) within 90 days after acquisition.
(4) Despite section 24, if a provincial corporation acquires securities or government debt instruments,
(a) that are issued in bearer form only, the provincial corporation may hold the securities or government debt instruments in bearer form; and
(b) that are Canadian money market instruments in street form, the provincial corporation may hold the securities or government debt instruments in street form.
(5) In this section,
“money market instrument” means a publicly traded debt instrument issued by a body corporate or a government, maturing within three years after its date of issue, that is,
(a) purchased by a provincial corporation for its own account, or
(b) held by a provincial corporation as collateral for a loan payable within up to one year from the day the loan was made. O. Reg. 413/97, s. 3.
26. A provincial corporation must take reasonable and prudent action to ensure that ownership rights of, or security interest in securities, property and other assets that are registered in the name of the provincial corporation or its nominee, or held by the provincial corporation, are protected under provincial law. O. Reg. 413/97, s. 3.
27. (1) Sections 27 to 29.2 apply to securities, property and other assets held by a registered corporation as trust assets under administration.
(2) Despite subsection (1), if a registered corporation enters into a securities lending arrangement with a financial institution or securities dealer for assets held by the registered corporation as trust assets under administration, sections 27 to 29.2 apply in respect of any securities received by the registered corporation as a result of the arrangement but do not apply in respect of any securities lent by the registered corporation under the arrangement. O. Reg. 413/97, s. 3.
28. (1) Documents evidencing ownership of securities, property or other assets that are held by a registered corporation as trust assets under administration shall be placed in the possession of a corporation, a bank or the Bank of Canada.
(2) Subsection (1) does not apply if a court order or an instrument that creates a fiduciary duty contains a direction respecting securities, property or trust assets that is inconsistent with subsection (1).
(3) There shall be an agreement in writing between a registered corporation and a custodian holding documents in accordance with subsection (1) or (2) governing the custody of securities, property and other assets held as trust assets that sets out the obligations of the custodian and the costs, if any, of the services to be provided to the registered corporation. O. Reg. 413/97, s. 3.
29. (1) Trust assets shall be registered and held by a registered corporation or its nominee in trust for the beneficial owner or in the name of the beneficial owner.
(2) Subsection (1) does not apply where a court order or an instrument that creates a fiduciary duty contains a direction respecting securities, property or other assets that is inconsistent with the requirements of that subsection. O. Reg. 413/97, s. 3.
29.1 (1) Canadian money market instruments that are held by a registered corporation as trust assets may be held in bearer form or in registered form accompanied by a power of attorney appointing the registered corporation.
(2) Securities and government debt instruments other than Canadian money market instruments held by a registered corporation as trust assets that the registered corporation intends to dispose of within 90 days after acquisition may be held by the registered corporation in bearer form or in registered form accompanied by a power of attorney appointing the registered corporation.
(3) Section 29 applies to a registered corporation that does not dispose of securities or government debt instruments described in subsection (2) within 90 days after acquisition.
(4) Despite section 29, if a registered corporation acquires securities or government debt instruments held by the registered corporation as trust assets,
(a) that are issued in bearer form only, the registered corporation may hold the securities or government debt instruments in bearer form; and
(b) that are Canadian money market instruments in street form, the registered corporation may hold the securities or government debt instruments in street form.
(5) In this section,
“money market instrument” means a publicly traded debt instrument issued by a body corporate or a government, maturing within three years after its date of issue and purchased by a registered corporation as a trust asset. O. Reg. 413/97, s. 3.
29.2 Where a registered corporation holds securities, property or other assets as trust assets and the securities, property or other assets are registered in the name of the registered corporation or its nominee, the registered corporation must take reasonable and prudent action to ensure that the ownership rights of or security interest in the securities, property or other assets are protected under provincial law. O. Reg. 413/97, s. 3.
29.3 (1) The existence of and ownership rights of a person in a security or government debt instrument held by a provincial corporation as collateral for a loan or as an acquisition for its own account or held by a registered corporation as trust assets under administration may be established by the delivery to the provincial corporation or registered corporation of,
(a) a certificate respecting the issuance and registration of the security or government debt instrument; or
(b) a statement of account for the security or government debt instrument given by a recognized securities depository in Canada that is authorized by law to operate a book based system or a comparable institution in a foreign jurisdiction that is authorized by law to operate a transnational book based system.
(2) In this section,
“book based system” means a system for the central handling of securities within which all securities in a class or series of any issuer that are deposited into the system are treated as fungible and may be transferred or pledged by a bookkeeping entry without the actual delivery of the securities. O. Reg. 413/97, s. 3.
30. (1) The financial statements required in respect of a corporation are the financial statements set out in section 120 of the Act.
(2) For the purpose of subsection (1), the financial statements must be audited and comply with the requirements for preparation and disclosure set out in this Part. R.R.O. 1990, Reg. 733, s. 30.
31. For the purposes of clause 120 (1) (d) of the Act, the financial statements of every subsidiary of a corporation must be placed before each annual meeting of shareholders of the corporation. R.R.O. 1990, Reg. 733, s. 31.
32. (1) The degree of disclosure required in the non-consolidated financial statements of a corporation to be placed before an annual meeting of shareholders is as set out in this Part.
(2) The degree of disclosure required for financial statements to be placed before an annual meeting of shareholders that are prepared on a consolidated basis is as set out in this Part, allowing for appropriate consolidation adjustments. R.R.O. 1990, Reg. 733, s. 32.
33. (1) Despite any other provision in this Part, a corporation is not required to disclose in its financial statements a matter that, in all the circumstances of the corporation, is relatively insignificant.
(2) A determination whether a matter is relatively insignificant must take into consideration the effect of the authorized borrowing multiple on the capital base of the corporation. R.R.O. 1990, Reg. 733, s. 33.
34. (1) Every statement of income must set out separately at least,
(a) revenue from mortgages, showing separately,
(i) interest earned on mortgages, and
(ii) other mortgage revenue, if any, including amortized fee income;
(b) earnings from investments in subsidiaries;
(c) earnings from investments in securities dealers, where the relationship of the securities dealer to the corporation is that of a subsidiary or a company under significant influence;
(d) revenue, excluding gains or losses on sales, from investments in securities other than those set out in clauses (b) and (c);
(e) revenue from loans to individuals;
(f) revenue from loans to persons other than individuals;
(g) revenue from the administration of estates, trusts and agencies;
(h) commissions from real estate sales net of commissions paid to other real estate brokers;
(i) revenue from real estate held for investment;
(j) revenue from real estate held for sale, net of depreciation, property taxes and all other operating expenses;
(k) net gains or losses from futures, options, short selling or similar instruments acquired other than for hedging purposes;
(l) net gains or losses on the sale of investments or other assets;
(m) operating revenue not included under clauses (a) to (l);
(n) interest expense on money received for guaranteed investments, savings or other deposits, debentures, notes, certificates of indebtedness and on bank or other borrowings;
(o) salaries, pension contributions and other staff benefits;
(p) operating expenses, including depreciation and amortization of office premises, equipment and leasehold improvements held for the corporation’s own use;
(q) operating expenses, including depreciation of real estate held for investment;
(r) operating expenses not included under clauses (n) to (q);
(s) amounts recorded as amortization or write-off of any intangible assets;
(t) provisions for known, probable and possible losses of any kind;
(u) income or loss before income taxes and extraordinary items;
(v) taxes on income, indicating the amount, if any, by which current income taxes have been increased or decreased as a result of tax deferrals;
(w) income or loss before extraordinary items;
(x) extraordinary items shown separately if they are material, less related income taxes, if any;
(y) net income or loss for the period; and
(z) earnings per share. R.R.O. 1990, Reg. 733, s. 34 (1); O. Reg. 413/97, s. 4.
(2) Despite subsection (1), any item required to be disclosed on the income statement may be disclosed in the notes to the financial statements or in another financial statement or, if the amount of the item is not significant, it may be combined with another item on the income statement. R.R.O. 1990, Reg. 733, s. 34 (2).
Statement of Retained Earnings
35. Every statement of retained earnings must set out separately at least,
(a) the balance of the retained earnings or deficit at the end of the preceding period;
(b) the additions to and deductions from the retained earnings or deficit during the current period showing at least,
(i) the net income or loss for the period,
(ii) the dividends declared on common shares, and, set out separately, on shares other than common shares, and
(iii) the prior period adjustments, including a description; and
(c) the balance of the retained earnings or deficit at the end of the current period. R.R.O. 1990, Reg. 733, s. 35.
Statement of Changes in Financial Position
36. Every statement of changes in financial position must set out separately,
(a) the changes in cash and cash equivalents resulting from the activities of the corporation during the period;
(b) the components of cash and cash equivalents; and
(c) cash flows, including cash flows from the corporation’s operating activities, financing activities and investing activities, set out separately. R.R.O. 1990, Reg. 733, s. 36.
37. (1) Every balance sheet must set out separately as assets at least,
(a) cash, bank term deposits and deposits or similar instruments with regulated financial institutions other than the corporation;
(b) securities, showing separately at least,
(i) securities issued or guaranteed by Canada or any province of Canada, stating the basis of valuation, and parenthetically indicating their aggregate market value,
(ii) short term paper not included under clause (a), stating the basis of valuation, and parenthetically indicating its aggregate at market value,
(iii) bonds, debentures and like securities not included under clause (a) or subclause (i) or (ii), stating the basis of valuation and parenthetically indicating their aggregate market value,
(iv) shares, other than shares of subsidiaries and securities dealers, distinguishing common shares from other shares, stating the basis of valuation and parenthetically indicating their aggregate market value,
(v) investment in subsidiaries, valued on the equity method, and
(vi) investment in securities dealers, valued on the equity method where the relationship of the securities dealer to the corporation is that of a subsidiary or a company under significant influence;
(c) the amounts that are owing to the corporation, whether on account of a loan or otherwise, from subsidiaries and other equity accounted-for investees;
(d) investment income that is due and accrued if it is not included with investments;
(e) advances to and fees receivable from estates, trusts and agencies;
(f) loans to individuals;
(g) loans to persons other than individuals;
(h) mortgages, stating the basis of valuation;
(i) office premises, equipment and leasehold improvements, stating,
(i) the basis of valuation,
(ii) the amount of accumulated allowance for depreciation and amortization,
(iii) if valued on the basis of an appraisal, the date of the appraisal, and
(iv) if the appraisal took place within five years before the date to which the balance sheet is made up, the disposition in the accounts of the corporation of any amount added to or deducted from the assets on appraisal;
(j) real estate held for investment stating the basis of valuation and the amount of the accumulated allowance for depreciation;
(k) real estate held for sale, stating the basis of valuation and the amount of accumulated allowance for depreciation; and
(l) assets not included under clauses (a) to (k). R.R.O. 1990, Reg. 733, s. 37 (1); O. Reg. 413/97, s. 5 (1).
(2) Every balance sheet must set out separately as liabilities at least,
(a) liabilities in respect of demand deposit accounts;
(b) debentures, bonds and similar securities issued by a loan corporation;
(c) money received for guaranteed investment by a trust corporation;
(d) interest due and accrued on deposits, debentures or guaranteed certificates, if not included with the corresponding liability;
(e) bank loans and overdrafts, including interest due and accrued;
(f) money borrowed under section 159 of the Act, including interest due and accrued;
(g) subordinated indebtedness;
(h) liability for current income taxes;
(i) dividends declared but not paid;
(j) deferred income;
(k) amounts owing by the corporation to its directors, officers and shareholders, excluding amounts owing on deposits;
(l) amounts owing by the corporation to subsidiaries and to other equity accounted-for investees;
(m) liabilities not included under clauses (a) to (l), segregating those that arose other than in the ordinary course of business; and
(n) deferred income taxes. R.R.O. 1990, Reg. 733, s. 37 (2); O. Reg. 413/97, s. 5 (2).
(3) Every balance sheet must set out separately as shareholders’ equity at least,
(a) the authorized capital of the corporation, giving the number of each class of shares, and a brief description of each such class indicating,
(i) dividend rates on preference shares and whether or not they are cumulative,
(ii) the redemption and retraction prices of redeemable or retractable shares, and
(iii) the existence of conversion provisions, and details of any changes during the year;
(b) the issued capital of the corporation, giving the number of shares of each class issued and outstanding, and showing the number of shares of each class issued since the date of the last balance sheet and the amount received, together with the arrears, if any, of dividends for cumulative preference shares; and
(c) retained earnings or deficit.
(4) Despite subsections (1) to (3), any item required to be disclosed on the balance sheet may be disclosed in the notes to the financial statements or in another financial statement or, if the amount of the item is not significant, it may be combined with another item on the balance sheet. R.R.O. 1990, Reg. 733, s. 37 (3, 4).
Notes to the Financial Statements
38. The financial statements of a corporation must disclose the following matters where they arise, and disclosure may be made by way of notes to the financial statements:
1. A description of all significant accounting policies adopted by the corporation.
2. Particulars of any change in accounting principles or practice or in the method of applying any accounting principle or practice made during the period that affects the comparability of any of the statements with any of those of the preceding period, and the effect of any such change upon the income or loss for the period.
3. Contractual obligations and commitments by corporation to make expenditures that are abnormal in relation to the corporation’s financial position or usual business operations.
3.1 Contractual obligations in respect of guarantees, letters of credit, endorsements, acceptances or other similar obligations not recorded on the balance sheet.
4. Contractual obligations in respect of long term operating leases including, in the period in which a transaction is effected, the principal details of any sale and lease-back transaction.
5. Contingent liabilities and other obligations that might involve losses not provided for in the accounts, stating their nature and an estimate of the amount of the contingent loss, or a statement that an estimate cannot be made, and whether any settlement resulting from the resolution of the contingency is expected to be accounted for as a prior period adjustment or as a charge to profit and loss in the period in which the settlement occurs.
6. If the corporation has contracted to issue shares or has given an option, right or warrant to purchase shares, the class and number of shares affected, the price and the date of issue of the shares or exercise of the option or like instrument.
7. The amount of the corporation’s unfunded obligation for its employees’ pension fund indicating the manner in which the corporation proposes to satisfy the obligation.
8. Any event or transaction occurring between the date of the financial statements and the date of their completion that does not relate to conditions that existed at the date of the financial statements, but results in significant changes to assets or liabilities in the subsequent period or is likely to or may have a significant effect on future operations of the corporation.
9. The amount of any loans made contrary to Part IX of the Act at any time during the period to individuals or bodies corporate, or investments made in bodies corporate, contrary to Part IX of the Act.
10. The basis of translation of amounts from currencies other than the currency in which the financial statements are expressed together with the accounting treatment used for any unrealized gains or losses related thereto.
11. Foreign currency restrictions that affect the assets of the corporation.
12. Any liability secured on any asset of the corporation, stating the nature and amount of the encumbrance on each asset and identifying the lender if the lender is an affiliate.
13. Any default by the corporation in principal, interest, sinking fund or redemption provisions with respect to any issue of its debt obligations.
14. The amount of arrears of dividends on any class of shares and the date to which the dividends were last paid.
15. Any restriction in the articles or by-laws of the corporation or by contract on the payment of dividends.
16. Particulars, in summary form, of amounts recorded in the financial statements as contributed surplus.
17. If the corporation is a trust corporation, particulars, in summary form, of those assets held in trust, earmarked and set aside with respect to money received for guaranteed investment.
18. Particulars for reconciling the effective income tax rate with the statutory income tax rate.
19. Information segmenting the corporation’s total operations by country and by profit centre function.
20. Details of any economic dependency of the corporation on a person because the corporation is conducting a significant volume of business with the person, and separately, details of any circumstance that might call into question the future viability of the corporation.
21. Details of all transactions entered into with any related parties including a description of the nature and extent of the transaction, a description of the nature of the relationship, amounts due to or from related parties and a description of all such transactions that constitute contraventions of the Act.
22. Details with respect to the method used to account for any amalgamations or business combinations, the net assets purchased or acquired in the business combination, the consideration given and other pertinent information.
23. Details with respect to any prior period adjustment, including a description of the adjustment and its effect on current and prior periods.
24. Details, by major asset class, of the aggregate carrying value of loans that were subject to troubled loan refinancing or restructuring during the period.
25. Details, by major asset class, of provisions for known, probable and possible losses stated in the form of a continuity schedule showing opening balances, changes during the period and closing balances. R.R.O. 1990, Reg. 733, s. 38; O. Reg. 413/97, s. 6.
39. (1) In this Part,
“book value”, with respect to an asset, means the cost or amortized cost of the asset less accumulated depreciation, provisions or allowances for losses, and received but unearned interest. R.R.O. 1990, Reg. 733, s. 39 (1).
(2) Revoked: O. Reg. 413/97, s. 7.
40. (1) For the purposes of the definition of “capital base” in the Act, the capital base of a provincial corporation shall be calculated by adding the book value of,
(a) all or any portion of the fully paid-in common and preference shares;
(b) contributed surplus;
(c) subordinated indebtedness;
(d) retained earnings or deficit; and
(e) net deferred income taxes payable,
and subtracting from that amount,
(f) the book value of,
(i) that portion of the shares and subordinated indebtedness of subsidiary loan or trust corporations that are registered under the Act or similar legislation, that the subsidiary includes in calculating its capital base,
(ii) that portion of the shares and subordinated indebtedness of a subsidiary bank, insurance company or foreign institution that the subsidiary includes in calculating its capital base,
(iii) any substantial investment in a body corporate that is permitted under clause 140 (2) (b) or section 142,
(iv) goodwill and other intangible assets,
(v) deferred charges, including start-up costs, operating losses and other similar charges,
(vi) leasehold improvements less the accumulated amortization on the leasehold,
(vii) investments, or any part of an investment, that are not permitted by or are in excess of the limits imposed by the Act or this Regulation,
(viii) investments in the shares of, or loans made to, a securities dealer in which the corporation owns more than 10 per cent of the voting shares,
(ix) unrealized losses on foreign currency translations, and
(x) net deferred income taxes recoverable;
(g) the amount, if any, by which the aggregate book value of the investments of the provincial corporation, except securities issued or guaranteed by the Government of Canada, the government of a province, territory or municipality or an agency thereof, exceeds the aggregate market value of the investments determined in accordance with section 42;
(h) the amount, if any, by which the aggregate book value of real estate, other than office premises, owned by the provincial corporation exceeds its aggregate market value as determined by an appraisal made within the preceding two years;
(i) the amount of any shares and subordinated indebtedness issued by the provincial corporation that represents either directly or indirectly a back to back placement with one or more financial institutions;
(j) the amount which is the percentage of the outstanding amount of any subordinated indebtedness with respect to an issue described in subsection 89 (3), as set out in the Table to this section;
(k) the amount of any subordinated indebtedness issued by a provincial corporation which is owned by a subsidiary of the corporation, less any amount which has been deducted with respect to that subordinated indebtedness under clause (j); and
(l) if the corporation has a subsidiary that is not a financial institution or a subsidiary of a financial institution other than the corporation,
(i) the amount determined under subsection (2), and
(ii) the amount determined under subsection (3).
(2) The amount in subclause (1) (l) (i) is determined by,
(a) assuming, for the purposes of the clause, that the corporation referred to in subsection (1) is the subsidiary and calculating the amounts described by clauses (1) (f), (g) and (h);
(b) adding the amounts determined in clause (a); and
(c) multiplying the amount determined in clause (b) by the percentage of equity in the subsidiary that the corporation holds.
(3) The amount in subclause (1) (l) (ii) is the amount obtained by dividing the total of all amounts borrowed by the subsidiary, other than from the corporation or a subsidiary of the corporation, by the authorized borrowing multiple of the corporation determined under section 157 of the Act.
TABLE
(For clause 40 (1) (j))
Time Period to Maturity or Date on which Holder has Contractual Retraction Right |
Percentage of Outstanding Amount |
5 years or more |
0% |
4 years or more and less than 5 years |
20 |
3 years or more and less than 4 years |
40 |
2 years or more and less than 3 years |
60 |
1 year or more and less than 2 years |
80 |
less than 1 year |
100 |
O. Reg. 413/97, s. 8.
41. For the purposes of clause 40 (1) (d), the amount of a corporation’s retained earnings or deficit shall be determined as set out in Part VIII. R.R.O. 1990, Reg. 733, s. 41.
42. (1) For the purposes of clause 40 (1) (g), the market value of the investments of a corporation shall be determined as set out in this section and, in this section, “investment” does not include a loan, whether secured or unsecured, or any investment in real estate or in a subsidiary. R.R.O. 1990, Reg. 733, s. 42 (1); O. Reg. 413/97, s. 9.
(2) The market value of investments described in this section shall be determined as of the valuation date.
(3) In this section, the “valuation date” for determining the market value of an investment is the date as of which the capital base of the corporation is calculated.
(4) A share that is listed on any stock exchange shall be valued at its closing sale price on the valuation date or, if there is no sale price reported for the share on the valuation date, at the more recent of,
(a) the average of the most recent bid and asked prices for the share; and
(b) the most recent sale price published for the share.
(5) An investment that is not listed on any stock exchange shall be valued,
(a) if bid and asked prices for the investment have been available to the public within sixty days before the valuation date, at the average of the most recent available bid and asked prices;
(b) if no bid and asked prices for the investment have been available to the public within sixty days before the valuation date, at the value for the investment that is determined by a valuator appointed for that purpose; and
(c) if a value for the investment has not been determined under clause (a) or (b), at the value calculated by reducing the book value of the investment by 25 per cent on the first anniversary of the acquisition of the investment and by 50 per cent on the second anniversary.
(6) If a determination of the market value of an investment in preferred shares under subsection (4) or clause (5) (a) results in a value that is not representative of the true value of the investment and the shares,
(a) have a variable dividend rate that is altered periodically in accordance with a predetermined index; and
(b) are part of an underwriting in which the issuer raised at least $50 million in the initial issue,
the determination of the market value of the shares shall be made by a valuator appointed for that purpose.
(7) For the purposes of clause (5) (b) and subsection (6), in determining the value of an investment, the valuator shall consider the most recent audited financial statements of the body corporate that issued the investment.
(8) No valuation done under clause (5) (b) or subsection (6) may be completed more than six months before the valuation date. R.R.O. 1990, Reg. 733, s. 42 (2-8).
PART VIII
RETAINED EARNINGS AND DEFICITS IN THE DEFINITION OF CAPITAL BASE
Determination of Retained Earnings or Deficit
43. For the purpose of calculating the capital base of a corporation, the amount of the corporation’s retained earnings or deficit shall be determined in accordance with the requirements set out in this Part. R.R.O. 1990, Reg. 733, s. 43.
44. The equity method of accounting shall be used to calculate a corporation’s investment in the shares of a subsidiary. R.R.O. 1990, Reg. 733, s. 44.
Swaps, Futures and Similar Instruments
45. (1) In this section,
“financial future” means a contract to buy or sell a standard quantity of a specified financial instrument on a specified future date at an agreed price;
“interest rate swap” means an agreement between two parties to exchange interest payments, usually in which one party agrees to make payments at a fixed interest rate and the other party agrees to make payments at a floating interest rate, predicated on notional principal value.
(2) If a corporation enters into an interest rate swap or similar agreement, and the purpose of the transaction is to hedge against interest rate or similar risks associated with its specific assets and liabilities or groups of specific assets and liabilities through a compensatory price movement contract, the net interest shall be recorded in the income accounts as it occurs.
(3) If a corporation acquires a financial future, financial option or similar instrument and the purpose of the transaction is to hedge against interest rate or similar risks associated with its specific assets and liabilities or groups of specific assets and liabilities through a compensatory price movement contract, any gain or loss shall be deferred until the closure of the hedge.
(4) If a corporation acquires a financial future, financial option or similar instrument other than for hedging purposes, the instrument shall be marked-to-market daily on an individual contract basis, any unrealized loss shall be recognized on that basis in the income accounts, and any unrealized gain shall be deferred until realized. R.R.O. 1990, Reg. 733, s. 45.
46. (1) In this section,
“covered option” means a contract under which the purchaser acquires the right to require the corporation to sell to it, within or at a specified time, for a specified amount, specified securities that the corporation owns at the time of contracting.
(2) Any premium received for writing a covered option shall be recorded as a reduction in the book value of the applicable investment until the expiry or exercise of the option.
(3) On the expiry of a covered option, the premium received shall be recorded as income.
(4) On the exercise of a covered option, the premium received shall be included in the gain or loss on the disposition of the applicable investment. R.R.O. 1990, Reg. 733, s. 46.
Short Selling and Uncovered Options
47. (1) In this section,
“short”, in relation to a sale of securities by a corporation, means a sale of securities that the corporation does not own or have the right to acquire at the time of making the sale. R.R.O. 1990, Reg. 733, s. 47 (1).
(2) If a corporation sells equity or debt obligations short,
(a) Revoked: O. Reg. 431/97, s. 10 (1).
(b) the investment in the short sale contract shall be marked-to-market daily, on a contract-by-contract basis, with the accumulated losses, if any, recorded in the corporation’s income accounts; and
(c) all unrealized gains on the investment in the short sale contract shall be deferred except to the extent that the recording of gains would increase the investment to its original value. R.R.O. 1990, Reg. 733, s. 47 (2); O. Reg. 413/97, s. 10.
48. (1) Any premium received for writing an uncovered call option shall be recorded as deferred income until the option lapses or is exercised or until an equal offsetting contract is purchased.
(2) If an uncovered call option,
(a) lapses unexercised, the premium shall be recorded as income;
(b) is exercised, the premium shall be included in the gain or loss on the transaction; or
(c) is offset by the purchase of an equal offsetting contract, the premium previously received shall be netted against the premium paid on the contract purchased, and the net gain or loss shall be recorded in the income accounts at the time of the purchase.
(3) Every uncovered call option shall be marked-to-market daily on a contract-by-contract basis with the accumulated losses, if any, recorded in the income accounts.
(4) No unrealized gains on an uncovered call option shall be recorded except to reverse previously recorded losses on the transaction. R.R.O. 1990, Reg. 733, s. 48.
Financial Instruments Generally
49. (1) When a corporation enters into a transaction mentioned in sections 46 to 48, the corporation shall determine whether the transaction is made for the purpose of either hedging or capital appreciation, and shall document its determination with its accounting records.
(2) All unrealized gains and losses on transactions mentioned in sections 46 to 48 that are entered into for hedging purposes shall be deferred until the closure of the hedge.
(3) All unrealized losses arising from transactions mentioned in sections 46 to 48 that are entered into for capital appreciation purposes shall be marked-to-market daily on a contract-by-contract basis, and all unrecognized gains shall be deferred on a contract-by-contract basis until the termination of the applicable agreement.
(4) After a corporation has made a determination under subsection (1) in respect of a transaction, the corporation shall not change its method of accounting for gains and losses arising from the transaction. R.R.O. 1990, Reg. 733, s. 49.
50. (1) In this section,
“asset-backed securities” means an arrangement for the sale of assets that entitles the purchaser to an undivided beneficial interest in a pool of assets.
(2) If a corporation has approved issuer status granted by Canada Mortgage and Housing Corporation under the CMHC mortgage-backed securities program, any gain on disposition arising from the sale of interests in pools of mortgages under that program may be recorded immediately in the income accounts.
(3) Any gain on disposition arising from the sale by the corporation of interests in pools of National Housing Act (Canada) mortgages under any mortgage-backed securities program may be recorded immediately in the income accounts.
(4) If, under any asset-backed securities arrangement not referred to in subsection (2) or (3), the corporation sells interests in pools of assets and retains administration of the assets on behalf of the purchasers, a portion of the gain on the sale, if any, equal to the maximum loss sustainable by the corporation under any recourse provision of the arrangement shall be treated as deferred income until the maturity of the asset-backed securities. R.R.O. 1990, Reg. 733, s. 50.
Profit Recognition on Asset Sales
51. (1) If a corporation sells an asset to a purchaser who is not a restricted party and the purchaser makes a cash down payment of at least 25 per cent of the purchase price, the determination of any gain or loss on the sale may be made without taking into account any reduced rate financing on the sale offered to the purchaser and any commercial and reasonable performance guarantee given to the purchaser.
(2) If a corporation sells an asset to a purchaser who is not a restricted party and the purchaser does not make a cash down payment of at least 25 per cent of the purchase price, the determination of any gain or loss on the sale shall take into account the estimated costs of any performance guarantee given by the corporation and any forebearance of interest. R.R.O. 1990, Reg. 733, s. 51.
52. Gains and losses on the sale of securities must be recognized in the income accounts at the time of the sale. R.R.O. 1990, Reg. 733, s. 52.
Real Estate Project Accounting
53. Indirect costs, including lease-up costs and general and administrative expenses that do not specifically relate to real estate projects under development, must be charged to expense in the income accounts as they are incurred. R.R.O. 1990, Reg. 733, s. 53.
54. The book value of a real estate development project shall not exceed the current market value of the project as reduced by the estimated costs of disposition. R.R.O. 1990, Reg. 733, s. 54.
55. (1) Revenue from the sale of real estate shall not be recognized until,
(a) the significant risks and rewards of ownership have been transferred to a purchaser in good faith in a transaction in which all significant acts have been completed and the corporation does not retain any continuing managerial involvement in the degree usually associated with the ownership of real estate; and
(b) the collection of the proceeds from the sale is reasonably assured.
(2) For the purpose of subsection (1), significant acts are not considered to be completed until such time as all parties are unconditionally bound by the terms of the contract. R.R.O. 1990, Reg. 733, s. 55.
56. Financing and carrying costs for vacant real estate held for resale or development must be charged to the income accounts as they are incurred. R.R.O. 1990, Reg. 733, s. 56.
57. In sections 58 to 68,
“loan fees” means the total of all placement fees, application fees, management fees and all other similar fees payable in respect of a loan, mortgage or lease except those that are unconditionally refundable, and includes,
(a) loan fees charged to a debtor, mortgagor or lessee for arranging or originating a loan, mortgage or lease,
(b) commitment fees, including standby and guarantee fees and fees of like nature, and
(c) interest rate pay-down fees. R.R.O. 1990, Reg. 733, s. 57.
58. Sections 59 to 68 apply if the loan fees for a loan, mortgage or lease or a proposed loan, mortgage or lease exceed the lesser of,
(a) $1,000; or
(b) one per cent of the principal amount of the loan, mortgage or lease. R.R.O. 1990, Reg. 733, s. 58.
59. For the purpose of calculating the amount of loan fees, fees charged to a third party are deemed to be fees charged to a debtor, mortgagor or lessee if the third party and the debtor, mortgagor or lessee are related or associated, or if the third party sold the mortgaged property to the mortgagor. R.R.O. 1990, Reg. 733, s. 59.
60. (1) Loan fees must be recognized as revenue, as an adjustment of the contractual interest rate over the deemed expected term of the loan to which the fees relate, and must be amortized on a time proportion basis so as to result in a constant interest rate adjustment to the yield on the loan.
(2) The deemed expected term of a loan is the contractual maturity date unless,
(a) the borrower has a right to renew the loan according to the contract terms, in which event the expected term is deemed to be extended in accordance with the right;
(b) the maturity date according to the contract occurs within the year, and in light of the economic substance of the financing it may reasonably be expected that the loan will be renewed, in which event the expected term is deemed to be three years; and
(c) there is no contractual maturity date, in which event the expected term is deemed to be five years after the contract date.
(3) For the purposes of subsection (2), the deemed expected term of a loan is not affected by any prepayment rights that the borrower is entitled to exercise. R.R.O. 1990, Reg. 733, s. 60.
61. (1) Direct costs relating to a loan, mortgage or a lease, including finders fees and commissions, legal fees and appraisal and other direct costs paid to independent third parties, may be recognized on the same basis as loan fees.
(2) Indirect costs including supervisory and overhead costs associated with loans, mortgages and leases shall be expensed in the period in which they are incurred. R.R.O. 1990, Reg. 733, s. 61.
62. (1) Non-refundable commitment fees shall be accounted for as deposits and may not be recognized as revenue while the commitment, by its terms, remains unexpired.
(2) A commitment fee for an expired unexercised commitment shall be recognized as revenue as of the date of expiry.
(3) A commitment fee for a commitment that is exercised shall be treated as a loan fee for the resulting loan by the corporation. R.R.O. 1990, Reg. 733, s. 62.
63. (1) Unconditionally refundable fees shall be accounted for as deposits until the fees are refunded.
(2) Refundable fees subject to conditions shall be treated as deposits until the conditions are resolved, at which time the residual amount shall be treated as loan fees. R.R.O. 1990, Reg. 733, s. 63.
64. (1) When a loan, mortgage or lease is sold or the balance of the loan, mortgage or lease is extinguished in the ordinary course of business, any related unamortized loan fees shall be recognized as revenue upon the sale or extinguishment.
(2) Subsection (1) does not apply in the case of sale unless all risks and rewards of ownership have been transferred in good faith to an independent third party. R.R.O. 1990, Reg. 733, s. 64.
65. If the terms of a loan, mortgage or lease permit prepayments of principal in an amount that exceeds 25 per cent of the balance outstanding and a prepayment is made, the amortization of the unamortized loan fees may be correspondingly accelerated in the proportion that the amount of the prepayment bears to the balance outstanding. R.R.O. 1990, Reg. 733, s. 65.
66. When a corporation ceases to recognize the contractual interest rate on a loan, mortgage or lease as income because of the doubtful collectibility of the balance of the loan, mortgage or lease, no unamortized fees shall be amortized until the loan, mortgage or lease ceases to be in arrears. R.R.O. 1990, Reg. 733, s. 66.
67. (1) When a loan, mortgage or lease is renegotiated because of adverse circumstances of the debtor, mortgagor or lessee, or is otherwise restructured, any unamortized fees from the original loan, mortgage or lease shall be treated as loan fees for the renegotiated transaction.
(2) If proceedings for foreclosure or under a power of sale in a mortgage are begun, any unamortized loan fees for the mortgage shall be netted against the outstanding balance of the mortgage. R.R.O. 1990, Reg. 733, s. 67.
68. In any transaction in which a corporation acquires an asset, any fee received by the corporation from the vendor to complete the transaction shall be recorded as an adjustment to the purchase price of the asset. R.R.O. 1990, Reg. 733, s. 68.
Troubled Loan Refinancing or Restructuring
69. For the purposes of sections 70 to 75, a troubled loan refinancing or restructuring occurs when a corporation, for economic or legal reasons related to the borrower’s financial difficulties, grants a concession to the borrower that it would not otherwise consider. R.R.O. 1990, Reg. 733, s. 69.
70. (1) The amount of any loss resulting from a troubled loan refinancing or restructuring in which only the repayment terms of the loan are modified shall be determined by calculating the discounted value of the total future cash receipts for the loan under the modified terms, and subtracting that amount from the discounted value of the total future cash receipts for the loan under the original terms.
(2) A loss determined under subsection (1) must be recorded as a loss in the income accounts at the time of the refinancing or restructuring and the book value of the loan adjusted accordingly. R.R.O. 1990, Reg. 733, s. 70.
71. (1) If the discounted value of the total cash receipts for a loan under a troubled loan refinancing or restructuring is greater than the discounted value of the total cash receipts for the original loan, interest income for the refinanced or restructured loan shall be calculated in accordance with the effective interest rate determined under subsection (2).
(2) For the purpose of subsection (1), the effective interest rate for the refinanced or restructured loan is the discount rate that equates the present value of future cash receipts under the refinanced or restructured loan with the amount of the recorded investment. R.R.O. 1990, Reg. 733, s. 71.
72. (1) Any payment for a loan following a troubled loan refinancing or restructuring that is received,
(a) within six months after the refinancing or restructuring, if the payment is collectible monthly; or
(b) within one year after the refinancing or restructuring, if the payment is collectible other than monthly,
shall be applied in reduction of the outstanding principal amount of the loan, and shall not be attributed to interest income.
(2) After subsection (1) ceases to apply, interest income may be recorded at the effective interest rate of the loan, which is deemed to be the discount rate that equates the present value of the future cash receipts under the terms of the refinancing or restructuring with the amount of the outstanding principal. R.R.O. 1990, Reg. 733, s. 72.
73. (1) If a troubled loan refinancing or restructuring involves the partial repayment of the loan by way of consideration other than cash and modifies the repayment terms of the loan,
(a) the fair market value of the non-cash consideration must be determined and accounted for as a partial repayment of the loan; and
(b) any loss resulting from the refinancing or restructuring shall be calculated in accordance with section 69.
(2) For the purposes of subsection (1), no value shall be ascribed to any contingent consideration receivable such as rights to future profit participations.
(3) No amount payable to the corporation as contingent consideration may be recognized as interest or other income until it is received. R.R.O. 1990, Reg. 733, s. 73.
74. All legal fees and other costs incurred with respect to a troubled loan refinancing or restructuring shall be expensed as they are incurred. R.R.O. 1990, Reg. 733, s. 74.
75. (1) All fees received by a corporation in respect of a troubled loan refinancing or restructuring shall be treated as deferred income until the loan is paid in full.
(2) Despite subsection (1), if, under a troubled loan restructuring or refinancing, the borrower provides additional security having a market value at least equal to 50 per cent of the value of the security given under the original loan, the fees received by the corporation in respect of the refinancing or restructuring shall be accounted for as set out in sections 57 to 68. R.R.O. 1990, Reg. 733, s. 75.
76. (1) This section applies in respect of a loan made by a corporation to a third party,
(a) at an interest rate that is more than two percentage points below the corporation’s normal lending rate for comparable loans with similar collection risks; and
(b) in connection with the disposition of real estate acquired by the corporation through a mortgage foreclosure or a loan restructuring.
(2) The amount of the discount on a loan described in subsection (1) is the difference between,
(a) the discounted value of the total future cash receipts for the loan, calculated using the corporation’s normal lending rate for comparable loans with similar collection risks in lieu of the contractual interest rate for the loan; and
(b) the discounted value of the total future cash receipts for the loan at the contractual interest rate.
(3) A discount on a loan determined under subsection (2) must be recorded as a loss in the income accounts at the time the loan is made and the book value of the loan adjusted accordingly. R.R.O. 1990, Reg. 733, s. 76.
77. (1) Any accumulation for known, probable and possible losses shall be deducted from the applicable asset.
(2) No sum in addition to provisions for known, probable and possible losses and bookable contingencies may be appropriated.
(3) Any addition to an accumulation for known, probable and possible losses shall be created by a charge to the income accounts. R.R.O. 1990, Reg. 733, s. 77.
78. A loss of any nature shall be included in the income accounts when the loss is incurred. R.R.O. 1990, Reg. 733, s. 78.
79. Subject to section 80, for the purpose of the definition of “total assets” in the Act, the assets of a registered corporation are calculated by,
(a) adding the book value of all assets of the registered corporation;
(b) subtracting from the amount determined in clause (a),
(i) the book value of goodwill and other intangible assets including copyrights and patents,
(ii) the book value of deferred charges, and
(iii) the amount, if any, that is the excess of the aggregate book value over the aggregate market value of all assets that are securities and debt obligations issued or guaranteed by any government, including a municipal government, or by any government agency. R.R.O. 1990, Reg. 733, s. 79.
80. For the purposes of section 79,
(a) provisions or allowances for losses of a general nature must be deducted from the most closely applicable class of assets;
(b) cash deposits in financial institutions must be offset against overdrafts with financial institutions;
(c) the equity method of accounting must be used when calculating the corporation’s investment in the shares of a subsidiary;
(d) assets administered for estates, trusts and agencies must not be included in the calculation of total assets; and
(e) the book value of an asset is the cost or amortized cost of the asset less accumulated depreciation, provisions or allowances for losses and received but unearned interest. R.R.O. 1990, Reg. 733, s. 80.
81. For the purposes of clause 142 (1) (h) of the Act, a provincial corporation may enter into a transaction to sell or redeem its own subordinated indebtedness and its own shares to or from a restricted party. R.R.O. 1990, Reg. 733, s. 81; O. Reg. 413/97, s. 11.
82. For the purposes of clause 142 (3) (d) of the Act and subject to Part X of the Act, a provincial corporation or a subsidiary of a provincial corporation may enter into sales and purchases to or from a restricted party of,
(a) treasury bills issued by the Government of Canada or the government of any province;
(b) mortgage loans that are insured by the Canada Mortgage and Housing Corporation or Mortgage Insurance Corporation of Canada that are not in default;
(c) bonds issued or guaranteed by the Government of Canada or the government of any province; and
(d) certificates or notes issued or guaranteed by a financial institution that is not a restricted party of the provincial corporation, that are issued in Canada and have a term to maturity when issued of one year or less but not including stocks, bonds or subordinated debentures,
that are undertaken at readily identifiable prevailing market rates if the instruments are transferable. R.R.O. 1990, Reg. 733, s. 82; O. Reg. 413/97, s. 12.
83. Revoked: O. Reg. 413/97, s. 13.
84. A provincial corporation may not invest more than an amount equal to the proceeds of its borrowings raised outside Canada plus 5 per cent of its total assets in,
(a) bonds, debentures or other forms of indebtedness of a body corporate incorporated outside of Canada;
(b) shares of a body corporate incorporated outside of Canada unless the shares are listed on a recognized Canadian stock exchange;
(c) real estate located outside of Canada;
(d) loans on the security of real estate or leaseholds outside Canada; and
(e) mutual fund shares or units that are traded only by dealers who are not registered with a securities commission in Canada. R.R.O. 1990, Reg. 733, s. 84; O. Reg. 413/97, s. 14.
84.1 For the purpose of subsection 159 (2) of the Act, a provincial corporation may pledge assets to the persons and with respect to the transactions described in this Part. O. Reg. 186/94, s. 1; O. Reg. 413/97, s. 14.
84.2 (1) A provincial corporation that is participating in services provided by CDS may pledge any of its assets to CDS, to another person who is participating in those services and to the Bank of Canada. O. Reg. 186/94, s. 1; O. Reg. 413/97, s. 14.
(2) The pledge of assets, other than a pledge to the Bank of Canada, must be made in accordance with,
(a) an agreement between the provincial corporation and CDS relating to the services; and
(b) the rules established by CDS with respect to the services. O. Reg. 186/94, s. 1; O. Reg. 413/97, s. 14.
(3) A provincial corporation shall provide written notice to the Superintendent seven days before entering into or amending an agreement with CDS relating to services provided by CDS. O. Reg. 186/94, s. 1; O. Reg. 413/97, s. 14.
(4) In this section,
“CDS” means The Canadian Depository for Securities Limited, incorporated under the Canada Business Corporations Act and designated as a recognized clearing agency by the Ontario Securities Commission under section 22 of the Securities Act and subsection 53 (1) of the Business Corporations Act. O. Reg. 186/94, s. 1.
85. For the purposes of section 160 of the Act,
(a) a provincial corporation shall maintain its liquid assets unencumbered in any of the forms described in section 86; and
(b) a provincial corporation shall maintain liquid assets in the minimum amount of 20 per cent of the total amount of deposits and obligations of the provincial corporation that are payable in 100 days or less. O. Reg. 413/97, s. 15.
86. The total amount of liquid assets maintained by a provincial corporation shall be the amount which is the aggregate of the following amounts for the corporation:
1. The amount by which the aggregate of cash on hand and demand deposits in banks, registered corporations and, if approved by the Superintendent, other depositories, exceeds the aggregate of,
i. overdrafts by the provincial corporation as shown in the accounting records, and
ii. debt obligations owed to banks, registered corporations and other lending institutions excluding the Bank of Canada that are,
A. repayable or callable at the option of the lender on demand or have a term to maturity when issued of seven days or less, and
B. borrowed to enable the provincial corporation to meet its short term requirements for liquid funds.
2. Treasury bills of Canada or a province, at book value.
3. Banker’s acceptances with a remaining term to maturity of one year or less, at book value.
4. Term deposits, bearer deposit notes and similar instruments issued by banks, registered corporations and, if approved by the Superintendent, other depositories, that in each case either are callable on demand or mature within 100 days, at book value.
5. Bonds, debentures or other evidence of indebtedness that are issued or guaranteed by, or in respect of which the debt service is guaranteed by the Government of Canada, or the government of a province or a municipality, at market value.
6. Demand loans that are fully secured by assets of the classes specified in paragraphs 2 to 5 made to brokers, investment dealers and securities dealers registered in Canada, at book value.
7. Accrued interest due and receivable on the assets referred to in paragraphs 1 to 6. O. Reg. 413/97, s. 16.
87. The total amount of deposits and obligations of the provincial corporation that are payable in 100 days or less shall be the amount which is the aggregate of the following amounts for the corporation:
1. Demand deposits and savings accounts.
2. Deposits, debentures, certificates and similar instruments issued for a specified term but callable on demand at the holder’s option.
3. All other deposits, debentures, certificates and similar instruments coming due in 100 days or less, or on notice of 100 days or less.
4. Borrowings, other than those included in paragraphs 1 to 3, from banks and other lending institutions coming due in 100 days or less or repayable at the option of the lender within 100 days, other than the indebtedness referred to in subparagraphs (i) and (ii) of paragraph 1 of section 86.
5. Accrued interest on all liabilities due and payable within 100 days or less. O. Reg. 413/97, s. 16.
88. Revoked: O. Reg. 413/97, s. 16.
PART XIII
SUBORDINATED INDEBTEDNESS
89. (1) For the purposes of the Act,
“subordinated indebtedness” means an instrument evidencing an indebtedness of a provincial corporation that by its terms provides that the indebtedness will, in the event of the insolvency or winding up of the corporation, be subordinate in right of payment to all deposit liabilities of the corporation and all other liabilities of the corporation except those that, by their terms, rank equally with or are subordinate to the indebtedness.
(2) All subordinated indebtedness issued by a provincial corporation shall provide,
(a) that the redemption or payment of the subordinated indebtedness at maturity, upon default or otherwise, will be suspended if there are reasonable grounds to believe that,
(i) the corporation is, or after the redemption or payment would be, unable to pay its liabilities as they become due,
(ii) after the redemption or payment, the realizable value of the corporation’s assets would be less than the aggregate of its liabilities, or
(iii) the redemption or payment would cause the corporation to be in contravention of the Act or the regulations;
(b) that, except in the event of the insolvency, bankruptcy or winding up of the corporation, the subordinated indebtedness will not be redeemed, paid or otherwise compromised by the corporation except on not less than 30 days written notice to the Superintendent by the corporation, a holder of the subordinated indebtedness or a trustee for the holders of the subordinated indebtedness; and
(c) for a fixed maturity date.
(3) Clause (2) (a) does not apply to an issue of subordinated indebtedness if,
(a) not more than 10 per cent of the principal amount of the subordinated indebtedness is issued to and beneficially owned at the time of issue by one or more affiliates of the corporation, other than a securities dealer affiliate which acquires the subordinated indebtedness with a view to selling the subordinated indebtedness;
(b) the subordinated indebtedness does not contain a special restrictive covenant or default clause which would allow the holder of the subordinated indebtedness in the event of the breach of the covenant or clause to require the corporation to accelerate the repayment of the subordinated indebtedness in circumstances other than the insolvency, bankruptcy or winding up of the corporation; and
(c) the provincial corporation has delivered written notice to the Superintendent that the subordinated indebtedness is to be issued subject to this subsection.
(4) On application to the Superintendent by the provincial corporation, a holder of the subordinated indebtedness or a trustee for the holders of the subordinated indebtedness, the period of the notice referred to in clause (2) (b) may be reduced by the Superintendent. O. Reg. 413/97, s. 17.
90. (1) Every instrument evidencing subordinated indebtedness issued by a provincial corporation shall include,
(a) the terms of its subordination;
(b) all restrictions applicable on redemption or payment of the subordinated indebtedness; and
(c) a disclosure that the subordinated indebtedness is not a deposit of the issuing corporation and is not insured by the Canada Deposit Insurance Corporation or, if appropriate, any similar public agency.
(2) No person shall, in any prospectus, advertisement, correspondence or literature relating to any subordinated indebtedness issued or to be issued by a provincial corporation, refer to the subordinated indebtedness otherwise than as subordinated indebtedness. O. Reg. 413/97, s. 17.
91. In this Part,
“Fund” means a common trust fund;
“investments” means bonds, debentures, guaranteed investment certificates, shares, warrants, rights to subscribe for or purchase shares, any title to or interest in the capital assets, property, profits, earnings or royalties of any undertaking or enterprise commonly evidenced by a certificate or a similar document or depository receipt;
“participant” means any trust or estate the money of which has been invested in the Fund;
“participation” means the interest of any participant in a Fund. R.R.O. 1990, Reg. 733, s. 91.
92. (1) A Fund may not be established unless there is trust money therein aggregating at least $200,000 and unless a written plan of operation for the Fund complying with this section has been submitted to the Superintendent at least thirty days before the start of operation.
(2) The Fund shall be maintained in accordance with the plan of operation and any amendment thereto must be filed with the Superintendent at least thirty days before it takes effect.
(3) The plan of operation must set out the manner in which the Fund is to be operated and contain provisions as to,
(a) the particulars of investment powers and restrictions of the Fund;
(b) the computation and allocation of income and the distribution thereof;
(c) the allocation of the profits and losses of the Fund;
(d) the conditions governing admissions of trust money to and withdrawals of participations from the Fund;
(e) the original unit of participation;
(f) the form of documentation to be used as evidence of participation;
(g) the auditing and settlement of accounts of the trust corporation with respect to the Fund;
(h) the basis and method of valuing the assets of the Fund;
(i) the basis upon which the Fund may be terminated;
(j) the method by which the plan of operation may be amended; and
(k) such other matters as may be necessary to define clearly the rights of participants.
(4) The plan of operation must provide that it is subject to all applicable laws of the Province of Ontario pertaining to the operation of common trust funds.
(5) The plan of operation must provide for,
(a) the amortization of premiums and discounts on bonds or other obligations; and
(b) the allocation of profits and losses and the apportionment thereof between principal and income. R.R.O. 1990, Reg. 733, s. 92.
93. (1) A Fund shall be divided into units of equal value, and the proportionate interest of each participant is expressed by the number of such units allocated to it.
(2) Upon the establishment of a Fund, a trust corporation shall divide the Fund into units of $5 or any multiple of $5, and allocate to each participant the number of units proportionate to its original investment in the Fund.
(3) When additional money is admitted to the Fund, the amount so admitted must be equal to the then value of one or more of the units of the Fund, and the number of units increased accordingly.
(4) Each unit of participation must have a proportionately equal beneficial interest in the Fund, and none may have priority or preference over any other. R.R.O. 1990, Reg. 733, s. 93.
94. (1) No money from any participant may be accepted by a Fund if as a result the participant would have an interest in the Fund in excess of 10 per cent of the book value of the assets of the Fund.
(2) In applying the limitation contained in this section, if two or more trusts are created by the same settlor or settlors and as much as one-half of the income or principal or both of each trust is payable or applicable to the use of the same person or persons, the trusts shall be treated as one. R.R.O. 1990, Reg. 733, s. 94.
Management and Ownership of Assets in a Fund
95. (1) A trust corporation has exclusive management and control of any Fund that it maintains.
(2) No participant and no person having an interest in a participant may have individual ownership of any particular assets in a Fund.
(3) All the assets of a Fund are at all times considered to be assets held in trust by the trust corporation, and title thereto is vested solely in the trust corporation as trustee. R.R.O. 1990, Reg. 733, s. 95.
Admissions and Withdrawals of Participations
96. (1) No trust money may be admitted to and no participation may be withdrawn from a Fund except on the basis of the trust corporation’s valuation of the Fund and except as of a valuation date.
(2) The value of the Fund and its units shall be determined within ten business days following the valuation date.
(3) When a participation or any part thereof is withdrawn from a Fund, the amount withdrawn may, in the discretion of the trust corporation, be paid in cash or rateably in kind, or partly in cash and partly rateably in kind, but all payments or transfers as of any one valuation date must be made on the same basis. R.R.O. 1990, Reg. 733, s. 96 (1-3).
(4) Revoked: O. Reg. 413/97, s. 18.
(5) If, because of a change in circumstances, an investment held by a Fund does not continue to meet the eligibility criteria under the plan of operation of the Fund for a new investment, and the state of ineligibility continues for a period of six months, no admission to or withdrawal from the Fund may be made except as set out in subsection (6).
(6) Admission to and withdrawal from a Fund in the circumstances set out in subsection (5) may be made,
(a) when, because of a change in circumstances, the investment again meets the eligibility criteria under the plan of operation of the Fund for a new investment; or
(b) when the investment is eliminated from the Fund by means of,
(i) sale,
(ii) distribution in kind to participants, or
(iii) segregation in a liquidation account for the benefit rateably of all the participants in the Fund on the date of the segregation.
(7) No participation may be withdrawn in part only unless the amount so withdrawn is equal to the value of one or more full units at the time of the withdrawal. R.R.O. 1990, Reg. 733, s. 96 (5-7).
97. A register must be maintained for each fund during the existence of the Fund and for a period of six years after its termination showing with respect to each participant,
(a) the date of each admission of trust money to the Fund, the number of units allotted and the value at which each unit is allocated;
(b) the date of each withdrawal, the number of units redeemed and the amount paid on redemption to the participant;
(c) the number of units currently held; and
(d) the share in any liquidating account. R.R.O. 1990, Reg. 733, s. 97.
98. Participations in a Fund may be evidenced by certificates, but no trust corporation maintaining a Fund may issue any document evidencing a direct or indirect interest therein in any form that purports to be negotiable or assignable. R.R.O. 1990, Reg. 733, s. 98.
99. (1) Not less frequently than once during each period of three months, every trust corporation must determine the value of each Fund that it maintains and of the units of participation thereof.
(2) The investments held by a Fund shall be valued as set out in subsections (3) to (10).
(3) A share that is listed on any stock exchange shall be valued at its closing sale price on the valuation date or, if there is no sale price for the share on the valuation date, at the more recent of,
(a) the average of the most recent bid and asked prices for the share; and
(b) the most recent sale price published for the share.
(4) Despite subsection (3), if, in the opinion of the trust corporation, the value of a share that is determined under subsection (3) does not fairly indicate its market value, the trust corporation shall obtain from two members of a stock exchange a written estimate of the value of the share as of the valuation date, and the value of the share shall be deemed to be the average of the two estimates.
(5) An investment, other than a mortgage, that is not listed on any stock exchange shall be valued as of the valuation date,
(a) if bid and asked prices for the investment have been available to the public within sixty days before the valuation date, at the average of the most recent available bid and asked prices; or
(b) at the average of the most recent available quotations of the price of the investment by two recognized dealers in the securities.
(6) For the purposes of subsections (3) and (5), the sale price, bid and asked prices, and over-the-counter quotations for an investment that are published in any newspaper of general circulation in the City of Toronto, in any recognized financial journal or report, or by any quotation service or that are contained in the records of a stock exchange are sufficient evidence of the prices and quotations.
(7) The value of an investment in a mortgage is the present value of the mortgage calculated using the current interest rate to the maturity of the mortgage.
(8) If a dividend on a share has been declared but not received by the Fund, and the dividend is considered to be income under the plan of operation of the Fund, the amount of the dividend shall be deducted from the price of the share unless the share price is an exdividend price.
(9) If the Fund has purchased an investment and has not paid for it pending delivery of the investment, the investment shall be valued as an investment held by the Fund and the cash accounts adjusted accordingly.
(10) If the Fund has sold an investment and has not delivered it pending receipt of the sale proceeds, the investment shall be valued as an investment held by the Fund at the net sale price. R.R.O. 1990, Reg. 733, s. 99.
100. (1) The income of a Fund and the apportionment thereof must be determined at each valuation date.
(2) The income must be distributed to participants not less frequently than quarter-yearly.
(3) For purposes of distribution to participants, the income may be computed at the option of the trust corporation either on the basis of income accrued or on the basis of income actually received.
(4) To facilitate the distribution of accrued but uncollected income, the cash principal of a Fund may be used to the extent necessary. R.R.O. 1990, Reg. 733, s. 100.
101. (1) The investments of a Fund must be kept separate from the trust corporation’s own property, and each investment must be so identified in the books of the corporation to show clearly the Fund to which it belongs.
(2) Despite subsection (1), any money of the Fund awaiting investment or distribution may be held on deposit in the savings department of the trust corporation subject to payment thereon by the corporation of interest computed at the current rate and in the same manner as in the case of ordinary deposits. R.R.O. 1990, Reg. 733, s. 101 (1, 2).
(3) The total investment of a Fund in,
(a) guaranteed investment certificates of any trust corporation;
(b) debentures of any loan corporation;
(c) deposits in a bank or receipts, deposit notes, certificates of deposit, acceptances and other similar instruments issued or endorsed by a bank; or
(d) bonds of, or guaranteed by, any municipal corporation,
may not exceed, in each case, 10 per cent of the book value of the Fund. O. Reg. 413/97, s. 19 (1).
(4) The total investment of the Fund in investments of or guaranteed by any one person, other than the obligations referred to in subsection (3), may not exceed 5 per cent of the book value of the Fund.
(5) Subsections (3) and (4) do not apply to investment in obligations issued or guaranteed by the Government of Canada or the government of any province of Canada.
(6) The total number of shares held by a Fund in any one class of shares of any one body corporate may not exceed 5 per cent of the number of such shares outstanding and, if the trust corporation maintains more than one Fund, no investment may be made that would cause the aggregate investment for all the Funds in any one class of shares of any one body corporate to exceed such limitation. R.R.O. 1990, Reg. 733, s. 101 (4-6).
(7) The liquidity of a Fund shall be maintained in adequate amounts and appropriate forms. O. Reg. 413/97, s. 19 (2).
Accounting Records and Register of Participants
102. A complete set of accounting records must be maintained for each Fund during the existence of the Fund and for six years after its termination and the records must clearly distinguish items of principal from items of income. R.R.O. 1990, Reg. 733, s. 102.
103. The register of participants and all accounting records pertaining to a Fund for the period after that covered by the last accounts passed by a court shall be open to inspection during the regular business hours of the trust corporation by any co-trustee or beneficiary of a participant. R.R.O. 1990, Reg. 733, s. 103.
Audit Report and Financial Statements
104. (1) Every trust corporation must, at least once during each period of twelve months, prepare financial statements for each of its Funds and cause an audit of each of its Funds to be made by an independent accountant.
(2) The financial statements mentioned in subsection (1) must include,
(a) a list of the investments comprising each Fund at the end of the period covered by the statements and the book value thereof as at the end of the period covered by the statements;
(b) a statement of purchases, sales and any investment changes and of revenue and disbursements since the last statements; and
(c) appropriate comments as to any investments in default as to payment of principal and interest.
(3) The trust corporation must file a copy of the financial statements and audit report for an audit of each Fund under subsection (1) with the Superintendent within ninety days after the date of the audit report.
(4) The trust corporation must, without charge, send a copy of the financial statements and audit report for a Fund,
(a) to every co-trustee of a participant in the Fund; and
(b) upon request, to every beneficiary of a participant in the Fund.
(5) The reasonable expenses of an audit under subsection (1) shall be paid out of the Fund and charged to principal and income in such proportion as the trust corporation considers appropriate. R.R.O. 1990, Reg. 733, s. 104.
Administration Fees and Expenses
105. (1) A Fund may not be treated as a separate trust Fund on which commissions or other compensation is allowable and no trust corporation maintaining a Fund may make any charge against it for the management thereof nor pay a fee, commission or compensation out of the Fund for management but may reimburse itself out of a Fund for all reasonable expenses incurred by it in the administration of the Fund.
(2) In any trust or estate that has money participating in a Fund, the trust corporation is entitled to the management fee or other compensation to which it would otherwise be entitled in respect of such money. R.R.O. 1990, Reg. 733, s. 105.
106. A trust corporation may not make representations as to the earnings realized on a Fund or the value of the assets thereof except as is permitted or required under this Part. R.R.O. 1990, Reg. 733, s. 106.
107. In this Part,
“deposit agent” means a person who receives deposits for transmission to a registered corporation. R.R.O. 1990, Reg. 733, s. 107; O. Reg. 413/97, s. 20.
108. Every deposit received by a deposit agent must be evidenced by a receipt issued to the depositor in the name of the corporation with a copy of the receipt provided to the corporation. R.R.O. 1990, Reg. 733, s. 108.
109. Every deposit received by a deposit agent from or on behalf of a depositor must be payable to the registered corporation only or be accompanied by a written direction authorizing the deposit agent to deposit the funds with a registered corporation. R.R.O. 1990, Reg. 733, s. 109.
110. Revoked: O. Reg. 413/97, s. 21.
111. Revoked: O. Reg. 413/97, s. 21.
PART XVI Revoked: O. Reg. 413/97, s. 22.
PART XVII
LOANS TO DIRECTORS, OFFICERS AND EMPLOYEES
112. For the purposes of subclause 142 (1) (a) (i) of the Act, all mortgage loans are prohibited, except a mortgage loan secured upon improved real estate in Canada under which the amount paid for or advanced on the mortgage, together with the amount of indebtedness under any mortgage on the real estate ranking equally with or prior to the mortgage does not exceed the lending value of the real estate to which the mortgage relates unless,
(a) the mortgage loan is approved or insured under the National Housing Act (Canada); or
(b) the excess is guaranteed or insured through an agency of the Government of Canada or of a province or territory of Canada or is insured by a policy of mortgage insurance issued by an insurance company licensed or registered under the Insurance Companies Act (Canada) or the Insurance Act or similar legislation of any province or territory of Canada, provided that the insurance company is not a subsidiary of the corporation. O. Reg. 413/97, s. 23 (2).
112.1 For the purposes of clause 142 (1) (b) of the Act, a loan is prohibited if at any time it exceeds the lesser of,
(a) $250,000; and
(b) one-tenth of 1 per cent of the total assets of the corporation. O. Reg. 413/97, s. 23 (2).
113. For the purposes of subsection 142 (2) of the Act, a provincial corporation that has been in operation for five years may make loans to its employees. R.R.O. 1990, Reg. 733, s. 113; O. Reg. 413/97, s. 24.
114. (1) The amount of a loan made under subsection 142 (2) of the Act shall not exceed,
(a) $150,000 where the corporation has total assets exceeding $100,000,000; and
(b) fifteen one-hundredths of 1 per cent of the total assets of a corporation with total assets of $100,000,000 or less. R.R.O. 1990, Reg. 733, s. 114 (1).
(2) Despite subsection (1), a loan made under subsection 142 (2) of the Act that is secured by the principal residence of the employee or the employee’s spouse shall not exceed,
(a) $300,000 where the corporation has total assets exceeding $100,000,000; and
(b) three-tenths of 1 per cent of the total assets of a corporation with total assets of $100,000,000 or less. R.R.O. 1990, Reg. 733, s. 114 (2); O. Reg. 112/00, s. 1; O. Reg. 322/05, s. 1.
114.1 In this Part,
“factoring corporation” means a body corporate the activities of which are limited to acting as a factor in respect of accounts receivable, including raising money for the purpose of acting as a factor and lending money while acting as such a factor;
“financial leasing corporation” means a body corporate the activities of which are limited to the financial leasing of personal property, and to,
(a) entering into and accepting the assignment of conditional sales agreements in respect of personal property,
(b) administering financial lease agreements and conditional sales agreements on behalf of any person, and
(c) raising money for the purpose of financing the activities of the financial leasing corporation and investing that money pending its use for those activities;
“information processing services” means the collection, manipulation and transmission of information that is primarily financial or economic in nature or that relates to the business of an entity referred to in subsection 115 (1) or of a real estate holding vehicle;
“information services corporation” means a body corporate, the ancillary activities of which may include the design, development, manufacture or sale of special purpose computer hardware, but that is primarily engaged in,
(a) providing information processing services,
(b) providing advisory or other services in the design, development or implementation of information management systems, or
(c) designing, developing or marketing computer software;
“investment counselling and portfolio management corporation” means a body corporate the principal activity of which consists of,
(a) offering advice or advising on investments, or
(b) investing or controlling, in any way that involves an element of discretionary judgment by the body corporate,
(i) property, deposits or securities that are not owned by the body corporate, or
(ii) money that is not owned by the body corporate or deposited with the body corporate in the ordinary course of business;
“mutual fund corporation” means a body corporate whose activities are limited to investing funds of the body corporate, and includes a body corporate that is an issuer of securities that entitle the holder to receive, on demand or within a specified period after demand, an amount computed by reference to the value of a proportionate interest in the whole or in a part of the net assets, including a separate fund or trust account, of the issuer of the securities;
“mutual fund distribution corporation” means a body corporate whose principal activity is acting as a selling agent of units, shares or other interests in a mutual fund and acting as a collecting agent in the collection of payments for any of those interests if,
(a) the proceeds of the sales of any of those interests, less any sales commissions and service fees, are paid to the fund, and
(b) the existence of a sales commission and service fee in respect of the sale of any of those interests is disclosed to the purchaser of the interest before the sale;
“prescribed subsidiary” means a body corporate prescribed under subsection 115 (1);
“real estate brokerage corporation” means a body corporate that is primarily engaged in,
(a) acting as an agent for vendors, purchasers, mortgagors, mortgagees, lessors or lessees of real estate, and
(b) providing consulting or appraisal services in respect of real estate;
“service corporation”, in relation to a provincial corporation, means a body corporate that engages exclusively in providing services,
(a) and provides such services to,
(i) the corporation,
(ii) an entity in which the corporation has a substantial investment,
(iii) a financial institution that is affiliated with the corporation, or
(iv) an entity in which a financial institution referred to in subclause (iii) has a substantial investment,
(b) and may also provide such services to,
(i) another Canadian financial institution incorporated or formed by or under the laws of a province or territory of Canada or of Canada that has a substantial investment in the body corporate,
(ii) an entity in which any Canadian financial institution referred to in subclause (i) has a substantial investment,
(iii) a financial institution that is affiliated with any Canadian financial institution referred to in subclause (i), or
(iv) an entity in which a financial institution referred to in subclause (iii) has a substantial investment;
“special purpose computer hardware” means computer equipment that is integral to the provision of financial services or of information services related to the business of financial institutions. O. Reg. 413/97, s. 25.
115. (1) For the purposes of subsection 163 (1) of the Act, a provincial corporation may establish or acquire, as a subsidiary,
(a) a financial institution;
(b) a factoring corporation;
(c) a financial leasing corporation;
(d) an information services corporation;
(e) an investment counselling and portfolio management corporation;
(f) a mutual fund corporation;
(g) a mutual fund distribution corporation;
(h) a real estate brokerage corporation;
(i) a real estate corporation;
(j) a service corporation;
(k) a specialized financing corporation;
(l) a financial holding corporation that does not have a substantial investment in any entity other than in,
(i) a body corporate referred to in this subsection,
(ii) a real estate holding vehicle, or
(iii) any other entity in which a financial institution or specialized financing corporation controlled by the financial holding corporation has a substantial investment;
(m) a body corporate whose activities are ancillary to the business of the corporation or of a financial institution that is its subsidiary; and
(n) a body corporate that engages in two or more of the businesses or activities engaged in or carried on by bodies corporate referred to in any of clauses (b) to (m). O. Reg. 413/97, s. 26 (1).
(2) Before making an application to incorporate a proposed subsidiary, or seven days before making an investment in the shares of a proposed subsidiary that is an existing corporation or company, a provincial corporation shall file with the Superintendent,
(a) where it is investing in the shares of an existing corporation or company, a certified copy of the instrument of incorporation, by-laws and most recent financial statements of the corporation or company; and
(b) an undertaking that the provincial corporation,
(i) will ensure that the proposed subsidiary engages only in business activities related to the purposes for which it is incorporated or acquired and subject to any terms and conditions imposed by the Superintendent,
(ii) will ensure that the proposed subsidiary makes only investments that satisfy the terms, conditions and restrictions that are applicable to investments made by the provincial corporation,
(iii) will provide to the Superintendent copies of the financial statements of the proposed subsidiary and such other information concerning its affairs as the Superintendent may from time to time request, and permit the Superintendent or a person appointed by the Superintendent to visit the head office and other offices of the subsidiary at any time and examine its books, vouchers, securities and documents,
(iv) will notify the Superintendent forthwith of its disposition of any shares of the proposed subsidiary, and
(v) will not permit the proposed subsidiary to amalgamate with another corporation or company without giving the Superintendent at least 15 days notice of the proposed amalgamation and obtaining the Superintendent’s approval. R.R.O. 1990, Reg. 733, s. 115 (2); O. Reg. 413/97, s. 26 (2).
116. Revoked: O. Reg. 413/97, s. 27.
117. (1) Every provincial corporation that has established or acquired a specialized financing corporation as a subsidiary shall ensure that at the time the subsidiary is acquired or established and at any subsequent time,
(a) the subsidiary does not hold shares or ownership interests in a financial institution, directly or indirectly;
(b) the aggregate of the book value of the shares held by the provincial corporation and its prescribed subsidiaries in the subsidiary and in all specialized financing corporations and the amount of loans that the provincial corporation and its subsidiaries have made to the subsidiary and all specialized financing corporations that are outstanding does not exceed 5 per cent of the corporation’s capital base;
(c) the aggregate amount of all loans that were made to the subsidiary by all entities and that are outstanding does not exceed twice the amount of the subsidiary’s shareholders’ equity; and
(d) the subsidiary has not held a substantial investment in any entity for more than 10 years.
(2) For the purposes of subsection (1),
(a) the amount of the subsidiary’s debt and shareholders’ equity is the amount indicated on its balance sheet, prepared on an unconsolidated basis; and
(b) the book value of the shares and ownership interests held by an entity is the book value indicated on the entity’s balance sheet. O. Reg. 413/97, s. 28.
118. (1) The duties of an audit committee under subsection 103 (1) of the Act are as set out in section 119.
(2) Every audit committee shall perform the duties set out in section 119 at least once each year and the duties set out in clauses 119 (2) (d), (m), (n) and (o) at such additional times as any committee member considers necessary. R.R.O. 1990, Reg. 733, s. 118.
119. (1) In this section,
“audited financial statements” means the audited annual financial statements to be placed before the shareholders of a corporation, including the notes to the financial statements and the auditor’s report.
(2) The duties of an audit committee are to,
(a) review the reasonableness and significance of the financial position and reported results in the audited financial statements of the corporation for the purpose of making a report under subsection 122 (2) of the Act;
(b) review the accounting principles and practices followed by the corporation during the fiscal year of the financial statements reviewed under clause (a), and all significant changes from the principles and practices followed during the preceding fiscal year;
(c) review the audited financial statements of the corporation’s subsidiaries, if any;
(d) review every financial report that requires the approval of the board of directors of the corporation prior to being submitted to a regulatory body;
(e) discuss with the auditor the audit findings, any restrictions on the scope of the auditor’s work and any problems that the auditor experienced in performing the audit;
(f) review the nature and extent of the auditor’s evaluation of the internal control systems of the corporation;
(g) review the recommendations made by the auditor to the management of the corporation and the response made by management to the recommendations;
(h) review the organization and independence of the internal auditors of the corporation, including the internal auditors’ goals and work plans and any problems that the internal auditors experienced in performing the audit;
(i) review the recommendations that the internal auditors consider significant respecting the improvement of accounting and internal control practices made by the internal auditors to the management of the corporation and the response made by management to the recommendations;
(j) monitor the adherence by the directors, officers and employees of the corporation to the code of conduct, if any, of the corporation;
(k) inquire into all alleged contraventions of the code of conduct of the corporation and into all circumstances that the committee considers might indicate that the corporation or any of its directors, officers or employees may have contravened the Act, the Securities Act, the Income Tax Act (Canada) or the regulations made under those Acts;
(l) review the adequacy of the corporation’s complement of employees to perform its accounting and financial responsibilities;
(m) inquire into any change in circumstances of the corporation that might reasonably be expected to materially and adversely affect the financial position of the corporation;
(n) report and make such recommendations to the board of directors of the corporation arising from its duties under clauses (b) to (m) as the committee considers appropriate in the circumstances; and
(o) report to the board of directors of the corporation any conflict between the auditor and the management of the corporation that the committee has been unable to resolve within a reasonable period of time. R.R.O. 1990, Reg. 733, s. 119.
Duties of an Investment Committee
120. (1) The duties of an investment committee under subsection 103 (1) of the Act are as set out in section 121.
(2) Any report or recommendation made by an investment committee under section 121 is made to the board of directors of the corporation. R.R.O. 1990, Reg. 733, s. 120.
121. (1) In this section,
“investment practices” means the guidelines established for making specified classes of investments and the investment decisions made in relation to the guidelines, including investment decisions respecting mortgage loans, acquisition, development and construction loans, personal loans, commercial loans, leasing loans, marketable securities, other financial instruments, real estate and other fixed assets.
(2) The duties of an investment committee are to,
(a) monitor the investment practices of the corporation to ensure that the corporation is adhering to prudent investment standards, and report its findings thereon;
(b) monitor and recommend procedures to be used by the corporation to monitor the investment practices of every subsidiary of the corporation and every joint venture in which the corporation is a participant to ensure that they are adhering to prudent investment standards;
(c) recommend an investment policy for the corporation that specifies the proportion of the assets of the corporation that shall be allocated to specified classes of investments, and recommend procedures for implementing the policy;
(d) recommend such changes to the investment policy of the corporation as the committee from time to time considers necessary to meet changes in the investment climate;
(e) recommend the duties and powers of investment subcommittees, if any, and officers and employees of the corporation to determine and implement the investment policy of the corporation for specific classes of investments;
(f) review and report on the investment policy determined by, and the investment decisions made by investment subcommittees, officers and employees of the corporation, and on the competence demonstrated by the subcommittees, officers and employees;
(g) recommend the duties and powers to be given to any investment counsellor or other professional advisor retained by the corporation in connection with the investment policy of the corporation, and monitor the decisions of the counsellor or advisor to ensure that they are consistent with the investment policy of the corporation;
(h) review every valuation performed under clause 42 (5) (b) or subsection 42 (6),
(i) to ensure that it was performed by a valuator who, in the opinion of the committee, has a demonstrated ability to evaluate investments with independence and proficiency, and
(ii) by examining the valuation method used, to ensure that the valuation is based upon sufficiently current information;
(i) report every deviation from the investment policy of the corporation at the first meeting of the board of directors after the committee becomes aware of the deviation;
(j) review all management reports concerning compliance by the corporation and its directors, officers and employees with the Act and regulations; and
(k) monitor the investment practices of the corporation to ensure that the investment limits established do not exceed the limits required under the Act and regulations, and report its findings thereon. R.R.O. 1990, Reg. 733, s. 121.
PART XX
BORROWING OVER THE LIMIT
122. For the purposes of subsection 157 (4) of the Act, the following are prescribed as the manners for investing amounts that exceed the limit on the borrowing multiple of a provincial corporation:
1. Cash on hand and demand deposits in banks, provincial corporations and, if approved by the Superintendent, other depositories.
2. Treasury bills of Canada or a province.
3. Banker’s acceptances with a remaining term to maturity of one year or less.
4. Term deposits, bearer deposit notes and similar instruments issued by banks, provincial corporations and, if approved by the Superintendent, other depositories that in each case either are callable on demand or mature within 100 days.
5. Bonds, debentures or other evidence of indebtedness that are issued or guaranteed by, or in respect of which the debt service is guaranteed by, the Government of Canada, or the government of a province or a municipality.
6. Demand loans that are fully secured by assets of the classes specified in paragraphs 2 to 5, made to brokers, investment dealers and securities dealers provincial in Canada. R.R.O. 1990, Reg. 733, s. 122; O. Reg. 413/97, s. 29.
123. Revoked: O. Reg. 413/97, s. 30.
Leases and Conditional Sales Contracts
124. (1) A provincial corporation shall not enter into a financial lease agreement or a conditional sales agreement other than a financial lease agreement or conditional sales agreement,
(a) in respect of personal property that was,
(i) selected by the lessee or purchaser and acquired by the corporation at the request of the lessee or purchaser, or
(ii) previously acquired by the corporation in respect of another financial lease agreement or conditional sales agreement; and
(b) the primary purpose of which is the extending of credit to a lessee or purchaser.
(2) A provincial corporation shall not direct its customers or potential customers to particular dealers in respect of personal property that is conditionally sold or that is to be conditionally sold under a conditional sales agreement with the corporation.
(3) A provincial corporation shall not permit its prescribed subsidiaries to do anything that the provincial corporation is prohibited from doing by subsection (1) or (2).
(4) Every financial lease agreement or conditional sales agreement entered into by a provincial corporation must include a provision assigning to the lessee or purchaser the benefit of, or setting out the responsibilities of the corporation in respect of, all warranties, guarantees or other undertakings made by a manufacturer or supplier in respect of the personal property that is the subject of the agreement.
(5) Every financial lease agreement entered into by a provincial corporation must yield,
(a) a return to the corporation that is not less than its full investment in the property that is the subject of the agreement; and
(b) a rate of return that is reasonable taking into account the term and the other conditions of the agreement and the rate of return sought by other lessors in respect of the financial leasing of similar property under similar conditions.
(6) For the purposes of subsection (5), the calculation of the return under a financial lease agreement must take into account,
(a) rental charges that have been or are to be paid by the lessee under the lease agreement;
(b) estimated tax benefits accruing to the corporation on account of the lease agreement, including tax credits and capital cost allowance claims; and
(c) either,
(i) if the lessee or a third party who is dealing at arm’s length with the corporation has, on or before the start of the lease agreement, contracted to purchase the leased property or has unconditionally guaranteed the resale value of the leased property at the date of expiration of the lease agreement, the amount of the purchase price or resale value, or
(ii) in a case other than that set out in subclause (i), the lesser of the amount of the estimated residual value of the property and 25 per cent of the cost of acquisition of the property to the corporation.
(7) A provincial corporation shall not permit its prescribed subsidiaries to enter into a financial lease agreement or conditional sales agreement which the corporation is prohibited from entering into by subsections (4) and (5).
(8) The aggregate of the estimated residual value of all leased properties held by a provincial corporation and its prescribed subsidiaries that are referred to in subclause (6) (c) (ii) may not at any time exceed 10 per cent of the aggregate of the cost of acquisition of those leased properties.
(9) This section does not apply to leases or conditional sales contracts where the provincial corporation or any of its prescribed subsidiaries is either the lessee or the conditional purchaser.
(10) In this section,
“estimated residual value” means, in respect of personal property that is the subject of a financial lease agreement with a provincial corporation or its prescribed subsidiaries, the value of the property immediately after the expiration of the lease agreement, as estimated by the corporation or its subsidiary at the time the lease agreement was entered into. O. Reg. 413/97, s. 31.
PART XX.1
DURATION OF AUTHORITY TO CARRY ON BUSINESS
125. The date in subsection 227 (1) of the Act is changed from July 1, 1998 to July 1, 1999. O. Reg. 320/98, s. 1.
126. (1) For the purposes of section 164 of the Act,
“commercial loan” means,
(a) any loan made or acquired other than,
(i) a loan to an individual in an amount of $250,000 or less,
(ii) a loan to,
(A) the Government of Canada, the government of a province or territory of Canada, a municipality in Canada or an agency of any of them,
(B) the government of a foreign country that is a member of the Organization for Economic Cooperation and Development or any political subdivision or agency thereof, or
(C) the Asian Development Bank, the Inter-American Development Bank, the International Bank for Reconstruction and Development or the International Finance Corporation,
(iii) a loan that is guaranteed by, or fully secured by securities issued by, a government, a municipality or an agency referred to in subclause (ii),
(iv) a loan that is secured by a mortgage on real estate if the mortgage is,
(A) on residential real estate and the amount of the loan, together with the amount then outstanding of any mortgage having an equal or prior claim against the real estate, does not exceed the lending value of the real estate at the time the loan is made or acquired, or
(B) on real estate other than residential real estate and,
1. the amount of the loan, together with the amount then outstanding of any mortgage having an equal or prior claim against the real estate, does not exceed the lending value of the real estate at the time the loan is made or acquired, and
2. at the time the loan is made or acquired the real estate provides an annual income sufficient to pay all annual expenses related to the real estate, including the payments owing under the mortgage and the mortgages having an equal or prior claim against the real estate,
(v) a loan that is secured by a mortgage on real estate, where,
(A) the mortgage is on residential real estate and,
1. the amount of the loan, together with the amount then outstanding of any mortgage having an equal or prior claim against the real estate, exceeds the lending value of the real estate at the time the loan is made or acquired, and
2. repayment of the amount of the loan that exceeds the lending value of the real estate is guaranteed or insured by a government agency or private insurer other than a subsidiary of the corporation that is licensed or registered under the laws of Canada or a province of Canada,
(B) the mortgage is on real estate, other than residential real estate and,
1. the amount of the loan, together with the amount then outstanding of any mortgage having an equal or prior claim against the real estate, exceeds the lending value of the real estate at the time the loan is made or acquired,
2. repayment of the amount of the loan that exceeds the lending value of the real estate is guaranteed or insured by a government agency or private insurer other than a subsidiary of the corporation that is licensed or registered under the laws of Canada or a province of Canada, and
3. at the time the loan is made or acquired, the real estate provides an annual income sufficient to pay all annual expenses related to the real estate, including the payments owing under the mortgage and the mortgages having an equal or prior claim against the real estate, or
(C) the loan is one referred to in clause 134 (2) (d), or
(vi) a loan that,
(A) consists of a deposit made by the corporation with another financial institution,
(B) is fully secured by a deposit with any financial institution, including the corporation,
(C) is fully secured by debt obligations guaranteed by any financial institution other than the corporation or a subsidiary of the corporation, or
(D) is fully secured by a guarantee of a financial institution other than the corporation or a subsidiary of the corporation,
(b) an investment in debt obligations other than,
(i) debt obligations that are,
(A) guaranteed by any financial institution other than the corporation or a subsidiary of the corporation,
(B) fully secured by deposits with any financial institution, including the corporation, or
(C) fully secured by debt obligations that are guaranteed by any financial institution other than the corporation or a subsidiary of the corporation,
(ii) debt obligations issued by,
(A) the Government of Canada, the government of a province or territory of Canada, a municipality in Canada or an agency of any of them,
(B) the government of a foreign country that is a member of the Organization for Economic Cooperation and Development or any political subdivision or agency thereof, or
(C) the Asian Development Bank, the Inter-American Development Bank, the International Bank for Reconstruction and Development or the International Finance Corporation,
(iii) debt obligations that are guaranteed or fully secured by securities issued by a government, a municipality or an agency referred to in subclause (ii),
(iv) debt obligations that are widely distributed, or
(v) debt obligations of an entity controlled by the corporation, and
(c) an investment in shares of a body corporate or ownership interests in an unincorporated entity, other than,
(i) shares or ownership interests that are widely distributed,
(ii) shares or ownership interests of an entity controlled by the corporation, or
(iii) participating shares.
(2) If a provincial corporation and its prescribed subsidiaries make or acquire loans having an aggregate amount of more than $250,000 to an individual to avoid the application of subclause (1) (a) (i) to the loans, the loans shall be deemed to be commercial loans. O. Reg. 413/97, s. 32.
127. In this Part,
“loan” includes an acceptance, endorsement or other guarantee, a deposit, a letter of credit, 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;
“participating share” means a share of a body corporate that carries the right to participate in the earnings of the body corporate to an unlimited degree and to participate in a distribution of the remaining property of the body corporate on dissolution;
“residential real estate” means real estate consisting of buildings, at least one-half of the floor space of which is used or is intended to be used as one or more private dwellings;
“widely distributed” means,
(a) in respect of debt obligations the distribution of which was exempted from the requirements to file a prospectus under the laws of Ontario, Canada, another province of Canada or a jurisdiction outside Canada,
(i) at least 90 per cent of the maximum authorized principal of the debt obligations is held by one or more persons other than the provincial corporation and its prescribed subsidiaries, and,
(A) the debt obligations were issued to at least 25 persons other than the corporation and its subsidiaries within six months after the day on which the first of the debt obligations was issued, or
(B) if the debt obligations are issued on a continuous basis, there are on average at least 25 holders other than the corporation and its subsidiaries, or
(ii) at the time of their initial distribution, the debt obligations met at least three of the following criteria:
1. Their initial term was less than one year.
2. They were rated by a rating agency.
3. They were distributed through a person authorized to trade in securities.
4. They were distributed in accordance with an offering circular or memorandum or a similar document relating to the distribution of securities,
(b) in respect of any securities not referred to in clause (a),
(i) they are listed and posted for trading on a recognized stock exchange, or
(ii) a prospectus relating to the issuance of the securities was filed under the laws of Ontario, Canada, another province of Canada or a jurisdiction outside Canada. O. Reg. 413/97, s. 32.
Portfolio Limits — Commercial Loans
128. (1) A provincial corporation with a capital base of $15,000,000 or less shall not make or acquire a commercial loan, or acquire control of a body corporate of a type referred to in subsection 115 (1) that holds commercial loans, if the aggregate value of all commercial loans held by the corporation and its prescribed subsidiaries exceeds, or the acquisition or making of the commercial loan or the acquisition of control of the body corporate would cause the aggregate value of all commercial loans held by the corporation and its prescribed subsidiaries to exceed, 5 per cent of the consolidated assets of the corporation.
(2) A provincial corporation shall not permit its prescribed subsidiaries to do anything that the corporation is prohibited from doing by subsection (1). O. Reg. 413/97, s. 32.
129. (1) A provincial corporation with a capital base of more than $15,000,000 may make or acquire commercial loans, or acquire control of a body corporate of a type referred to in subsection 115 (1) that holds commercial loans, if the aggregate value of all commercial loans held by the corporation and its prescribed subsidiaries would thereby exceed 5 per cent of the consolidated assets of the corporation only with the prior written approval of the Superintendent and in accordance with such conditions as the Superintendent may specify.
(2) A provincial corporation shall not permit its prescribed subsidiaries to do anything that the corporation is prohibited from doing by subsection (1). O. Reg. 413/97, s. 32.
130. For the purposes of sections 128 and 129, the consolidated assets of a provincial corporation shall be computed in accordance with generally accepted accounting principles. O. Reg. 413/97, s. 32.
Portfolio Limits — Real Estate
131. (1) A provincial corporation shall not acquire an interest in real estate, or make an improvement to any real estate in which the corporation or any of its prescribed subsidiaries has an interest, if the aggregate value of all interests of the corporation in real estate exceeds, or the acquisition of the interest or the making of the improvement would cause that aggregate value to exceed, 70 per cent of the capital base of the corporation.
(2) A provincial corporation shall not permit its prescribed subsidiaries to do anything that the provincial corporation is prohibited from doing by subsection (1). O. Reg. 413/97, s. 32.
132. (1) A provincial corporation shall not,
(a) acquire any participating shares of any body corporate or any ownership interests in any unincorporated entity, other than those of a body corporate referred to in subsection 115 (1) or a real estate holding vehicle, in which the corporation has, or by virtue of the acquisition would have, a substantial investment; or
(b) acquire control of a body corporate that holds shares or ownership interests referred to in clause (a),
if the aggregate value of all participating shares, excluding participating shares of bodies corporate referred to in subsection 115 (1) in which the corporation has a substantial investment, and all ownership interests in unincorporated entities, excluding ownership interests in real estate holding vehicles in which the corporation has a substantial investment, beneficially owned by the corporation and its prescribed subsidiaries exceeds, or the purchase or acquisition would cause that aggregate value to exceed, 70 per cent of the capital base of the corporation.
(2) A provincial corporation shall not permit its prescribed subsidiaries to do anything that the provincial corporation is prohibited from doing by subsection (1).
(3) For the purposes of subsection (2), a prescribed subsidiary of a provincial corporation does not include,
(a) an insurance company;
(b) a securities dealer; or
(c) a subsidiary of an insurance company or a securities dealer. O. Reg. 413/97, s. 32.
Aggregate Limit — Real Estate and Equities
133. (1) A provincial corporation shall not,
(a) acquire,
(i) participating shares of a body corporate, other than those of a body corporate referred to in subsection 115 (1) in which the corporation has, or by virtue of the acquisition would have, a substantial investment,
(ii) ownership interests in an unincorporated entity, or
(iii) interests in real estate; or
(b) make an improvement to real estate in which the corporation or any of its prescribed subsidiaries has an interest,
if the aggregate value of all participating shares and ownership interests referred to in subclauses (a) (i) and (ii) that are beneficially owned by the corporation and its prescribed subsidiaries and all interests of the corporation in real estate referred to in subclause (a) (iii) exceeds, or the acquisition or the making of the improvement would cause that aggregate value to exceed, the capital base of the corporation.
(2) A provincial corporation shall not permit its prescribed subsidiaries to do anything that the provincial corporation is prohibited from doing by subsection (1).
(3) For the purposes of subsection (2), a prescribed subsidiary of a provincial corporation does not include,
(a) an insurance company;
(b) a securities dealer; or
(c) a subsidiary of an insurance company or a securities dealer. O. Reg. 413/97, s. 32.
Restriction on Residential Mortgages
134. (1) A provincial corporation shall not make a loan in Canada on the security of residential real estate in Canada for the purpose of purchasing, renovating or improving that real estate, or refinance such a loan, if the amount of the loan, together with the amount then outstanding of any mortgage having an equal or prior claim against the real estate would exceed the lending value of the real estate at the time of the loan.
(2) Subsection (1) does not apply in respect of,
(a) a loan made or guaranteed under the National Housing Act (Canada) or any other Act of Parliament by or pursuant to which a different limit on the value of real estate on the security of which the corporation may make a loan is established;
(b) a loan if repayment of the amount of the loan that exceeds the maximum amount set out in subsection (1) is guaranteed or insured by a government agency or a private insurer other than a subsidiary of the corporation that is licensed or registered under the laws of Canada or a province of Canada;
(c) the acquisition by the corporation from an entity of securities issued or guaranteed by the entity that are secured on any residential real estate, whether in favour of a trustee or otherwise, or the making of a loan by the corporation to the entity against the issue of such securities; or
(d) a loan secured by a mortgage where,
(i) the mortgage is taken back by the corporation on real estate disposed of by the corporation, including where the disposition is by way of a realization of a security interest, and
(ii) the mortgage secures payment of an amount payable to the corporation for the real estate. O. Reg. 413/97, s. 32.
135. (1) Despite anything in this Part, if a provincial corporation or any of its prescribed subsidiaries has made a loan to an entity and a default has occurred under the terms of the agreement between the corporation or subsidiary and the entity with respect to the loan and any other documents governing the terms of the loan, the corporation or subsidiary may acquire,
(a) if the entity is a body corporate, all or any of the shares of the body corporate;
(b) if the entity is an unincorporated entity, all or any of the ownership interests in the entity;
(c) all or any of the shares or all or any of the ownership interests in any entity that is an affiliate of the entity; or
(d) all or any of the shares of a body corporate that is primarily engaged in holding shares of, ownership interests in or assets acquired from, the entity or any of its affiliates.
(2) A corporation or subsidiary that makes an acquisition under the authority of subsection (1) shall do all things necessary to ensure that it does not have a substantial investment in any entity referred to in subsection (1) within five years after the acquisition.
(3) Despite subsection (2), if pursuant to subsection (1) a corporation or any of its prescribed subsidiaries has acquired control of a body corporate that it would otherwise be permitted to acquire under subsection 115 (1), the corporation or subsidiary may continue to hold the investment if the approval of the Superintendent is obtained under section 163 of the Act. O. Reg. 413/97, s. 32.
136. (1) Despite anything in this Part, if the investment or interest is acquired through the realization of a security interest held by a provincial corporation or any of its prescribed subsidiaries, the provincial corporation or subsidiary may acquire,
(a) an investment in a body corporate;
(b) an interest in an unincorporated entity; or
(c) an interest in real estate.
(2) If, pursuant to the realization of a security interest held by a provincial corporation or any of its prescribed subsidiaries, the corporation acquires a substantial investment in an entity, other than an entity referred to in clauses 115 (1) (d) to (j) or a real estate holding vehicle, the corporation shall, within five years after the substantial investment was acquired, do all things necessary to ensure that the corporation no longer has a substantial investment in the entity.
(3) Despite subsection (2), if, pursuant to the realization of a security interest held by a provincial corporation or any of its prescribed subsidiaries, the corporation acquires control of a body corporate that it would otherwise be permitted to acquire under subsection 115 (1), the corporation or subsidiary may continue to hold the investment if the approval of the Superintendent is obtained under section 163 of the Act. O. Reg. 413/97, s. 32.
Exclusions from Portfolio Limits
137. (1) The amount of all loans, investments and interests acquired by a provincial corporation and any of its prescribed subsidiaries as a result of a realization of a security interest or under section 135 shall not be included in calculating the value of loans, investments and interests of the corporation and its prescribed subsidiaries under sections 128 to 133,
(a) in the case of an interest in real estate, for a period of 12 years after the interest was acquired;
(b) in the case of a loan, investment or interest, other than an interest in real estate, for a period of five years after the loan, investment or interest was acquired.
(2) Subsection (1) does not apply to an investment or interest described in that subsection if the investment or interest is defined under sections 148 to 152 to be an interest in real estate and,
(a) the corporation or the subsidiary acquired the investment or interest as result of the realization of a security interest securing a loan that is defined under sections 148 to 152 to be an interest in real estate; or
(b) the corporation or the subsidiary acquired the investment or interest under section 135 as a result of a default referred to in that section in respect of a loan that was defined by sections 148 to 152 to be an interest in real estate. O. Reg. 413/97, s. 32.
138. (1) The aggregate amount of all loans to, or investments in, any one person, or two or more persons that to the knowledge of the provincial corporation are related, made directly or indirectly by a provincial corporation and its prescribed subsidiaries shall not exceed the greater of,
(a) $500,000; and
(b) 1 per cent of the consolidated assets of the corporation.
(2) Subsection (1) does not apply so as to restrict investments in,
(a) securities issued or guaranteed by the government of Canada, including mortgages insured under the National Housing Act (Canada), by the government of any province of Canada or by any municipality in Canada;
(b) debt instruments issued or endorsed by a bank; or
(c) a prescribed subsidiary.
(3) For the purposes of clause (1) (b), the consolidated assets of the provincial corporation shall be computed in accordance with generally accepted accounting principles. O. Reg. 413/97, s. 32.
139. For the purposes of section 138, a person is considered to be related to,
(a) every body corporate that the person controls and every affiliate of that body corporate;
(b) the person’s partner, if the person and the partner each have a 50 per cent interest in the partnership;
(c) every trust or estate in which the person has a substantial beneficial interest or for which the person serves as trustee or in a similar capacity;
(d) the spouse and every child of the person;
(e) every relative of the person or of his or her spouse who has the same home as the person. O. Reg. 413/97, s. 32; O. Reg. 112/00, s. 2; O. Reg. 322/05, s. 2.
140. (1) A provincial corporation shall not acquire, increase or hold a substantial investment in any entity.
(2) Despite subsection (1) a corporation may acquire, increase or hold a substantial investment in,
(a) a prescribed subsidiary;
(b) a body corporate the business or activities of which are limited to the business engaged in or carried on by bodies corporate referred to in any of clauses 115 (1) (d) to (j); or
(c) a real estate holding vehicle.
(3) Subsection (1) does not apply so as to restrict the acquisition, increase or holding of a substantial investment by a provincial corporation in an entity, other than an entity referred to in subsection 115 (1), by way of,
(a) an acquisition of control of a financial institution or specialized financing corporation that has a substantial investment in the entity; or
(b) an acquisition of shares or ownership interests in the entity by,
(i) a financial institution or specialized financing corporation that is controlled by the corporation, or
(ii) an entity controlled by a financial institution or specialized financing corporation that is controlled by the corporation.
(4) A provincial corporation must deliver written notice to the Superintendent 10 days before acquiring or increasing a substantial investment in a body corporate referred to in clause (2) (b). O. Reg. 413/97, s. 32.
141. In this Part,
“designated body corporate” means a body corporate referred to in any of clauses 115 (1) (a), (b), (c), (k) and (l);
“value” means,
(a) in respect of a share or loan held by a provincial corporation or a prescribed subsidiary at a particular time, the book value of the share or loan that would be reported on the balance sheet of the corporation or subsidiary prepared as at that time in accordance with generally accepted accounting principles, and
(b) in respect of a guarantee, the face value of the guarantee. O. Reg. 413/97, s. 32.
142. (1) Despite section 140 and subject to section 143, a provincial corporation may acquire, increase or hold a substantial investment in a designated body corporate.
(2) If the designated body corporate is a foreign institution, subsection (1) applies only if the activities of the designated body corporate are regulated by laws of the jurisdiction in which it carries on business.
(3) A provincial corporation must deliver written notice to the Superintendent 20 days before acquiring or increasing a substantial investment in a designated body corporate. O. Reg. 413/97, s. 32.
143. (1) A provincial corporation shall not acquire or increase a substantial investment in a designated body corporate under section 142 if, after the acquisition or increase, the total value of the following would exceed 50 per cent of the capital base of the corporation:
1. All shares beneficially owned by the corporation, and all shares beneficially owned by entities controlled by the corporation, in designated bodies corporate in which the corporation has a substantial investment but which it does not control.
2. All loans held by the corporation, and all loans held by entities controlled by the corporation, that were made to designated bodies corporate in which the corporation has a substantial investment but which it does not control.
3. All outstanding guarantees given by the corporation, and all outstanding guarantees given by entities controlled by the corporation, on behalf of designated bodies corporate in which the corporation has a substantial investment but which it does not control.
(2) A provincial corporation that has a substantial investment in a designated body corporate which it does not control shall not make a loan to, or give a guarantee on behalf of, the designated body corporate, or permit entities controlled by it to do so, if, after the making of the loan or the giving of the guarantee, the total value referred to in subsection (2) would exceed 50 per cent of the capital base of the corporation.
(3) In calculating the total values referred to in subsections (1) and (2), no amount shall be included in respect of shares acquired under sections 135 and 136. O. Reg. 413/97, s. 32.
144. For the purposes of this Regulation, a person has a substantial investment in,
(a) a body corporate if,
(i) the voting rights attached to the aggregate of any voting shares of the body corporate beneficially owned by the person and by any entities controlled by the person exceed 10 per cent of the voting rights attached to all of the outstanding voting shares of the body corporate, or
(ii) the aggregate of any shares of the body corporate beneficially owned by the person and by any entities controlled by the person represents ownership of greater than 25 per cent of the shareholders’ equity of the body corporate; and
(b) an unincorporated entity if the aggregate of any ownership interests, however designated, into which the entity is divided, beneficially owned by the person and by any entities controlled by the person exceeds 25 per cent of all of the ownership interests into which the entity is divided. O. Reg. 413/97, s. 32.
145. Nothing in this Part requires the termination of a loan, the disposal of an investment, the termination of a commitment to make a loan or investment or the termination of a commitment to increase a loan or investment if the loan, investment or commitment was made before the coming into force of this Part but, if the loan or investment would be precluded or limited by this Part, the loan or investment shall not be increased after the coming into force of this Part, except pursuant to a commitment that was made before the coming into force of this Part. O. Reg. 413/97, s. 32.
Real Estate Interest Valuation
146. (1) In this Part,
“designated entity” means an entity other than,
(a) a joint venture,
(b) an insurance company,
(c) a securities dealer, or
(d) an entity that is controlled by an insurance company or securities dealer;
“joint venture” means a real estate entity,
(a) that was formed for the purpose of a specific business undertaking by,
(i) a provincial corporation or by a designated entity controlled by a provincial corporation, and
(ii) one or more other persons,
(b) in which the corporation or designated entity has a substantial investment, and
(c) in respect of which the persons who formed the entity have agreed on joint control, regardless of the distribution of their equity;
“real estate entity” means a real estate corporation or a real estate holding vehicle;
“related real estate entity”, in respect of a provincial corporation, means,
(a) a real estate entity, other than a designated entity controlled by the corporation, in which the corporation or a designated entity controlled by the corporation beneficially owns sufficient shares or ownership interests to cause the corporation or designated entity to have a substantial investment in the real estate entity, or
(b) a real estate entity that is controlled by a real estate entity described in clause (a);
“third party”, in respect of a provincial corporation, means a person other than,
(a) the corporation,
(b) a designated entity controlled by the corporation, or
(c) a related real estate entity of the corporation.
(2) For the purposes of sections 131 and 133, a prescribed subsidiary of a provincial corporation is a subsidiary of the corporation other than an insurance company, a securities dealer or a subsidiary of an insurance company or securities dealer.
(3) For the purposes of sections 148 to 151, the book value of an asset that is an interest of a provincial corporation in real estate, at a particular time, is,
(a) if the asset is real estate, the gross book value of the real estate, less any accumulated depreciation, that would be reported on a balance sheet of the corporation prepared as at that time in accordance with generally accepted accounting principles; and
(b) if the asset is a security or loan, the book value of the security or loan that would be reported on a balance sheet of the corporation prepared as at that time in accordance with generally accepted accounting principles. O. Reg. 413/97, s. 32.
147. For the purposes of this Part, the interests of a provincial corporation in real estate refers to the interests set out in sections 148 to 152. O. Reg. 413/97, s. 32.
Direct Interests — Real Estate and Debt Obligations
148. (1) The following are interests of a provincial corporation in real estate:
1. Real estate beneficially owned by the corporation or by a designated entity controlled by the corporation.
2. A debt obligation issued for the purpose of acquiring or improving the real estate referred to in paragraph 1, or secured by that real estate, for which the corporation or a designated entity controlled by the corporation is liable.
(2) The value of the interests of a provincial corporation in real estate is,
(a) in respect of real estate referred to in paragraph 1 of subsection (1), the book value of the real estate; and
(b) in respect of a debt obligation referred to in paragraph 2 of subsection (1), any amount by which the book value of the debt obligation exceeds the book value of the real estate referred to in that paragraph. O. Reg. 413/97, s. 32.
Indirect Interests — Real Estate, Share and Ownership Interests
149. (1) The following are interests of a provincial corporation in real estate:
1. Real estate beneficially owned by a related real estate entity of the corporation that is a joint venture or by an entity in which the joint venture has a substantial investment, if the real estate would be reported on a balance sheet of the corporation prepared in accordance with generally accepted accounting principles.
2. Shares and ownership interests beneficially owned by the corporation, or by a designated entity controlled by the corporation, in any related real estate entity of the corporation other than a related real estate entity referred to in paragraph 1.
(2) The value of the interests of a provincial corporation in real estate is,
(a) in respect of real estate referred to in paragraph 1 of subsection (1), the book value of the real estate; and
(b) in respect of shares and ownership interests referred to in paragraph 2 of subsection (1), the book value of the shares and ownership interests. O. Reg. 413/97, s. 32.
Indirect Interests — Loans and Debt Obligations
150. (1) The following are interests of a provincial corporation in real estate:
1. A debt obligation issued by a related real estate entity of the corporation and beneficially owned by the corporation or by a designated entity controlled by the corporation.
2. A loan made by the corporation, or by a designated entity controlled by the corporation, to a related real estate entity of the corporation.
3. A loan made by the corporation, or by a designated entity controlled by the corporation, to,
i. a real estate entity in which a securities dealer or insurance company controlled by the corporation has a substantial investment, or
ii. a real estate entity that is controlled by a real estate entity described in subparagraph i.
4. A debt obligation issued by a real estate entity described in paragraph 3 and beneficially owned by the corporation or by a designated entity controlled by the corporation.
5. A debt obligation that is,
i. issued by a related real estate entity of the corporation,
ii. beneficially owned by a third party, and
iii. guaranteed by the corporation or by a designated entity controlled by the corporation.
6. A loan made by a third party to a related real estate entity of the corporation and guaranteed by the corporation or by a designated entity controlled by the corporation.
(2) The value of the interests of a provincial corporation in real estate is,
(a) in respect of a debt obligation referred to in paragraph 1 or 4 of subsection (1), the book value of the debt obligation;
(b) in respect of a loan referred to in paragraph 2 or 3 of subsection (1), the book value of the loan;
(c) in respect of a guaranteed debt obligation referred to in paragraph 5 of subsection (1) or a guaranteed loan referred to in paragraph 6 of subsection (1),
(i) if the debt obligation is issued by, or the loan is made to, a related real estate entity that beneficially owns real estate that is an interest of the corporation in real estate under paragraph 1 of subsection 149 (1), any amount by which the face value of the guarantee exceeds the value of the real estate calculated in accordance with clause 149 (2) (a), and
(ii) in any case other than that set out in subclause (i), the face value of the guarantee. O. Reg. 413/97, s. 32.
Indirect Interests — Secured Loans and Debt Obligations
151. (1) If a provincial corporation or a designated entity controlled by a corporation makes a loan to, or beneficially owns or guarantees the debt obligation of, a third party, the loan or debt obligation is an interest of the corporation in real estate if it is secured by,
(a) real estate beneficially owned by a third party in conjunction with,
(i) the corporation,
(ii) the designated entity,
(iii) a related real estate entity of the corporation,
(iv) a securities dealer or insurance company controlled by the corporation,
(v) an entity controlled by a securities dealer or insurance company controlled by the corporation, or
(vi) a real estate entity described in subparagraph i or ii of paragraph 3 of subsection 150 (1);
(b) shares or ownership interests beneficially owned by a third party in,
(i) an entity that beneficially owns real estate in conjunction with the corporation, a related real estate entity of the corporation or a designated entity controlled by the corporation, or
(ii) a related real estate entity of the corporation.
(2) The value of the interests of a provincial corporation in real estate is,
(a) in respect of a loan or debt obligation that is secured by real estate referred to in clause (1) (a), the lesser of,
(i) the net realizable value of the third party’s interest in the real estate at the time that the security interest was given, and
(ii) either,
(A) if the loan was made by the corporation or a designated entity controlled by the corporation or the debt obligation is beneficially owned by the corporation or a designated entity controlled by the corporation, the book value of the loan or debt obligation, or
(B) if the debt obligation is guaranteed by the corporation or a designated entity controlled by the corporation, the face value of the guarantee,
less the total net realizable value of any other security interests that were given for the loan or debt obligation;
(b) in respect of a loan or debt obligation that is secured by shares or ownership interests beneficially owned by a third party in an entity referred to in subclause (1) (b) (i), the lesser of,
(i) the net realizable value of the third party’s interest in those shares or ownership interests at the time that the security interest was given, and
(ii) either,
(A) if the loan was made by the corporation or a designated entity controlled by the corporation or the debt obligation is beneficially owned by the corporation or a designated entity controlled by the corporation, the book value of the loan or debt obligation, or
(B) if the debt obligation is guaranteed by the corporation or a designated entity controlled by the corporation, the face value of the guarantee,
less any amount by which,
(C) the total net realizable value of all security interests that were given for the loan or debt obligation,
exceeds,
(D) the product obtained by multiplying the net realizable value of the entity’s interest in the real estate referred to in subclause (1) (b) (i) by the percentage that the shares or ownership interests that are given as the security interest constitute of the total outstanding shares or ownership interests in the entity; and
(c) in respect of a loan or debt obligation that is secured by shares or ownership interests beneficially owned by a third party in a related real estate entity referred to in subclause (1) (b) (ii), the lesser of,
(i) the net realizable value of the third party’s interest in those shares or ownership interests at the time that the security interest was given, and
(ii) either,
(A) if the loan was made by the corporation or a designated entity controlled by the corporation or the debt obligation is beneficially owned by the corporation or a designated entity controlled by the corporation, the book value of the loan or debt obligation, or
(B) if the debt obligation is guaranteed by the corporation or a designated entity controlled by the corporation, the face value of the guarantee,
less the total net realizable value of any other security interests that were given for the loan or debt obligation. O. Reg. 413/97, s. 32.
152. (1) The following are interests of a provincial corporation in real estate:
1. A guarantee given by the corporation, or by a designated entity controlled by the corporation, to an entity other than the corporation or the designated entity for the purpose of completing the development of real estate that is beneficially owned by,
i. the corporation,
ii. the designated entity controlled by the corporation, or
iii. a related real estate entity of the corporation.
2. An agreement made by the corporation, or by a designated entity controlled by the corporation, to support a third party’s cost of operating or financing real estate that is beneficially owned by,
i. the corporation,
ii. the designated entity controlled by the corporation, or
iii. a related real estate entity of the corporation.
(2) The value of the interests of a provincial corporation in real estate is,
(a) in respect of a guarantee referred to in paragraph 1 of subsection (1), the estimated cost of completing the development of the real estate;
(b) in respect of an agreement referred to in paragraph 2 of subsection (1), the amount of any funds advanced by the corporation, or by a designated entity controlled by the corporation, pursuant to the agreement. O. Reg. 413/97, s. 32.
PART XXI (Schedules I, II) Revoked: O. Reg. 413/97, s. 33.
FORM 1 Revoked: O. Reg. 413/97, s. 34.
FORM 2 Revoked: O. Reg. 413/97, s. 34.
FORM 3 Revoked: O. Reg. 413/97, s. 34.
FORM 4 Revoked: O. Reg. 413/97, s. 34.
FORM 5 Revoked: O. Reg. 413/97, s. 34.