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Credit Unions and Caisses Populaires Act, 1994

S.O. 1994, CHAPTER 11

Consolidation Period: From October 1, 2009 to the e-Laws currency date.

Note: October 1, 2010 has been named by proclamation as the day on which the amendments made by 2007, c. 7, Sched. 7, ss. 61, 62, 69 come into force.

Note: October 1, 2010 has been named by proclamation as the day on which the amendments made by 1999, c. 12, Sched. I, s. 2 (6) come into force.

Last amendment: 2007, c. 7, Sched. 7, ss. 1-177.

SKIP TABLE OF CONTENTS

CONTENTS

PART I
INTERPRETATION

Definitions

1.  In this Act,

“affiliate” means an affiliated body corporate within the meaning of section 5; (“membre du même groupe”)

“articles of incorporation” or “articles” means the original or restated articles of incorporation, articles of amalgamation, articles of amendment, memorandum of association, a special Act or other instrument by which a credit union is incorporated and includes any amendment thereto; (“statuts constitutifs” ou “statuts”)

“board” means, with respect to a credit union, its board of directors; (“conseil”)

“body corporate” means any body corporate with or without share capital and whether or not it is a corporation to which this Act applies; (“personne morale”)

“borrow” does not include the taking of deposits; (“emprunter”)

“Corporation” means the Deposit Insurance Corporation of Ontario; (“Société”)

“court”, except where the context indicates otherwise, means the Superior Court of Justice; (“tribunal”)

“credit union” means a corporation incorporated or continued as a credit union or caisse populaire under this Act or a predecessor of this Act; (“caisse”, “caisse populaire”)

“debt obligation” means a bond, debenture, note or other evidence of indebtedness of an entity, whether secured or unsecured; (“titre de créance”)

“deposit” includes money deposited with a credit union under a federal or provincial registered savings plan or fund; (“dépôt”)

“deposit insurer” means the Deposit Insurance Corporation of Ontario; (“organisme d’assurance-dépôts”)

“depositor” means a person with funds on deposit with a credit union; (“déposant”)

“entity” means a body corporate, trust, partnership, fund, an unincorporated organization, Her Majesty in right of Canada or of a province, 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; (“entité”)

“financial institution” means,

(a) a bank or authorized foreign bank within the meaning of section 2 of the Bank Act (Canada),

(b) an insurer licensed under the Insurance Act,

(c) a corporation registered under the Loan and Trust Corporations Act,

(d) an entity that is,

(i) incorporated or formed by or under an Act of the Parliament of Canada or of the legislature of a province, and

(ii) primarily engaged in dealing in securities, including portfolio management and investment counselling,

(e) a credit union,

(f) a league,

(g) a retail association as defined under the Cooperative Credit Associations Act (Canada), and

(h) such other entities or classes of entities as may be prescribed; (“institution financière”)

“financial statement” means a financial statement referred to in subsection 212 (4); (“état financier”)

“firm of accountants” means,

(a) a partnership, the members of which are accountants engaged in the practice of accounting, or

(b) a body corporate that is incorporated by or under an Act of the legislature of a province and engaged in the practice of accounting; (“cabinet de comptables”)

“incorporator” means an individual who signs articles of incorporation; (“fondateur”)

“league” means a corporation incorporated as a credit union league or federation under this Act or a predecessor of this Act; (“fédération”)

“member” means a person who is a member or enrolled as a member of a credit union under this Act, the articles and the by-laws of the credit union governing membership; (“sociétaire”)

“membership share” means an interest in the equity of a credit union that confers the rights referred to in subsection 52(1); (“part sociale”)

“Minister” means the Minister of Finance; (“ministre”)

“officer”, in respect of a credit union, means,

(a) the chair of the board required under section 94.2,

(b) the corporate secretary required under subsection 140 (1),

(c) the chief executive officer required under subsection 140 (1), and

(d) any other officer provided for in the by-laws referred to in subsection 140 (1); (“dirigeant”)

“patronage share” means a share of a class provided for by the articles of a credit union in accordance with section 53; (“part de ristourne”)

“personal representative” means a person who stands in place of and represents another person and includes, as the circumstances require, a trustee, an executor, an administrator, a committee, a guardian, a curator, an assignee, a receiver, an agent or an attorney of any person, but does not include a delegate; (“représentant personnel”)

“prescribed” means prescribed by the regulations; (“prescrit”)

“regulations” means the regulations made under this Act; (“règlement”)

“regulatory capital” in respect of a credit union, has the meaning given to that expression by the regulations; (“capital réglementaire”)

“related person”, when used to indicate a relationship with any person, means,

(a) a spouse of the person,

(b) any son or daughter of the person, or

(c) any relative of the person or of any person mentioned in clause (a) or (b); (“personne liée”)

“relative” means a relative by blood, marriage or adoption; (“parent”)

“security” means a security as defined under the Securities Act but does not include a deposit with a financial institution or any instrument evidencing the deposit; (“valeur mobilière”)

“share” includes a membership share unless specifically excluded by this Act; (“action”)

“shareholder” means a shareholder as defined in subsection 8 (1); (“actionnaire”)

“special resolution” means a resolution passed by two-thirds or more of the votes cast by or on behalf of the persons who voted in respect of that resolution; (“résolution extraordinaire”)

“spouse” means a spouse as defined under Part III of the Family Law Act; (“conjoint”)

“subordinated indebtedness” means an instrument evidencing an indebtedness of a credit union that, by its terms, provides that the indebtedness will, in the event of the insolvency or winding up of the credit union, be subordinate in right of payment to all deposit liabilities of the credit union and all other liabilities of the credit union except those that, by their terms, rank equally with or are subordinate to the indebtedness; (“titre secondaire”)

“Superintendent” means the Superintendent of Financial Services appointed under the Financial Services Commission of Ontario Act, 1997; (“surintendant”)

“Tribunal” means the Financial Services Tribunal established under the Financial Services Commission of Ontario Act, 1997. (“Tribunal”) 1994, c. 11, s. 1; 1997, c. 28, s. 52; 1999, c. 6, s. 19 (1, 2); 2002, c. 18, Sched. H, s. 3 (1); 2004; c. 8, ss. 46, 47 (1); 2005, c. 5, s. 18 (1, 2); 2006, c. 19, Sched. C, s. 1 (1); 2007, c. 7, Sched. 7, s. 1.

Joint shareholders

2.  (1)  For the purposes of this Act, two or more persons holding the same share or shares jointly are considered as one member or shareholder. 1994, c. 11, s. 2 (1).

Exception

(2)  Despite subsection (1), two or more persons jointly holding enough membership shares to entitle each of them to be a member in their own right are all considered as separate members. 1994, c. 11, s. 2 (2); 2007, c. 7, Sched. 7, s. 2.

Subsidiary

3.  For the purposes of this Act, a body corporate is a subsidiary of another body corporate if,

(a) it is controlled by,

(i) that other,

(ii) that other and one or more bodies corporate each of which is controlled by that other, or

(iii) two or more bodies corporate that are that other’s subsidiary; or

(b) it is a subsidiary of a body corporate that is that other’s subsidiary. 1994, c. 11, s. 3.

Holding body corporate

4.  For the purposes of this Act, a body corporate is another’s holding body corporate if that other is its subsidiary. 1994, c. 11, s. 4.

Affiliation

5.  (1)  For the purposes of this Act, one body corporate is affiliated with another body corporate if one of them is the subsidiary of the other or both are subsidiaries of the same body corporate or each of them is controlled by the same person. 1994, c. 11, s. 5 (1).

Affiliate by order

(2)  On application in writing by a credit union, the Corporation may, by order and on the terms specified in the order, deem a corporate body named in the order to be an affiliate for the purposes of this Act or for the purpose of specific provisions of this Act. 1994, c. 11, s. 5 (2); 1997, c. 28, s. 53; 2007, c. 7, Sched. 7, s. 3 (1).

Revocation of order

(3)  The Corporation may, by order, revoke an order under subsection (2) if the Corporation believes that the credit union has failed to comply with a term set out in the order under subsection (2) or that it is no longer appropriate to deem the corporate body in respect of which the order under subsection (2) was made to be an affiliate. 2007, c. 7, Sched. 7, s. 3 (2).

Procedural rules

(4)  Section 240.1 applies with respect to an order under this section. 2007, c. 7, Sched. 7, s. 3 (2).

Controlling body corporate

6.  For the purposes of this Act, a body corporate is controlled by another person or by two or more bodies corporate if,

(a) voting securities of the first mentioned body corporate carrying more than 50 per cent of the votes for the election of directors are held, other than by way of security only, by or for the benefit of the other person or by or for the benefit of the other bodies corporate; and

(b) the votes carried by the securities are sufficient, if exercised, to elect a majority of the board of directors of the first-mentioned body corporate. 1994, c. 11, s. 6.

Member

7.  (1)  For the purposes of this Act, a person is a holder of a membership share of a credit union when, according to the register under section 230, the person is the owner of the membership share or is entitled to be entered in the register as the owner of the share. 2007, c. 7, Sched. 7, s. 4.

Holder of membership share

(2)  A reference in this Act to the holding of a membership share by or in the name of a person is a reference to the fact that the person is registered or is entitled to be registered in the register under section 230 as the holder of the share. 2007, c. 7, Sched. 7, s. 4.

Shareholder

8.  (1)  For the purposes of this Act, a person is a shareholder of a body corporate when, according to the securities register of the body corporate, the person is the owner of a share of the body corporate or is entitled to be entered in the securities register or like record of the body corporate as the owner of a share.

Holder of a share

(2)  A reference in this Act to the holding of a share by or in the name of any person is a reference to the fact that the person is registered or is entitled to be registered in the securities register or a similar register of the body corporate as the holder of that share. 1994, c. 11, s. 8.

PART II (ss. 9-11) Repealed: 2007, c. 7, Sched. 7, s. 5.

PART III
ESTABLISHING A CREDIT UNION

Incorporation

Corporate charter

12.  (1)  The certificate of incorporation, articles of incorporation and the by-laws of a credit union, together with this Act, constitute the charter of the credit union.

Date of incorporation

(2)  A credit union comes into existence on the date set out in the certificate of incorporation. 1994, c. 11, s. 12.

Articles of incorporation

13.  (1)  Twenty or more individuals may incorporate a credit union by signing articles of incorporation and complying with section 15. 1994, c. 11, s. 13 (1).

Restriction

(2)  An individual is disqualified from being an incorporator if he or she,

(a) is less than eighteen years of age;

(b) is of unsound mind and has been so found by a court in Canada or elsewhere; or

(c) is an undischarged bankrupt or has been discharged as a bankrupt in the five years preceding the date the application to incorporate the credit union is made under subsection 15 (1). 1994, c. 11, s. 13 (2); 2007, c. 7, Sched. 7, s. 6.

Contents of articles

14.  (1)  The articles of incorporation must set out the prescribed information. 2007, c. 7, Sched. 7, s. 7.

Same

(2)  The articles may include any provision that is permitted under this Act to be set out in the articles or that could be the subject of a by-law of the credit union. 1994, c. 11, s. 14 (2).

Same

(3)  The articles must set out any restrictions on the business that the credit union may carry on or on the powers that the credit union may exercise. 1994, c. 11, s. 14 (3).

First directors

(4)  The articles must name at least five individuals who hold office as first directors of the credit union. 1994, c. 11, s. 14 (4).

Affidavit

(5)  An affidavit verifying the following matters must accompany the articles:

1. The signature of each incorporator and each first director.

2. The fact that each incorporator and first director meet the criteria for eligibility under subsection 13 (2) and section 91, as applicable, and that each first director is not disqualified to be a director under section 92. 1994, c. 11, s. 14 (5).

Where consent required

(6)  If a person who is not an incorporator is named in the articles as a first director, his or her consent to act as a first director must accompany the articles. 1994, c. 11, s. 14 (6).

Form of consent

(7)  The consent must be in a form approved by the Superintendent. 1994, c. 11, s. 14 (7); 1997, c. 28, s. 53.

Application for incorporation

15.  (1)  An application to incorporate a credit union may be made by sending to the Superintendent two copies of the proposed articles of incorporation and the proposed by-laws of the credit union and paying the application fee established by the Minister. 2007, c. 7, Sched. 7, s. 8 (1).

Inquiry before incorporation

(2)  The Superintendent shall inquire into the circumstances, sufficiency and regularity of the articles and by-laws and may do any of the following before issuing a certificate of incorporation:

1. Require the incorporators to provide such additional information as the Superintendent considers relevant to the application.

2. Require any matter set out in the articles or by-laws or in the additional information provided to the Superintendent to be verified under oath.

3. Require the articles or by-laws to be amended if the Superintendent considers that they are inconsistent with this Act or the regulations. 1994, c. 11, s. 15 (2); 1997, c. 28, s. 53; 2007, c. 7, Sched. 7, s. 8 (2).

Certificate of incorporation

16.  (1)  Subject to subsection (2), the Superintendent shall issue a certificate of incorporation to the incorporators. 2007, c. 7, Sched. 7, s. 9 (1).

Grounds for refusing certificate

(2)  The Superintendent shall not issue a certificate of incorporation if the articles do not meet the requirements of section 14 or 15 or if the incorporators do not satisfy the Superintendent of the following matters:

1. The plans for the conduct and development of the business of the credit union are feasible and sound.

2. The credit union will be operated in accordance with co-operative principles.

3. The credit union will be operated in such a way that deposits will be safeguarded without the likelihood of a claim against the Corporation.

4. The credit union will be operated responsibly by individuals who, by virtue of their character, competence and experience, are suited to operating a financial institution.

5. The incorporation of the credit union will serve the best interests of the co-operative financial system in Ontario. 1994, c. 11, s. 16 (2); 2007, c. 7, Sched. 7, s. 9 (2, 3).

Effect of certificate

17.  (1)  A certificate of incorporation is conclusive proof that the incorporators have complied with all conditions precedent to incorporating a credit union and that the credit union was incorporated under this Act on the date set out in the certificate.

Exception

(2)  Subsection (1) does not apply in a proceeding under section 301. 1994, c. 11, s. 17.

Refusal of certificate

18.  If the Superintendent decides, after giving the applicants for incorporation an opportunity to make written submissions, not to issue a certificate of incorporation, he or she shall notify the incorporators, in writing, and set out the reasons for the decision. 2007, c. 7, Sched. 7, s. 10.

Language and form of corporate name

19.  (1)  The corporate name of a credit union must be in the language and form authorized in the articles and approved by the Superintendent. 2007, c. 7, Sched. 7, s. 10.

Use of “credit union”

(2)  Subject to subsections (3) and (4), the corporate name of a credit union must include the words “credit union” or “caisse populaire”. 2007, c. 7, Sched. 7, s. 10.

Use of “caisse populaire”

(3)  Only a corporation incorporated under this Act or a predecessor of this Act that provides financial services to its members and promotes the interests of the French-speaking community in Ontario by providing management and democratic control in French may include “caisse populaire” in its corporate name, and all other corporations incorporated under this Act or a predecessor of this Act shall include “credit union” in their corporate names. 2007, c. 7, Sched. 7, s. 10.

Use of “Limited”, etc.

(4)  The corporate name of a credit union must have at the end of it one of the following: “Limited”, “Ltd”, “Limitée”, “Ltée”, “incorporated”, “incorporée” or “Inc”. 2007, c. 7, Sched. 7, s. 10.

Use of other name

19.1  (1)  A credit union shall not carry on business under or identify itself by a name other than its corporate name unless the Superintendent has approved that name. 2007, c. 7, Sched. 7, s. 11.

Restriction on approval

(2)  The Superintendent shall not approve a name under subsection (1),

(a) if the name includes “credit union” or “caisse populaire”, unless the name is derived from the credit union’s corporate name; or

(b) if the name would be precluded as a corporate name under section 21. 2007, c. 7, Sched. 7, s. 11.

Corporate name to be used in all documents

(3)  A credit union shall set out its corporate name in legible characters in all documents that evidence rights or obligations with respect to other parties (including contracts, invoices and negotiable instruments) and that are issued or made by or on behalf of the credit union. 1999, c. 12, Sched. I, s. 2 (2).

Prohibition, use of “credit union”, “caisse populaire”

20.  No person, other than a credit union or prescribed person or entity, shall carry on business using a name in which “credit union” or “caisse populaire” is used. 2007, c. 7, Sched. 7, s. 12.

Restrictions re corporate names

21.  (1)  A credit union may not be incorporated under this Act with a corporate name that,

(a) is prohibited under an Act of the Parliament of Canada or a province or territory of Canada;

(b) does not meet the prescribed requirements;

(c) is reserved under section 22 for another credit union;

(d) is the same as or confusingly similar to any existing trade-mark or trade name or corporate name of a body corporate;

(e) is the same as or confusingly similar to the known name under or by which another entity carries on business or is identified;

(f) contains a word or phrase that indicates or suggests that it is incorporated for any object other than one set out in its articles; or

(g) is deceptively misdescriptive. 1994, c. 11, s. 21 (1); 2007, c. 7, Sched. 7, s. 13 (1).

Exception re trade-marks, etc.

(2)  Clause (1) (d) does not apply if the Superintendent is satisfied that,

(a) the trade-mark or trade name is being changed or the body corporate is being dissolved or is changing its corporate name; and

(b) in the case of a corporate name, there is consent to the use of the corporate name. 1994, c. 11, s. 21 (2); 1997, c. 28, s. 53.

Exception for affiliates

(3)  Clauses (1) (d) and (e) do not apply with respect to a credit union that is affiliated with another entity if the Superintendent is satisfied that the entity consents to it having a corporate name substantially similar to the entity’s name. 2007, c. 7, Sched. 7, s. 13 (2).

Change of corporate name

(4)  If a credit union has acquired a corporate name contrary to subsection (1), the Superintendent may, by order, issue a certificate of amendment to the articles changing the name of the credit union. 2007, c. 7, Sched. 7, s. 13 (2).

Procedural rules

(5)  Section 240.1 applies with respect to an order under subsection (4). 2007, c. 7, Sched. 7, s. 13 (2).

Reserving a corporate name

22.  (1)  A person may reserve a corporate name for a period of up to 90 days by making an application to the Superintendent and paying the fee established by the Minister. 2007, c. 7, Sched. 7, s. 14.

Effect of reservation

(2)  During the period that the corporate name is reserved, a body corporate is not entitled to acquire the name or a similar name without the written consent of the person for whose use and benefit the name is reserved. 2007, c. 7, Sched. 7, s. 14.

Renewal of reservation of corporate name

(3)  Within 30 days before the expiry of the reservation of a corporate name under subsection (1), the person who reserved the name may apply for a renewal of the reservation for a further period of not more than 90 days by submitting an application for the renewal to the Superintendent and paying the fee established by the Minister. 2007, c. 7, Sched. 7, s. 14.

Corporate seal

22.1  A credit union may, but need not, have a corporate seal. 2007, c. 7, Sched. 7, s. 14.

Location of head office

23.  (1)  A credit union shall have its head office in Ontario at the place indicated in its articles.

Change

(2)  A credit union may by articles of amendment change the location of its head office to another place in Ontario. 1994, c. 11, s. 23.

Objects and Powers

Objects

24.  (1)  The object of a credit union is to provide on a co-operative basis financial services primarily for its members. 1994, c. 11, s. 24 (1).

Co-operative basis

(2)  A credit union shall operate on a co-operative basis such that,

(a) membership is voluntary and is open to those that fall within its bond of association;

(b) its business is carried on primarily for the benefit of its members;

(c) the net income that accrues from its business is,

(i) used to provide services for its members,

(ii) used to develop its business,

(iii) used to increase its reserves or retained earnings,

(iv) distributed to its members and shareholders, or

(v) used for another purpose approved by the members; and

(d) each member has only one vote at its general meetings or in respect of elections of its directors. 1994, c. 11, s. 24 (2); 2007, c. 7, Sched. 7, s. 15 (1).

Exception

(3)  Clause (2) (d) does not prevent a member from voting as a proxy holder as allowed under section 217.3. 2007, c. 7, Sched. 7, s. 15 (2).

Powers

25.  (1)  A credit union has the capacity of a natural person and, subject to this Act, the rights, powers and privileges of a natural person.

Powers outside Ontario

(2)  A credit union may exercise its powers outside of Ontario to the extent permitted under the laws of the applicable jurisdiction.

Extra-provincial powers

(3)  A credit union may accept extra-provincial powers and rights. 1994, c. 11, s. 25.

Acting outside powers

26.  (1)  No act of a credit union and no transfer of real or personal property to or by a credit union before or after this section comes into force, that is otherwise lawful, is invalid because the credit union was without capacity or power to do the act or make or receive the transfer, but a lack of capacity or power may be asserted,

(a) in a proceeding against the credit union by a member under subsection (2);

(b) in a proceeding by the credit union, whether acting directly or through a receiver, liquidator, trustee or their legal representative or through members in a representative capacity, against a director or officer or former director or officer of the credit union; or

(c) as a cause for the cancellation of the certificate of incorporation of the credit union.

Restraining order

(2)  A member of a credit union may apply to court for an order restraining the credit union from doing any act on the ground that the credit union lacks capacity to do so.

Granting order

(3)  Subject to subsection (4), the court may, if it considers it to be just and equitable, grant the order.

Where contract

(4)  If the act or transfer that the member seeks to restrain is to be done under a contract to which the credit union is a party,

(a) all the parties to the contract are parties to the proceedings;

(b) the court may,

(i) grant the order and set aside the contract, and

(ii) award compensation to the credit union or other parties to the contract for any damages or loss, other than anticipated profits from the contract, sustained by them because the order is granted and the contract is set aside. 1994, c. 11, s. 26.

Miscellaneous

Indoor management rule

27.  (1)  A credit union or a guarantor of an obligation of one shall not assert against a person dealing with the credit union or with a person who has acquired rights from the credit union any of the following matters:

1. The articles or by-laws have not been complied with.

2. The individuals named in the most recent notice filed under the Corporations Information Act or named in the articles, whichever is more current, are not the directors of the credit union.

3. The location of its head office indicated in a notice filed under the Corporations Information Act, as named in the by-laws, or named in the articles, whichever is more current, is not the head office of the credit union.

4. A person held out by the credit union as a director, officer or agent has not been duly appointed or does not have authority to exercise the powers and perform the duties that are customary in the business of the credit union or usual for the director, officer or agent.

5. A document issued by a director, officer or agent of the credit union with actual or usual authority to issue the document is not valid or not genuine.

6. Financial assistance was not authorized.

7. The sale, lease, exchange or disposition of property of the credit union was not authorized under section 204.

Exception

(2)  Subsection (1) does not apply if the person has or ought to have knowledge of the matter by virtue of his, her or its position with or relationship to the credit union. 1994, c. 11, s. 27 (1, 2).

No deemed notice

(3)  No person is affected by or is deemed to have knowledge of the contents of a document concerning a credit union by reason only that the document has been filed with the Superintendent or is available for inspection at an office of the credit union. 1994, c. 11, s. 27 (3); 1997, c. 28, s. 53.

Financial years

27.1  (1)  The financial year of a credit union must end on December 31. 2007, c. 7, Sched. 7, s. 16.

Existing financial years with different year ends

(2)  The following apply if, on the day this section comes into force, a credit union’s financial year ends on a date other than December 31:

1. The credit union’s financial year need not be changed.

2. If the credit union’s financial year is changed, it must be changed so that it ends on December 31. 2007, c. 7, Sched. 7, s. 16.

Special rule not to apply to amalgamated credit unions

(3)  Subsection (2) does not apply to a credit union formed by the amalgamation of two or more credit unions after the day this section comes into force; in such a case, the financial year of the amalgamated credit union must end on December 31. 2007, c. 7, Sched. 7, s. 16.

Corporations Act not to apply

27.2  The Corporations Act does not apply to credit unions. 2007, c. 7, Sched. 7, s. 16.

PART IV
MEMBERSHIP

Who May Be Member

Membership

28.  (1)  Membership in a credit union is governed by the credit union’s by-laws, subject to the provisions of this Act and the credit union’s articles. 2007, c. 7, Sched. 7, s. 17.

Minimum membership shares required

(2)  To be a member, a person or entity must hold the minimum number of membership shares required under the by-laws of the credit union. 2007, c. 7, Sched. 7, s. 17.

Member who ceases to hold the minimum

(3)  A member who ceases to hold enough shares to be a member shall, nonetheless, continue to be a member of the credit union for the purposes of this Act, subject to any limitations in the by-laws of the credit union, including limitations on the rights that member may exercise. 2007, c. 7, Sched. 7, s. 17.

Ground for expulsion

(4)  For greater certainty, subsection (3) does not prevent holding fewer than the minimum number of shares from being set out in the by-laws of the credit union as a ground for expulsion under subsection 47 (1). 2007, c. 7, Sched. 7, s. 17.

Becoming a member

29.  (1)  Each incorporator of a credit union who has subscribed for a membership share in the credit union becomes a member upon the effective date of incorporation.

Subscription deemed application

(2)  A subscription for the number of membership shares in a credit union required by the by-laws of the credit union constitutes an application for membership and the issue of a membership share to the applicant constitutes admission to membership.

Applicants for membership

(3)  Subject to subsection (1), no person shall become a member of a credit union until the person’s application for membership has been approved by the board or an employee authorized by the board and the applicant has complied fully with the by-laws governing admission of members. 1994, c. 11, s. 29.

Limitation on membership

30.  (1)  The by-laws of every credit union shall provide that the membership of the credit union is limited to persons, related persons and entities who come within a bond of association and shall specify the nature of the bond of association. 2007, c. 7, Sched. 7, s. 18 (1).

(2)  Repealed: 2007, c. 7, Sched. 7, s. 18 (1).

Exception

(3)  Despite subsection (1), the by-laws may provide that an employee of a credit union may become a member. 1994, c. 11, s. 30 (3).

(4)-(7)  Repealed: 2007, c. 7, Sched. 7, s. 18 (2).

Admissions outside bond of association

31.  (1)  If the credit union’s by-laws permit it to do so, the board may admit, as a member of the credit union, any person or entity who does not come within the bond of association in the following circumstances:

1. The number of members who do not come within the bond of association does not exceed 3 per cent of the number of members in the credit union.

2. The admission of specific members who do not come within the bond of association is approved by the board.

3. Members who do not come within the bond of association must be identified as such in the register under section 230. 1994, c. 11, s. 31 (1); 2007, c. 7, Sched. 7, s. 19.

Same

(2)  A person or entity admitted as a member who does not come within the bond of association has all the rights and obligations of membership. 1994, c. 11, s. 31 (2).

Retaining membership

32.  (1)  If authorized by the by-laws, a member who no longer falls within the bond of association may retain membership in the credit union.

Exception

(2)  Section 31 does not apply to members who retain their membership under subsection (1). 1994, c. 11, s. 32.

Record, information relating to membership

33.  (1)  Every person or entity whose name is registered in the register under section 230 is entitled to,

(a) a record specifying the amount paid upon membership shares, deposits and loans by the person or entity; and

(b) such other information as may be prescribed by the by-laws of the credit union. 1994, c. 11, s. 33 (1); 2007, c. 7, Sched. 7, s. 20.

Same

(2)  The record referred to in clause (1) (a) is admissible in evidence as proof, in the absence of evidence to the contrary, of membership and of the information entered therein. 1994, c. 11, s. 33 (2).

Corporate and partnership members

34.  Her Majesty the Queen in right of Ontario or in right of Canada or a corporation including a municipality as defined in the Municipal Affairs Act, an unincorporated association or a partnership registered under the Business Names Act or a predecessor thereof may become a member of a credit union on such conditions as are prescribed. 1994, c. 11, s. 34.

35., 36.  Repealed: 2007, c. 7, Sched. 7, s. 21.

Rights and Liabilities

Liability of members

37.  The members of a credit union are not, by reason only of holding membership shares of a credit union, liable for any liability, act or default of the credit union except as otherwise provided by this Act. 1994, c. 11, s. 37.

Not bound by trust

38.  (1)  A credit union is not bound to see to the execution of any trust to which any membership share is subject. 2007, c. 7, Sched. 7, s. 22.

Application

(2)  Subsection (1) applies whether the trust is express, implied or constructive. 2007, c. 7, Sched. 7, s. 22.

Trusts for named beneficiaries

39.  (1)  A credit union may accept deposits from a member in trust for a named beneficiary only if,

(a) the member holds, in trust for the beneficiary, the minimum number of membership shares required under subsection 28 (2);

(b) the member and the beneficiary are related persons;

(c) the deposits are money the member is required to hold in accordance with subsection 57 (1) of the Law Society Act; or

(d) the deposits are required or governed under an Act and are prescribed for the purposes of this clause. 2007, c. 7, Sched. 7, s. 22.

Deposit is separate for deposit insurance purposes

(2)  A deposit of a member in trust for a named beneficiary shall be deemed, for the purpose of paragraph 2 of subsection 270 (2), to be a deposit separate from any other deposit of the member. 2007, c. 7, Sched. 7, s. 22.

Exercise of rights of membership shares held in trust

(3)  The following apply with respect to membership shares held by a member in trust for a beneficiary:

1. The member shall exercise the rights attached to the shares, subject to paragraph 2.

2. At a meeting of members, the member does not have an additional vote as a result of holding the membership shares in trust. 2007, c. 7, Sched. 7, s. 22.

Disclosure of beneficiary

(4)  The member shall disclose to the credit union such personal information concerning the beneficiary as the credit union requires to comply with all applicable laws. 2007, c. 7, Sched. 7, s. 22.

Failure to disclose

(5)  A credit union may refuse to accept or maintain a deposit made by a member in trust for a named beneficiary if the member refuses or fails to provide the information referred to in subsection (4). 2007, c. 7, Sched. 7, s. 22.

Joint accounts

40.  Two or more members may hold their membership shares and deposits in a joint account and, in the absence of written notice to the contrary, payment by the credit union to any of the members or to the survivor or any of the survivors of the members of any money standing to the credit of the joint share or deposit account discharges the credit union from any further liability for such payment. 1994, c. 11, s. 40.

Members under the age of 18 years

41.  If permitted by the by-laws of a credit union, a person under the age of 18 years may be a member of the credit union, subject to such conditions and restrictions as may be set out in the by-laws. 2007, c. 7, Sched. 7, s. 23.

Death, etc.

Limited payment re deceased member

42.  (1)  If a member of a credit union dies and the credit union makes a payment of an amount described in subsection (2) to such person as the credit union is satisfied is entitled to receive the amount, the payment discharges any obligation of the credit union and its board in respect of and to the extent of the amount paid even if the payment is made without letters probate or letters of administration being taken out. 2007, c. 7, Sched. 7, s. 24.

Type of payments

(2)  The payment referred to in subsection (1) is a payment of the following:

1. An amount not exceeding the prescribed amount payable from the amount on deposit in the name of the deceased or in consideration for the membership shares of the deceased.

2. An amount not exceeding the prescribed amount payable from any money that is received by the credit union under any policy of insurance on the life of the deceased. 2007, c. 7, Sched. 7, s. 24.

Restrictions

(3)  Subsection (1) applies only if the credit union pays the amount in good faith and the credit union receives, before the payment,

(a) a statutory declaration attesting to the person’s entitlement to receive the amount; or

(b) such other evidence of the person’s entitlement to the amount as the credit union considers to be appropriate in the circumstances. 2007, c. 7, Sched. 7, s. 24.

Credit union can require more

(4)  Nothing in this section prevents the credit union from requiring additional documentation or evidence as the credit union considers appropriate. 2007, c. 7, Sched. 7, s. 24.

Recovery from recipient

(5)  Subsection (1) does not affect any right of a person claiming to be entitled to recover the amount from the person to whom it was paid. 2007, c. 7, Sched. 7, s. 24.

No limit on other powers, requirements

(6)  For greater certainty, this section does not prevent a credit union from making a payment or transfer as otherwise allowed or required by law. 2007, c. 7, Sched. 7, s. 24.

If deceased member was trustee

(7)  If a member of a credit union dies holding membership shares or money on deposit in trust for a named beneficiary, the credit union may pay the amount of, or transfer, the membership shares or deposit and any interest or dividends on them,

(a) to the executor or administrator of the estate of the deceased member; or

(b) to the beneficiary if there is no executor or administrator of the estate of the deceased member or, if the beneficiary is a minor, to the beneficiary’s parent or guardian. 2007, c. 7, Sched. 7, s. 24.

43.  Repealed: 2007, c. 7, Sched. 7, s. 24.

Liens

Lien for liability

44.  (1)  A credit union has a lien on the deposits and membership shares of a member for any liability to it by the member, and may set off any sum standing to the credit of the member on the books of the credit union towards the payment of the liability. 2007, c. 7, Sched. 7, s. 25.

Limitation, member’s share account

(2)  Despite subsection (1), a credit union shall not apply any service charges or other deductions against a member’s share account except upon the termination of the membership. 2007, c. 7, Sched. 7, s. 25.

45.  Repealed: 2007, c. 7, Sched. 7, s. 25.

Withdrawals and Expulsions

Withdrawal of members

46.  (1)  A member of a credit union may withdraw from the credit union at any time by giving notice in accordance with the by-laws. 1994, c. 11, s. 46 (1).

Same

(2)  A deceased member shall be deemed to have given notice to the credit union of intention to withdraw on the day of his or her death. 1994, c. 11, s. 46 (2).

Rights of withdrawing member

(3)  The by-laws of a credit union shall set out the rights of a withdrawing member which shall include the right to receive payment for the member’s membership shares, subject to subsection 62 (3), and the return of any money on deposit and property held by the credit union. 2007, c. 7, Sched. 7, s. 26.

Expulsion of members

47.  (1)  A member of a credit union may be expelled from membership, in accordance with the by-laws, by a resolution of the board on the grounds set out in the by-laws. 2007, c. 7, Sched. 7, s. 27 (1).

Member rights relating to expulsion

(2)  The by-laws of a credit union shall provide for the following rights:

1. The right of a member to receive advance notice of any meeting of the board at which the board will consider a resolution to expel the member.

2. The right of the member not to be expelled without being given an opportunity to appear at the meeting of the board to make submissions and to be represented at the meeting by a person authorized under the Law Society Act to represent the member.

3. The right of an expelled member to appeal the decision of the board at the next general meeting of the members.

4. The right of the expelled member to be reinstated as a member of the credit union if, at the next general meeting, the members, by a majority of the votes cast at the meeting, set aside the resolution of the board.

5. The right of the expelled member to receive payment for the member’s membership shares, subject to subsection 62 (3), and the return of any money on deposit and property held by the credit union. 2007, c. 7, Sched. 7, s. 27.

Procedures to be set out in by-laws

(3)  The by-laws of a credit union shall set out the following:

1. The procedures to be followed by the board to provide the advance notice referred to in paragraph 1 of subsection (2).

2. The procedures to be followed relating to the appeal referred to in paragraph 3 of subsection (2). 2007, c. 7, Sched. 7, s. 27 (1).

Notice of decision

(4)  If the board passes a resolution expelling a member, the credit union shall, within five days after the resolution is passed, notify the member of the decision of the board by registered letter addressed to the member at the member’s last known address. 2007, c. 7, Sched. 7, s. 27 (1).

48., 49.  Repealed: 2007, c. 7, Sched. 7, s. 27 (1).

Representative Actions by Members

Members may maintain representative actions

50.  (1)  Subject to subsection (2), a member of a credit union may maintain an action in a court of competent jurisdiction in a representative capacity for the member and all other members of the credit union suing for and on behalf of the credit union to enforce any right, duty or obligation owed to the credit union under this Act or under any other statute or rule of law or equity that could be enforced by the credit union itself, or to obtain damages for any breach of any such right, duty or obligation.

Court order required

(2)  An action under subsection (1) shall not be started until the member has obtained an order of the court permitting the start of the action.

Application to court

(3)  A member may, upon at least seven days notice to the credit union, apply to the court for an order referred to in subsection (2).

Court order

(4)  The court may make the order upon such conditions as the court thinks fit if the court is satisfied that,

(a) the member was a member of the credit union at the time of the transaction or other event giving rise to the cause of action;

(b) the member has made reasonable efforts to cause the credit union to start or prosecute diligently the action on its own behalf; and

(c) the member is acting in good faith and it is apparently in the interests of the credit union or its members that the action be started.

Costs

(5)  At any time while an action started under this section is pending, the plaintiff may apply to the court for an order for the payment to the plaintiff by the credit union of reasonable interim costs, including solicitor’s and counsel fees and disbursements.

Accountability for costs

(6)  The plaintiff is accountable to the credit union for the interim costs if the action is dismissed on final disposition at the trial or on appeal.

Action, court approval

(7)  An action started under this section shall not be discontinued, settled or dismissed for want of prosecution without the approval of the court.

Same

(8)  If the court determines that the interests of the members or any class of members may be substantially affected by a discontinuance, settlement or dismissal, the court, may direct that notice in manner, form and content satisfactory to the court shall be given, at the expense of the credit union or any other party to the action as the court directs, to the members or class of members whose interests the court determines may be affected. 1994, c. 11, s. 50.

PART V
CAPITAL STRUCTURE

Shares

Classes of shares

51.  (1)  The articles of a credit union must provide for a class of shares known as membership shares and may provide for additional classes of shares, including patronage shares referred to in section 53. 2007, c. 7, Sched. 7, s. 29.

Nature of shares

(2)  The shares of a credit union are personal property. 2007, c. 7, Sched. 7, s. 29.

Form

(3)  The shares of a credit union are without nominal or par value and, if they are not membership shares or patronage shares, must be in registered form. 2007, c. 7, Sched. 7, s. 29.

Membership shares

52.  (1)  Membership shares confer on the holder the right to receive dividends declared on the shares and to receive the remaining property of the credit union on dissolution. 2007, c. 7, Sched. 7, s. 30.

Number of shares that member can hold

(2)  Subject to any prescribed limit or limit set out in the by-laws of the credit union, a member may hold more than the minimum number of membership shares required under subsection 28 (2) to be a member. 2007, c. 7, Sched. 7, s. 30.

Transfer prohibited

(3)  The holder of a membership share may not transfer an interest in the share to a person other than the credit union or another credit union and any transaction that purports to make such a transfer is void. 2007, c. 7, Sched. 7, s. 30.

(4)  Repealed: 2007, c. 7, Sched. 7, s. 30.

Certificates not mandatory

(5)  The by-laws of a credit union may provide that membership share certificates need not be issued but, if this is the case, the credit union shall give each member who requests one a statement of the number of membership shares held by the member. 1994, c. 11, s. 52 (5).

Certificates

(6)  Membership share certificates issued after this subsection comes into force must include such information as may be prescribed. 1994, c. 11, s. 52 (6).

Patronage shares

53.  (1)  The articles of a credit union may provide for a class of shares known as patronage shares to be payable to members as a dividend under section 65 or as a patronage return under section 66. 2007, c. 7, Sched. 7, s. 31.

Nature of share

(2)  A patronage share does not confer on the holder the right to vote at meetings of the members of the credit union, the right to notice of any meeting of members of the credit union, the right to receive dividends or the right to receive the remaining property of the credit union on dissolution. 2007, c. 7, Sched. 7, s. 31.

Transfer prohibited

(3)  The holder of a patronage share may not transfer an interest in the share to a person other than the credit union or another credit union and any transaction that purports to make such a transfer is void. 2007, c. 7, Sched. 7, s. 31.

Rights of classes

53.1  (1)  For each class of shares, the articles must set out,

(a) the rights, privileges, restrictions and conditions attaching to the shares of the class; and

(b) the maximum number, if any, of shares of the class that the credit union is authorized to issue. 2007, c. 7, Sched. 7, s. 31.

Restrictions

(2)  Shares, other than membership shares, do not confer on their holder the right to vote at meetings of the members of the credit union except as permitted under this Act or the right to receive any of the remaining property of the credit union on dissolution. 2007, c. 7, Sched. 7, s. 31.

Shares in series

54.  (1)  The articles of a credit union may authorize the issue of any class of shares, other than membership shares, in one or more series and may fix the number of shares in, and set out the designation, rights, privileges, restrictions and conditions attaching to the shares of each series. 1994, c. 11, s. 54 (1); 2007, c. 7, Sched. 7, s. 32 (1).

Same

(2)  The articles may authorize the board to fix the maximum number, if any, of shares in each series and to determine the designation, rights, privileges, restrictions and conditions attaching to the shares of each series, subject to the limitations set out in the articles and the limitations under this Act. 1994, c. 11, s. 54 (2); 2007, c. 7, Sched. 7, s. 32 (2).

Series participation

(3)  If any cumulative dividend or amounts payable on return of capital in respect of a series of shares are not paid in full, the shares of all series of the same class participate rateably in respect of accumulated dividends and return of capital. 1994, c. 11, s. 54 (3).

Voting rights

(4)  If voting rights are attached to any series of a class of shares, the shares of every other series of that class have the same voting rights. 1994, c. 11, s. 54 (4).

Restriction on series

(5)  No rights, privileges, restrictions or conditions attached to a series of shares confer on the series a priority in respect of dividends or return of capital over any other series of shares of the same class that are then outstanding. 1994, c. 11, s. 54 (5).

Information to Superintendent

(6)  Before issuing shares in series, the credit union must file with the Superintendent articles of amendment designating the series and setting out the rights, privileges, restrictions and conditions attaching to the shares. 2007, c. 7, Sched. 7, s. 32 (3).

(7)  Repealed: 2007, c. 7, Sched. 7, s. 32 (3).

55.  Repealed: 2007, c. 7, Sched. 7, s. 33.

Pre-emptive right

56.  (1)  If the articles so provide, a credit union shall not issue shares of a class, other than membership shares or patronage shares, unless the shares have first been offered to shareholders holding shares of that class. 1994, c. 11, s. 56 (1); 2007, c. 7, Sched. 7, s. 34.

Same

(2)  Those shareholders have a pre-emptive right to acquire the offered shares in proportion to their holdings of the shares of that class, at the same price and on the same conditions as the shares are to be offered to others. 1994, c. 11, s. 56 (2).

Exception

(3)  A shareholder has no pre-emptive right in respect of shares that are to be issued,

(a) as a share dividend; or

(b) pursuant to the exercise of conversion privileges, options or rights previously granted by the credit union. 1994, c. 11, s. 56 (3).

Same

(4)  A shareholder has no pre-emptive right in respect of shares that are to be issued,

(a) if the issuance of shares to the shareholder is prohibited under this Act; or

(b) if, to the knowledge of the board, the offer of shares to a shareholder whose recorded address is outside Ontario ought not to be made unless the appropriate authority in that jurisdiction is provided with information in addition to that submitted to the shareholders at the most recent annual meeting. 1994, c. 11, s. 56 (4).

Conversion privileges

57.  (1)  A credit union may issue conversion privileges, options or rights to acquire its securities, other than membership shares or patronage shares, and shall set out the applicable conditions,

(a) in the documents that evidence the conversion privileges, options or rights; or

(b) in the securities to which the conversion privileges, options or rights are attached. 1994, c. 11, s. 57 (1); 2007, c. 7, Sched. 7, s. 35.

Transferable rights

(2)  Conversion privileges, options and rights to acquire securities of a credit union may be made transferable or non-transferable, and options and rights to acquire such securities may be made separable or inseparable from the securities to which they are attached. 1994, c. 11, s. 57 (2).

Reserved shares

(3)  If a credit union has granted privileges to convert its securities into shares or into shares of another class or series, or has issued or granted options or rights to acquire shares, and if the articles limit the number of authorized shares, the credit union shall reserve and continue to reserve sufficient authorized shares to meet the exercise of the conversion privileges, options and rights. 1994, c. 11, s. 57 (3).

Issuing Shares

Power to issue shares

58.  (1)  A credit union may issue shares at such times, to such persons and for such consideration as the board may determine.

Restrictions re shares

(2)  A credit union may issue shares only in accordance with this Act and the articles and by-laws of the credit union. 1994, c. 11, s. 58.

Consideration

59.  (1)  A credit union shall not issue any share other than a patronage share until the credit union has received full payment for it in cash or, with the approval of the Superintendent, in property. 1994, c. 11, s. 59 (1); 1997, c. 28, s. 53; 2007, c. 7, Sched. 7, s. 36 (1).

Exception for certain asset purchases

(1.1)  Subsection (1) does not apply to the issue of shares by a credit union if the issue is part of a transaction in which the credit union (the “purchaser credit union”) acquires the assets of another credit union (the “vendor credit union”) and, as part of that transaction, shareholders of the vendor credit union are to be issued with shares of the purchaser credit union. 2007, c. 7, Sched. 7, s. 36 (2).

Prohibition re commission

(2)  No person shall charge or accept payment of a commission on the purchase or sale of a membership share of a credit union. 1994, c. 11, s. 59 (2).

(3)  Repealed: 2007, c. 7, Sched. 7, s. 36 (3).

Shares non-assessable

60.  Shares issued by a credit union are non-assessable and no person is liable to the credit union or to its creditors in respect of the person’s shares. 1994, c. 11, s. 60; 2007, c. 7, Sched. 7, s. 37.

Redemption and Cancellation of Shares

Holding own shares

61.  (1)  Except as permitted under this Act or prescribed by regulation, a credit union shall not,

(a) hold shares of the credit union;

(b) permit a subsidiary to hold a greater number of membership shares than the minimum number required for membership in the credit union; or

(c) permit a subsidiary to hold any other shares of the credit union.

Holding as personal representative

(2)  A credit union may hold its shares in the capacity of a personal representative and may permit a subsidiary to do so, but only if neither the credit union nor any subsidiary has a beneficial interest in the shares. 1994, c. 11, s. 61 (1, 2).

Security interest

(3)  A credit union may hold its shares by way of a security interest and may permit a subsidiary to do so if the security interest is nominal or immaterial when measured by criteria established by the credit union that have been approved in writing by the Superintendent. 1994, c. 11, s. 61 (3); 1997, c. 28, s. 53.

Transitional provision

(4)  Nothing in this section precludes a credit union or any of its subsidiaries from holding a security interest held immediately before this Part comes into force.

Exception

(5)  Section 28 of the Business Corporations Act does not apply to prevent a subsidiary of a credit union from holding membership shares in a credit union that is its holding body corporate. 1994, c. 11, s. 61 (4, 5).

Purchase and redemption of shares

62.  (1)  A credit union may purchase or redeem its shares only in accordance with this section and the articles and by-laws of the credit union. 2007, c. 7, Sched. 7, s. 38.

Same

(2)  A credit union may purchase, for the purpose of cancellation, any of its shares or redeem any of its redeemable shares at a price not exceeding the redemption price of the share calculated according to a formula stated in its articles or, in the case of shares other than membership shares, according to the conditions attaching to the shares. 1994, c. 11, s. 62 (2).

Restrictions

(3)  A credit union shall not make any payment to purchase or redeem its shares if there are reasonable grounds for believing that the credit union is, or the payment would cause it to be, in contravention of section 84. 1994, c. 11, s. 62 (3).

Donations

(4)  A credit union may accept a share surrendered to it as a gift but may not extinguish or reduce a liability in respect of an amount unpaid on the share except in accordance with section 72. 1994, c. 11, s. 62 (4).

Cancellation of shares

63.  A credit union shall cancel its shares or fractions of its shares that it has purchased, redeemed or otherwise acquired, other than through the realization of security. 2007, c. 7, Sched. 7, s. 39.

Shares acquired through realization of security

64.  (1)  If a credit union acquires any of its shares through the realization of security, the credit union shall sell, cancel or otherwise dispose of them within six months after the day of the realization. 2007, c. 7, Sched. 7, s. 39.

Same

(2)  If a subsidiary of a credit union acquires shares of the credit union through the realization of security, the credit union shall cause the subsidiary to sell or otherwise dispose of them within six months after the day of the realization. 2007, c. 7, Sched. 7, s. 39.

Dividends and Patronage Returns

Declaration of dividend

65.  (1)  The board may declare, subject to the by-laws, and the credit union may pay a dividend. 2007, c. 7, Sched. 7, s. 40.

Form of dividend

(2)  A dividend may be paid,

(a) in cash;

(b) by issuing patronage shares;

(c) by issuing fully paid shares, other than membership shares, or options or rights to acquire fully paid shares, other than membership shares, in any class or series of shares;

(d) in a combination of two or more forms of dividends described in clauses (a), (b) and (c); or

(e) in property, with the approval of the Superintendent. 2007, c. 7, Sched. 7, s. 40.

Declaration of patronage return

66.  (1)  The board may declare, subject to the by-laws, and the credit union may pay, a patronage return to its members in proportion to the business done by each member with or through the credit union. 1994, c. 11, s. 66 (1).

Form of patronage return

(2)  A patronage return may be paid,

(a) in cash;

(b) by issuing patronage shares;

(c) by issuing fully paid shares, other than membership shares, or options or rights to acquire fully paid shares, other than membership shares, in any class or series of shares; or

(d) in a combination of two or more forms of patronage returns described in clauses (a), (b) and (c). 2007, c. 7, Sched. 7, s. 41.

Rebate of interest

(3)  A patronage return may include a rebate of interest paid by members during a financial year in respect of loans from the credit union. 2007, c. 7, Sched. 7, s. 41.

Restriction on dividends, etc.

67.  The board shall not declare, and the credit union shall not pay, a dividend or patronage return if there are reasonable grounds for believing that the credit union is, or the payment would cause it to be, in contravention of section 84. 1994, c. 11, s. 67.

Stated Capital

Stated capital account

68.  (1)  A credit union shall maintain a separate stated capital account for each class and series of shares it issues. 1994, c. 11, s. 68 (1).

Addition to account

(2)  A credit union shall record in the appropriate stated capital account the full amount of any consideration it receives for any shares it issues. 1994, c. 11, s. 68 (2).

(3), (4)  Repealed: 2007, c. 7, Sched. 7, s. 42.

Adjustment due to conversion

69.  (1)  On a conversion of outstanding shares, other than membership shares or patronage shares, of a credit union into shares of another class or series, the credit union shall,

(a) deduct from the stated capital account maintained for the class or series of shares converted an amount equal to the result obtained by multiplying the stated capital of the shares of that class or series by the number of shares of that class or series converted, and dividing by the number of outstanding shares of that class or series immediately before the conversion; and

(b) record the result obtained under clause (a) and any additional consideration received on the conversion in the stated capital account maintained for the class or series of shares into which the shares have been converted. 1994, c. 11, s. 69 (1); 2007, c. 7, Sched. 7, s. 43.

Stated capital of convertible shares

(2)  For the purposes of subsection (1) and subject to the articles, if a credit union issues two classes of shares and there is attached to each class a right to convert a share of one class into a share of the other class and a share is so converted, the amount of stated capital attributable to a share in either class is the aggregate of the stated capital of both classes divided by the number of outstanding shares of both classes immediately before the conversion. 1994, c. 11, s. 69 (2).

Conversion or change of shares

(3)  Shares issued by a credit union and converted into shares of another class or series become issued shares of the class or series into which the shares have been converted. 1994, c. 11, s. 69 (3).

Definition

(4)  In this section,

“conversion” of a share includes a change made under subsection 311 (1) into another class or series. 1994, c. 11, s. 69 (4).

Addition due to debt conversion

70.  On conversion of a debt obligation of a credit union into shares, the credit union shall,

(a) deduct from the liabilities of the credit union the nominal value of the debt obligation; and

(b) record the result obtained under clause (a) and any additional consideration received for the conversion in the stated capital account maintained for the class or series of shares into which the debt obligation has been converted. 1994, c. 11, s. 70.

Reduction due to purchase, etc.

71.  (1)  On a purchase, redemption or other acquisition of shares or fractions of shares by a credit union, the credit union shall deduct from the stated capital account maintained for the applicable class or series of shares an amount equal to the result obtained by multiplying the stated capital in respect of the shares of that class or series by the number of shares purchased, redeemed or acquired and dividing by the number of shares of that class or series outstanding immediately before the purchase, redemption or acquisition.

Exception

(2)  This section does not apply with respect to shares acquired as described in subsection 61 (2) or acquired through the realization of security and sold in accordance with subsection 64 (1). 1994, c. 11, s. 71.

Reduction by special resolution

72.  (1)  The stated capital of a credit union may be reduced by special resolution of the members of the credit union. 2007, c. 7, Sched. 7, s. 44 (1).

Contents of special resolution

(2)  The special resolution must specify each stated capital account to be affected by the reduction. 1994, c. 11, s. 72 (2).

Approval

(3)  The special resolution has no effect until it is approved in writing by the Superintendent. 1994, c. 11, s. 72 (3); 1997, c. 28, s. 53.

Conditions for approval

(4)  The Superintendent may not approve the special resolution unless an application for his or her approval is made within three months after the resolution is passed and a copy of the resolution, together with a notice of intention to apply for approval, has been published in The Ontario Gazette. 1994, c. 11, s. 72 (4); 1997, c. 28, s. 53; 2007, c. 7, Sched. 7, s. 44 (2).

Information

(5)  An application for approval must include such information and documents as the Superintendent may require. 1994, c. 11, s. 72 (5); 1997, c. 28, s. 53.

Restriction

(6)  A credit union shall not reduce its stated capital by special resolution if there are reasonable grounds for believing that the credit union is, or the reduction would cause it to be, in contravention of section 84. 1994, c. 11, s. 72 (6).

Reducing capital account

(7)  A credit union shall adjust its stated capital account or accounts in accordance with any special resolution referred to in subsection (1). 1994, c. 11, s. 72 (7).

Recovery by action

73.  (1)  If money has been paid or property distributed as a consequence of a reduction of capital made contrary to section 72, a creditor of the credit union may apply to a court for an order compelling the member, shareholder or other person to pay the money or deliver the property to the credit union. 1994, c. 11, s. 73 (1).

Shares held by personal representative

(2)  A person holding shares as a personal representative who is registered in the register under section 230 as a member or shareholder and described as the personal representative for a named person is not personally liable under subsection (1), but the named person is liable. 2007, c. 7, Sched. 7, s. 45.

(3)  Repealed: 2002, c. 24, Sched. B, s. 25.

Remedy preserved

(4)  This section does not affect any liability that arises under section 153. 1994, c. 11, s. 73 (4).

Transfer of Securities

Application of Securities Transfer Act, 2006

74.  The Securities Transfer Act, 2006 applies, with necessary modifications, with respect to the transfer of securities, other than membership shares or patronage shares. 2006, c. 8, s. 142; 2007, c. 7, Sched. 7, s. 46.

Restrictions on transfer of securities

74.1  (1)  A security issued under circumstances described in clause 75 (1) (a) shall not be transferred except to another member of the credit union or to a prescribed person. 2007, c. 7, Sched. 7, s. 47.

Same

(2)  The transfer of a security that is permitted under subsection (1) shall be made in the prescribed manner and subject to the prescribed conditions. 2007, c. 7, Sched. 7, s. 47.

Same

(3)  The transfer of a security that is permitted under subsection (1) is effective when the transfer is recorded in the register under section 230. 2007, c. 7, Sched. 7, s. 47.

Offering Statement

Selling securities

75.  (1)  A credit union may sell its securities to a member or accept from a member, directly or indirectly, consideration for its securities if,

(a) the credit union has obtained a receipt under section 78 for an offering statement respecting the securities and the receipt has not been revoked or expired; or

(b) the credit union has provided the Superintendent with a copy of receipts from the Ontario Securities Commission under the Securities Act for a preliminary prospectus and a prospectus respecting the offering of the securities. 1994, c. 11, s. 75 (1); 1997, c. 28, s. 53.

When Securities Act does not apply

(2)  The Securities Act does not apply to securities sold or disposed of by a credit union pursuant to a receipt, under section 78, for an offering statement. 1994, c. 11, s. 75 (2).

Exception

(3)  Subsection (1) and the Securities Act do not apply with respect to the issuance of,

(a) membership shares;

(b) patronage shares; or

(c) shares under section 65 or 66. 1994, c. 11, s. 75 (3); 2007, c. 7, Sched. 7, s. 48.

Interpretation

(4)  When, in subsection (1), credit union is read to mean league, a member of a league includes a member of a credit union that is a member of the league. 1994, c. 11, s. 75 (4).

Permitted sellers

76.  Securities sold under the circumstances described in clause 75 (1) (a) may be sold by,

(a) the directors, officers and employees of the issuing credit union;

(b) in the case of an issuing league, the directors, officers and employees of the league or of a credit union that is a member of the league; or

(c) a person registered under the Securities Act as a securities dealer, investment dealer or broker. 1994, c. 11, s. 76; 2007, c. 7, Sched. 7, s. 49.

Offering statement

77.  (1)  Application for a receipt for an offering statement is made by filing with the Superintendent a copy of the offering statement and paying the fee established by the Minister. 2007, c. 7, Sched. 7, s. 50 (1).

Contents

(2)  The offering statement must contain such information as may be prescribed. 2007, c. 7, Sched. 7, s. 50 (1).

Standard of disclosure

(3)  The offering statement must provide full, true and plain disclosure of all material facts relating to the securities that the credit union proposes to issue. 1994, c. 11, s. 77 (3).

Certificate

(4)  The offering statement must be accompanied by a disclosure certificate signed by the chair of the board and the chief executive officer, certifying that the offering statement satisfies the requirements of subsections (2) and (3). 2007, c. 7, Sched. 7, s. 50 (2).

Additional material

(5)  The Superintendent may require,

(a) the credit union to provide additional documents, reports and other material; and

(b) that the information contained in the material referred to in clause (a) form part of the offering statement. 1994, c. 11, s. 77 (5); 1997, c. 28, s. 53.

Examination

(6)  Before issuing a receipt, the Superintendent may require the credit union to permit an examination of its affairs, at its own expense, by a person authorized in writing by the Superintendent. 1994, c. 11, s. 77 (6); 1997, c. 28, s. 53.

Receipt for offering statement

78.  (1)  The Superintendent shall issue a receipt for an offering statement unless it appears to him or her that,

(a) the statement or any document accompanying it,

(i) fails to comply in any substantial respect with this Act or the regulations,

(ii) contains any statement, promise, estimate or forecast that is misleading, false or deceptive,

(iii) contains an extract from an opinion or statement of an expert that does not fairly represent the opinion or statement, or

(iv) conceals or omits to state any material facts necessary in order to make any statement contained in the offering statement not misleading in light of the circumstances in which it was made;

(b) the proceeds from the sale of the securities are insufficient, together with the other resources of the credit union, to accomplish the purpose of the issue that is stated in the offering statement; or

(c) it would not be in the public interest to issue a receipt for the offering statement. 1994, c. 11, s. 78 (1); 1997, c. 28, s. 53.

Refusal to issue, revocation

(2)  The Superintendent may refuse to issue or may revoke a receipt for an offering statement in any of the following circumstances:

1. The credit union is in contravention of section 84.

2. The credit union is subject to the supervision of the Corporation or under the administration of the Corporation. 2007, c. 7, Sched. 7, s. 51.

Same

(3)  Before refusing to issue a receipt or revoking a receipt, the Superintendent shall give the applicant an opportunity to make written submissions. 2007, c. 7, Sched. 7, s. 51.

Same

(4)  A decision to refuse to issue a receipt or a decision to revoke a receipt must be given in writing and must include the reasons for the refusal or revocation. 2007, c. 7, Sched. 7, s. 51.

Expiry of receipt

(5)  A receipt for an offering statement expires on the earlier of,

(a) the date that is six months after the day it is issued; and

(b) the date on which the offering of securities contemplated by the offering statement for which the receipt is granted is closed in accordance with the offering statement. 2007, c. 7, Sched. 7, s. 51.

Renewal of receipt

79.  (1)  Application for renewal of the receipt for an offering statement may be made by filing an application with the Superintendent with a copy of the statement and paying the fee established by the Minister. 2007, c. 7, Sched. 7, s. 52.

Time for application

(2)  Application for renewal must be made before the receipt for the offering statement expires. 1994, c. 11, s. 79 (2).

Receipt

(3)  Section 78 applies, with necessary modifications, with respect to the renewal of a receipt. 1994, c. 11, s. 79 (3).

Material change

80.  (1)  If there is a material change in the facts set out in an offering statement, the credit union shall file with the Superintendent,

(a) an amendment to the offering statement, if no receipt has been issued for the statement; or

(b) a statement of material change, if a receipt has been issued for the offering statement and the receipt has not been revoked or expired. 1994, c. 11, s. 80 (1); 1997, c. 28, s. 53.

Time

(2)  The credit union shall give the Superintendent the amendment or statement of material change promptly and, in any event, within ten days after the date on which the material change occurred. 1994, c. 11, s. 80 (2); 1997, c. 28, s. 53.

Notice to persons

(3)  The credit union shall give a copy of the amendment or statement of material change to every person to whom it gave a copy of the offering statement. 1994, c. 11, s. 80 (3).

Replacement statement

(4)  A credit union may, and if requested to do so by the Superintendent, shall file with the Superintendent a new offering statement instead of one or more statements of material change. 1994, c. 11, s. 80 (4); 1997, c. 28, s. 53.

Contents

(5)  Sections 77 and 78 apply with respect to a statement of material change as if it were an offering statement.

Exclusion

(6)  In this section,

“material change” does not include such types of change as may be prescribed. 1994, c. 11, s. 80 (5, 6).

Distribution of statements

81.  (1)  A credit union shall give a copy of an offering statement or statement of material change to each member that requests a copy of one. 1994, c. 11, s. 81 (1).

Same

(2)  A person who offers a security in a credit union for sale shall give a copy of the offering statement and statement of material change, if any, to a prospective purchaser upon request and to a purchaser. 1994, c. 11, s. 81 (2).

Withdrawal from purchase

(3)  An agreement of purchase and sale in respect of securities is not binding on the purchaser if the person from whom the purchaser has agreed to purchase the security receives written notice of the purchaser’s intention not to be bound by the agreement not later than midnight on the second business day after receipt by the purchaser of the latest offering statement and any statement of material change. 2007, c. 7, Sched. 7, s. 53.

Same

(4)  Subsection (3) applies with necessary modifications in respect of a person who is subscribing for securities to be issued by a credit union. 2007, c. 7, Sched. 7, s. 53.

Receipt by fax, etc., considered written notice

(5)  Without limiting how else a written notice may be given, a written notice is considered to be received by a recipient for the purposes of subsection (3) if the recipient receives the notice by facsimile or electronic means. 2007, c. 7, Sched. 7, s. 53.

Business day

(6)  In subsection (3),

“business day” means a day that is not,

(a) Saturday, or

(b) Sunday or any other holiday, other than Easter Monday and Remembrance Day. 2007, c. 7, Sched. 7, s. 53.

Effect of misrepresentation

82.  (1)  If an offering statement or a statement of material change contains a misrepresentation, a purchaser of a security shall be deemed to have relied upon the misrepresentation if it was a misrepresentation when the purchase was made. 1994, c. 11, s. 82 (1).

Exception

(2)  Subsection (1) does not apply if the purchaser knew about the misrepresentation when purchasing the security. 1994, c. 11, s. 82 (2).

Right of action

(3)  The purchaser has a right of action for damages against,

(a) the credit union;

(b) every person, other than an employee of a credit union, who sells the security on behalf of the credit union;

(c) every director of the credit union at the time the offering statement or statement of material change was filed with the Superintendent;

(d) every person whose consent has been filed pursuant to a requirement of the regulations but only with respect to reports, opinions or statements that have been made by them; and

(e) every person who signed the offering statement or statement of material change other than the persons included in clauses (a) to (d). 1994, c. 11, s. 82 (3); 1997, c. 28, s. 53.

Same

(4)  If the purchaser purchased the security from a credit union, the purchaser may elect to exercise a right of rescission against the credit union, in which case the purchaser has no right of action for damages against the credit union. 1994, c. 11, s. 82 (4).

Defence

(5)  A person who signed the disclosure certificate required under subsection 77 (4) or a director is not liable under this section if the person proves one of the following:

1. The offering statement or statement of material change was filed with the Superintendent without the person’s knowledge or consent. As soon as the person became aware that it had been filed with the Superintendent, the person advised the Superintendent that it was filed with the Superintendent without the person’s knowledge or consent.

2. The person was not aware of the misrepresentation when the offering statement or material change statement was filed with the Superintendent. After the receipt for the statement was issued but before the purchaser bought the security, the person immediately after the person became aware of the misrepresentation advised the Superintendent that the person withdrew consent to the filing of the statement with the Superintendent.

3. The person had no reasonable grounds to believe, and did not believe, that there had been a misrepresentation. 1994, c. 11, s. 82 (5); 1997, c. 19, s. 5 (3); 1997, c. 28, s. 53; 1999, c. 12, Sched. I, s. 2 (4); 2007, c. 7, Sched. 7, s. 54.

Interpretation

(6)  In this section,

“misrepresentation” means,

(a) an untrue statement of material fact, or

(b) an omission to state a material fact that is required to be stated or that is necessary to make a statement not misleading in light of the circumstances in which it was made. 1994, c. 11, s. 82 (6).

Restriction on Commission for Purchase or Sale

No commission by directors, officers, employees

83.  None of the following persons shall charge or accept payment of a commission on the purchase or sale of a security of a credit union:

1. The directors, officers and employees of the credit union.

2. The related persons of a director, officer or employee of the credit union.

3. If the credit union is a member of a league, the directors, officers and employees of the league. 2007, c. 7, Sched. 7, s. 55.

PART VI
CAPITAL AND LIQUIDITY

Adequacy of capital and liquidity

84.  (1)  A credit union shall maintain, in relation to its operations, adequate and appropriate forms of capital and liquidity. 1994, c. 11, s. 84 (1).

Same

(2)  A credit union shall comply with the regulations governing adequate capital and liquidity. 1994, c. 11, s. 84 (2).

Forming of groups relating to capital requirements

(3)  Subject to the regulations and with the approval of the Corporation, two or more credit unions may enter into an agreement with a league to form a group for the purposes of assisting the credit unions in satisfying the requirements of this section relating to capital. 2007, c. 7, Sched. 7, s. 56.

Revocation of approval

(4)  The Corporation may, by order, revoke its approval under subsection (3) on a prescribed ground. 2007, c. 7, Sched. 7, s. 56.

Procedural rules

(5)  Section 240.1 applies with respect to an order under subsection (4). 2007, c. 7, Sched. 7, s. 56.

Capital and liquidity policies

85.  (1)  A credit union shall establish capital and liquidity policies for the credit union consistent with the regulations governing adequate capital and liquidity and the credit union shall adhere to those policies. 2007, c. 7, Sched. 7, s. 57.

Policies to be prudent

(2)  The capital and liquidity policies of a credit union shall consist of policies, standards and procedures that a reasonable and prudent person would apply in order to ensure the financial soundness of the credit union, avoid undue risk of loss and obtain a reasonable return. 2007, c. 7, Sched. 7, s. 57.

Approval and review by board

(3)  The capital and liquidity policies of a credit union are subject to the approval of the board and the board shall review the policies at least once each year. 2007, c. 7, Sched. 7, s. 57.

Order if policies inadequate, etc.

(4)  If the Corporation considers the capital and liquidity policies of the credit union to be inadequate or imprudent, the Corporation may order the credit union to amend them in accordance with the order. 2007, c. 7, Sched. 7, s. 57.

Procedural rules

(5)  Section 240.1 applies with respect to an order under this section. 2007, c. 7, Sched. 7, s. 57.

Appeal to Tribunal

(6)  The credit union that is subject to an order under this section may appeal the order to the Tribunal in accordance with section 240.4. 2007, c. 7, Sched. 7, s. 57.

Additional requirements

86.  (1)  The Corporation may order a credit union,

(a) to increase its capital; or

(b) to provide additional liquidity in such forms and amounts as the Corporation may require. 2007, c. 7, Sched. 7, s. 57.

Circumstances

(2)  Despite a credit union’s compliance with the regulations governing adequate capital and liquidity, the Corporation may impose the requirements set out in subsection (1),

(a) if there are reasonable grounds to believe that the credit union is not complying with the requirements of this Act and the regulations concerning the management of risk in making loans and investments and in the general management of credit union business;

(b) if the Corporation considers that imposing the requirement is necessary to protect the interests of members, shareholders or depositors; or

(c) if the Corporation considers that imposing the requirement is necessary to ensure the financial security and integrity of the credit union. 2007, c. 7, Sched. 7, s. 57.

Compliance

(3)  The credit union shall comply with the order within such time as the Corporation specifies in the order. 2007, c. 7, Sched. 7, s. 57.

Time for compliance if member of a group

(4)  If the credit union is in a group formed under subsection 84 (3), the time for compliance specified under subsection (3) for an order under clause (1) (a) must be at least 30 days after the copy of the order is given to the credit union under section 240.2. 2007, c. 7, Sched. 7, s. 57.

Procedural rules

(5)  Section 240.1 applies with respect to an order under this section. 2007, c. 7, Sched. 7, s. 57.

Appeal to Tribunal

(6)  The credit union that is subject to an order under this section may appeal the order to the Tribunal in accordance with section 240.4. 2007, c. 7, Sched. 7, s. 57.

Variation of requirements

87.  (1)  A credit union may apply to the Corporation for a variation of the requirements under section 84. 2007, c. 7, Sched. 7, s. 57.

Application

(2)  An application must be in a form approved by the Corporation and must describe how and when the credit union will meet the requirements under section 84. 2007, c. 7, Sched. 7, s. 57.

Variation

(3)  The Corporation may grant the variation subject to any terms it considers appropriate if it considers that granting the variation is in the interest of the members of the credit union and that the credit union will meet the requirements under section 84 within a reasonable time. 2007, c. 7, Sched. 7, s. 57.

Valuation of asset

88.  If the Corporation has appraised the value of an asset held by a credit union or a subsidiary and the value determined by the Corporation varies materially from the value placed by the credit union or the subsidiary on the asset, the Corporation shall send to the credit union, its auditor and its audit committee a written notice of the value of the asset as determined by the Corporation. 2007, c. 7, Sched. 7, s. 57.

Report re adequacy

89.  A credit union shall provide a report in a form approved by the Corporation concerning its compliance with section 84 to such persons and at such times as required by the Corporation. 2007, c. 7, Sched. 7, s. 57.

Notification if credit union insolvent

89.1  If the Corporation believes that a credit union is unable to provide for the payment of its liabilities as they become due, the Corporation shall immediately notify the Superintendent in writing. 2007, c. 7, Sched. 7, s. 57.

Provision for losses and accrued interest

90.  A credit union shall make monthly provision for doubtful loans and establish reserves as prescribed. 1994, c. 11, s. 90; 1999, c. 12, Sched. I, s. 2 (5).

PART VII
GOVERNING THE CREDIT UNION

Directors

Qualifications of directors

91.  Only a natural person who meets the following criteria is eligible to be a director of a credit union:

1. He or she is a member of the credit union.

2. He or she is at least eighteen years of age.

3. He or she is a Canadian citizen or a person lawfully admitted to Canada for permanent residency who is ordinarily resident in Canada. 1994, c. 11, s. 91.

Disqualified individuals

92.  (1)  The following individuals are disqualified from being directors of a credit union:

1. One whose membership in any credit union has been terminated, other than voluntarily.

2. One who a court has decided is of unsound mind.

3. One who is an undischarged bankrupt or who has been discharged as a bankrupt in the five years preceding the date on which he or she may be elected as director.

4. One who is unable to obtain a bond of an insurer licensed under the Insurance Act to write surety and fidelity insurance.

5. One who is more than 90 days in arrears in the payment of a debt owed to the credit union unless the credit union has agreed to extend the time for repayment.

6. One who is a listed person within the meaning of the United Nations Suppression of Terrorism Regulations under the United Nations Act (Canada).

7. One who has been convicted, in the five years preceding the date on which he or she may be elected as a director, of an offence described in subsection (3) and who has not received a pardon for the offence.

8. One whose membership in a professional association has been terminated, in the five years preceding the date on which he or she may be elected as director, for professional misconduct.

9. An employee of the credit union or a league in which the credit union is a member or his or her spouse, parent or child.

10. A professional advisor who provides services to the credit union in his or her professional capacity or who has provided such services in the three years preceding the date on which he or she may be elected as a director.

11. An employee of the Corporation.

12. A public servant employed under Part III of the Public Service of Ontario Act, 2006 whose employment duties include regulating credit unions.

13. One who has not met the training requirements or qualifications for directors established by the credit union.

14. One who has not met any reasonable condition or qualification set out in the by-laws of the credit union. 2007, c. 7, Sched. 7, s. 58.

Exception

(2)  An individual is not an employee for the purposes of paragraph 9 of subsection (1) solely because he or she provides, without remuneration, services to the credit union or league that are ordinarily provided by an employee. 2007, c. 7, Sched. 7, s. 58 (1).

Type of offence

(3)  An offence referred to in paragraph 7 of subsection (1) is an offence that,

(a) is related to the qualifications, functions or duties of a director of a body corporate;

(b) involves theft or fraud;

(c) involves a contravention or failure to comply with this Act, a predecessor of this Act or an Act governing a subsidiary of the credit union; or

(d) involves a contravention or failure to comply with the Securities Act. 2007, c. 7, Sched. 7, s. 58 (1).

Number of directors

93.  (1)  Subject to subsection (2), the number of directors shall be as provided in the by-laws. 2007, c. 7, Sched. 7, s. 59.

Minimum

(2)  A credit union must have a minimum of five directors. 1994, c. 11, s. 93 (2).

Election of board

94.  (1)  Directors must be elected in the manner provided in the by-laws.

Election in rotation

(2)  The by-laws may provide for the election and retirement of directors in rotation.

Voting

(3)  A member who votes at an election of directors shall cast a number of votes equal to the number of directors to be elected but the member may not cast more than one vote for one candidate. 1994, c. 11, s. 94.

Disclosure of interest by candidates

94.1  (1)  A person who is a candidate for director of a credit union shall disclose, before the election, everything the person would have to disclose under section 146 if the person were a director. 2007, c. 7, Sched. 7, s. 60.

Clarification, existing directors, etc.

(2)  For greater certainty,

(a) subsection (1) applies in relation to the re-election of a director as well as to the election of a person who is not already a director;

(b) the obligation to disclose under subsection (1) is in addition to any requirement to disclose under section 146 and applies even if a disclosure has already been made under that section; and

(c) a general notice described in subsection 146 (6) is not sufficient disclosure of an interest in a contract for the purposes of subsection (1). 2007, c. 7, Sched. 7, s. 60.

Disclosure to board

(3)  A disclosure required under subsection (1) shall be made in writing to the board of the credit union. 2007, c. 7, Sched. 7, s. 60.

Notice to members

(4)  The board shall give the members notice of the disclosure before the election is held. 2007, c. 7, Sched. 7, s. 60.

How notice to members given

(5)  The by-laws of the credit union may specify how the board shall give notice of the disclosure under subsection (4). 2007, c. 7, Sched. 7, s. 60.

Chair of board

94.2  The directors shall elect or appoint a chair of the board from among themselves. 2007, c. 7, Sched. 7, s. 60.

Term of office, directors

95.  (1)  Directors hold office for such term as the by-laws provide. 1994, c. 11, s. 95 (1).

If election delayed

(2)  If an election is not held within the period set out in a credit union’s by-laws, the directors continue in office until their successors are elected. 1994, c. 11, s. 95 (2).

First directors

(3)  Each of the persons named as first directors in the articles is a director until replaced by a person duly elected or appointed in his or her stead. 1994, c. 11, s. 95 (3).

Maximum number

(4)  The by-laws may provide for a maximum number of consecutive terms for directors. 1994, c. 11, s. 95 (4).

Note: On a day to be named by proclamation of the Lieutenant Governor, subsection (4) is repealed by the Statutes of Ontario, 2007, chapter 7, Schedule 7, section 61 and the following substituted:

Maximum number

(4)  The by-laws shall provide for a maximum number of consecutive terms for directors. 2007, c. 7, Sched. 7, s. 61.

See: 2007, c. 7, Sched. 7, ss. 61, 192 (2).

Note: On a day to be named by proclamation of the Lieutenant Governor, the Act is amended by the Statutes of Ontario, 2007, chapter 7, Schedule 7, section 62 by adding the following section:

Term of office, chair

95.1  (1)  The chair of the board shall hold office for such term as the by-laws provide. 2007, c. 7, Sched. 7, s. 62.

Maximum number

(2)  The by-laws shall provide for a maximum number of consecutive terms for the chair of the board. 2007, c. 7, Sched. 7, s. 62.

See: 2007, c. 7, Sched. 7, ss. 62, 192 (2).

Quorum

96.  A majority of the board constitutes a quorum. 1994, c. 11, s. 96.

Vacancies

97.  (1)  If a vacancy occurs in the board and a quorum of directors remains, the directors remaining in office may appoint a qualified individual to fill the vacancy until the next annual meeting of the members of the credit union. 2007, c. 7, Sched. 7, s. 63.

Same, no quorum

(2)  If there is not a quorum of directors in office, the remaining directors shall promptly call a general meeting of the members to fill the vacancies; in default of this or if there are no remaining directors, any member may call the meeting. 1994, c. 11, s. 97 (2).

Ceasing to hold office

98.  (1)  A director ceases to hold office,

(a) at the end of the annual meeting at which his or her term of office expires or upon the election of a successor;

(b) when he or she dies or resigns;

(c) when he or she becomes ineligible to hold office under section 91 or 92;

(d) when he or she is removed from office under section 99, 100 or 101;

(e) when the Corporation replaces the board and appoints a person to assume the powers of the board under subsection 295 (1). 1994, c. 11, s. 98 (1); 2007, c. 7, Sched. 7, s. 64 (1).

Date of resignation

(2)  A director’s resignation becomes effective when the credit union receives the director’s written resignation or at the time specified in the resignation, whichever is later. 1994, c. 11, s. 98 (2).

Notice if no quorum of directors

(3)  The credit union shall notify the Superintendent if, after a director ceases to hold office, there is not a quorum of directors in office. 2007, c. 7, Sched. 7, s. 64 (2).

Removal by board

99.  If a director fails to attend three consecutive board meetings without, in the opinion of the board, reasonable cause or fails to perform any of the duties allotted to him or her as a director, the board may, by resolution, declare the director’s position vacant. 1994, c. 11, s. 99.

Removal by members

100.  (1)  The members of a credit union may remove a director before his or her term of office expires. 1994, c. 11, s. 100 (1).

Vote

(2)  A director is removed from office by a special resolution passed at a general meeting of the members duly called for that purpose. 2002, c. 18, Sched. H, s. 3 (4).

Notice

(3)  The notice calling the meeting must state that the purpose of the meeting is to remove the director named in the notice. 1994, c. 11, s. 100 (3).

Right to make representations

(4)  At the meeting, the director is entitled to speak to the resolution calling for his or her removal and may do so personally or through a person authorized under the Law Society Act to represent the member. 2007, c. 7, Sched. 7, s. 65.

(5)  Repealed: 2007, c. 7, Sched. 7, s. 65 (1).

Replacement

(6)  If the members remove the director from office, they shall elect another director at the same meeting to hold office in his or her stead for the remainder of his or her term of office. 1994, c. 11, s. 100 (6).

Removal by Superintendent

101.  (1)  The Superintendent may, by order, remove a director of a credit union if the Superintendent is of the opinion that the director is not suitable to hold office as a director on the basis of the character or competence of the director. 2007, c. 7, Sched. 7, s. 66.

Risk of prejudice

(2)  In forming an opinion under subsection (1), the Superintendent must consider whether the interests of the members, depositors and creditors of the credit union have been or are likely to be prejudiced by the director’s holding office. 2007, c. 7, Sched. 7, s. 66.

Procedural rules

(3)  Section 240.1 applies with respect to an order under this section. 2007, c. 7, Sched. 7, s. 66.

Appeal to Tribunal

(4)  The director who is subject to an order under this section may appeal the order to the Tribunal in accordance with section 240.4. 2007, c. 7, Sched. 7, s. 66.

Statement re opposition

102.  (1)  A director who opposes any proposed action or resolution by the directors or members is entitled to give the credit union a written statement setting out why he or she opposes the proposed action or resolution. 2007, c. 7, Sched. 7, s. 66.

Circulation of statement

(2)  The credit union shall, within 30 days after receipt of the statement, send a copy of the statement to the Superintendent. 2007, c. 7, Sched. 7, s. 66.

Immunity

(3)  A credit union and a person acting on its behalf do not incur any liability by reason only of sending the statement as required by subsection (2). 2007, c. 7, Sched. 7, s. 66.

Statement on resignation

103.  (1)  A director who resigns is entitled to give the credit union a written statement setting out his or her reasons for resigning. 1994, c. 11, s. 103 (1).

Information to Superintendent and Corporation

(2)  The Superintendent or the Corporation may require the director to provide such information relating to the resignation as the Superintendent or the Corporation, as the case may be, specifies and the director shall promptly do so. 2007, c. 7, Sched. 7, s. 67.

Statement re disagreement

(3)  If a director resigns as a result of a disagreement with the other directors or the officers of a credit union, the director shall give the credit union, the Superintendent and the Corporation a written statement setting out the nature of the disagreement. 2007, c. 7, Sched. 7, s. 67.

Advising members that statement available

(4)  The credit union shall, within 30 days after receipt of the statement under subsection (3), advise every member that a copy of the statement is available on request. 2007, c. 7, Sched. 7, s. 67.

Method of advising members

(5)  The advising of the members under subsection (4) may be by deliveries permitted under section 335 or by such other method as is provided for in the credit union’s by-laws. 2007, c. 7, Sched. 7, s. 67.

Duty to give copy of statement

(6)  The credit union shall give a copy of the statement to every member who requests it. 2007, c. 7, Sched. 7, s. 67.

Immunity

(7)  A credit union and a person acting on its behalf do not incur any liability by reason only of advising the members under subsection (4) or giving a copy of the statement to a member. 2007, c. 7, Sched. 7, s. 67.

Powers and Duties of the Board

Duties of the board

104.  (1)  The board shall manage or supervise the management of the business and affairs of the credit union and shall perform such additional duties as may be imposed under this Act, the regulations, the by-laws of the Corporation respecting credit unions or the by-laws of the credit union. 2007, c. 7, Sched. 7, s. 68.

Board, etc., not to manage day to day activities

(2)  The board, a committee of the board or a director shall not directly manage, or be involved in, the day to day activities of the credit union. 2007, c. 7, Sched. 7, s. 68.

First directors

(3)  The first directors of a credit union named in the articles have all the powers and duties and are subject to all the liabilities of directors. 1994, c. 11, s. 104 (3).

By-law powers

105.  (1)  The board may pass by-laws governing the conduct of the affairs of the credit union. 1994, c. 11, s. 105 (1).

Note: On a day to be named by proclamation of the Lieutenant Governor, section 105 is amended by the Statutes of Ontario, 2007, chapter 7, Schedule 7, section 69 by adding the following subsection:

Required matters

(1.1)  The by-laws of a credit union shall provide for the following matters:

1. The appointment of officers of the credit union and the establishment of their duties.

2. The calling of meetings of the board, including the minimum number of times the board must meet each financial year if the minimum number of times exceeds the prescribed minimum number of times, the place or places where meetings of the board may be held and the manner in which notice of the meetings must be given. 2007, c. 7, Sched. 7, s. 69.

See: 2007, c. 7, Sched. 7, ss. 69, 192 (2).

Same

(2)  The board shall pass by-laws, subject to this Act and the regulations, governing prescribed matters if they are not provided for by this Act or the regulations or set out in the articles. 1994, c. 11, s. 105 (2).

Limitation

(3)  By-laws that are contrary to this Act, the regulations or the articles of the credit union are void. 1994, c. 11, s. 105 (3).

Same

(4)  By-laws that relieve a person of obligations or requirements under this Act or the regulations are void. 1994, c. 11, s. 105 (4).

Restrictive by-laws

(5)  A by-law may impose greater restrictions in respect of a matter than are imposed under this Act or the regulations. 1994, c. 11, s. 105 (5).

Remuneration of directors

106.  The procedure for setting the remuneration of directors and members of committees shall be established by by-law. 1994, c. 11, s. 106.

When by-law effective

107.  (1)  A by-law is not effective until it is passed by the board and confirmed, with or without variation, by a special resolution passed at a general meeting of the members duly called for that purpose or by such greater proportion of the votes cast as the articles may provide. 2002, c. 18, Sched. H, s. 3 (5).

Filing

(2)  Within 30 days after a by-law is confirmed, the credit union shall file two copies of it with the Superintendent. 2007, c. 7, Sched. 7, s. 70.

Disclosure of expenses and remuneration

108.  A credit union’s annual audited financial statements must disclose the total expenses of the board and the total remuneration paid to the directors during the year. 2007, c. 7, Sched. 7, s. 71.

Establishment of and delegation to committees

109.  (1)  The board may establish committees and, subject to subsection (2), may delegate powers and assign duties to those committees. 2007, c. 7, Sched. 7, s. 72.

Limitation on delegation

(2)  The following powers cannot be delegated to a committee of the board:

1. Filling vacancies on the board or the audit committee.

2. Appointing or removing an officer or director of the credit union.

3. Appointing signing officers.

4. Adopting, amending or repealing by-laws.

5. Issuing securities except in the manner and on the terms authorized by the board.

6. Authorizing the payment of a commission upon the sale of shares.

7. Purchasing, redeeming or otherwise acquiring shares issued by the credit union.

8. Approving the financial statements.

9. Authorizing the purchase, sale, lease, exchange or other disposition of material assets.

10. Declaring dividends or patronage returns.

11. Expelling a member. 2007, c. 7, Sched. 7, s. 72.

110.-120.  Repealed: 2007, c. 7, Sched. 7, s. 73.

121.-124.  Repealed: 2007, c. 7, Sched. 7, s. 74.

Audit Committee

Audit committee

125.  (1)  The board of every credit union shall establish an audit committee composed of members appointed by the board from among the directors. 2007, c. 7, Sched. 7, s. 75.

Minimum number of members

(2)  The audit committee must have at least three members. 2007, c. 7, Sched. 7, s. 75.

When member ceases to be member

(3)  A person ceases to be a member of the audit committee of a credit union when he or she ceases to be a director or when he or she resigns from the committee or is replaced by the board. 2007, c. 7, Sched. 7, s. 75.

Training

(4)  Every member of an audit committee shall satisfy such training requirements or qualifications for audit committee members as are established by the credit union. 2007, c. 7, Sched. 7, s. 75.

Meetings

(5)  The audit committee shall hold a meeting no less frequently than once every quarter during each year and meetings may be called by the credit union’s auditor, a member of the audit committee or any director. 2007, c. 7, Sched. 7, s. 75.

Quorum

(6)  A majority of the members of the audit committee constitutes a quorum. 2007, c. 7, Sched. 7, s. 75.

Minutes

(7)  The audit committee shall keep minutes of its meetings. 2007, c. 7, Sched. 7, s. 75.

Report to the board

(8)  The audit committee shall report to the board within 60 days after each committee meeting or at the next board meeting, whichever is earlier, setting out the results of the meeting. 2007, c. 7, Sched. 7, s. 75.

Report to the members

(9)  The audit committee shall report to the members of the credit union at the annual meeting by a report containing such information as may be prescribed. 2007, c. 7, Sched. 7, s. 75.

Powers and duties of audit committee

126.  The audit committee has such powers and duties as are set out in this Act, prescribed by the regulations or set out in the by-laws. 2007, c. 7, Sched. 7, s. 75.

Notification about certain matters

127.  (1)  The audit committee shall promptly notify the board, the credit union’s auditor, the Corporation and the Superintendent if any of the following matters come to the attention of the committee:

1. Funds, securities or other property of the credit union have been or may have been misappropriated or misdirected.

2. The board, a director, an officer or an employee of the credit union has contravened or failed to comply with this Act, the regulations or the by-laws and the contravention or failure to comply materially affects the credit union. 2007, c. 7, Sched. 7, s. 75.

Assistance

(2)  Subject to the board’s approval, which shall not be unreasonably withheld, the committee may retain one or more persons to assist it in determining whether a misappropriation or misdirection has occurred. 2007, c. 7, Sched. 7, s. 75.

Remuneration

(3)  The committee shall fix the remuneration payable to the persons retained under subsection (2) and the credit union shall pay it. 2007, c. 7, Sched. 7, s. 75.

Power to call board meeting

128.  The audit committee may call a meeting of the board to consider a matter of concern to the committee. 2007, c. 7, Sched. 7, s. 75.

129.-139.  Repealed: 2007, c. 7, Sched. 7, s. 75.

Officers

Officers

140.  (1)  In addition to the chair of the board required under section 94.2, a credit union must have a corporate secretary and a chief executive officer and may have such other officers as are provided for in the by-laws. 2007, c. 7, Sched. 7, s. 76 (1).

Same

(2)  Subject to this Act, the regulations and the by-laws, the board may establish the duties of the credit union’s officers. 1994, c. 11, s. 140 (2).

Corporate secretary

(3)  The board may elect or appoint the corporate secretary from among the directors or may appoint an employee of the credit union as corporate secretary. 1994, c. 11, s. 140 (3).

Chief executive officer

(3.1)  The chief executive officer shall be an employee of the credit union appointed by the board. 2007, c. 7, Sched. 7, s. 76 (2).

Remuneration

(4)  Officers are entitled to receive such remuneration and other payments as the board approves. 1994, c. 11, s. 140 (4).

Remuneration reported in financial statements

(5)  A credit union’s annual audited financial statements must disclose the prescribed information about the remuneration paid during the year to the officers and employees of the credit union. 2007, c. 7, Sched. 7, s. 76 (3).

Duties of corporate secretary

141.  The corporate secretary shall ensure that the records of the by-laws of the credit union and the minutes of board meetings are kept up to date. 1994, c. 11, s. 141.

Duties of Directors, Officers and Committee Members

Duty of confidentiality

142.  (1)  Every director, officer, member of a committee or employee of a credit union shall keep confidential all information received by the credit union or by a subsidiary or other affiliate of the credit union that the director, officer, committee member or employee knows or should know is confidential to the credit union or subsidiary or other affiliate. 2007, c. 7, Sched. 7, s. 77.

Use of information

(2)  No director, officer, member of a committee or employee of a credit union shall make use of information referred to in subsection (1) in any transaction in order to obtain, directly or indirectly, a benefit or advantage for any person other than the credit union or a subsidiary or other affiliate of the credit union. 2007, c. 7, Sched. 7, s. 77.

Confidentiality re members

143.  (1)  Every director, officer, member of a committee or employee of a credit union shall keep confidential all information respecting members of the credit union. 2007, c. 7, Sched. 7, s. 77.

Exception – consent

(2)  Despite subsection (1), information respecting a member may be disclosed with the consent of the member. 2007, c. 7, Sched. 7, s. 77.

Exceptions

(3)  Despite subsection (1), a director, officer or member of a committee or an employee authorized by the board may disclose information,

(a) to a person acting in a confidential or professional relationship to the credit union, including an employee of a league in which the credit union is a member;

(b) to a financial institution with which the credit union has transactions that may involve confidential matters;

(c) to another credit union with which the credit union of the director, officer, committee member or employee proposes to amalgamate, for the purposes of the amalgamation, if the credit unions have signed letters of intent to enter into an agreement for the amalgamation;

(d) to a person to whom the credit union proposes to sell assets, for the purposes of the sale, if the credit union and the person have signed letters of intent to enter into an agreement of purchase and sale for the sale;

(e) to a credit grantor or to a reporting agency, if the disclosure is for the purpose of determining the creditworthiness of the member;

(f) to the Superintendent and the Corporation; and

(g) to any other person entitled to the information by law. 2007, c. 7, Sched. 7, s. 77.

Duty of care

144.  (1)  Every director, officer and member of a committee shall exercise the powers and discharge the duties of his or her office honestly, in good faith and in the best interests of the credit union. 2007, c. 7, Sched. 7, s. 78.

Standard of care

(2)  The director, officer or committee member shall exercise the degree of care, diligence and skill that a reasonably prudent person would exercise in comparable circumstances. 1994, c. 11, s. 144 (2).

Duty to comply

145.  (1)  Every director, officer, member of a committee and employee of a credit union shall comply with this Act, the regulations made under it and the articles and by-laws of the credit union. 2007, c. 7, Sched. 7, s. 79.

Same

(2)  A director, officer, committee member or employee shall comply with any requirements imposed by the Superintendent under this Act. 1994, c. 11, s. 145 (2); 1997, c. 28, s. 53.

No exculpation

(3)  No provision in any contract, in any resolution or in the by-laws of a credit union relieves a director, officer, committee member or employee from a duty under this section or relieves him or her from liability for a breach of a duty. 1994, c. 11, s. 145 (3).

Conflicts of Interest

Disclosure of interest

146.  (1)  This section applies to every director, officer, member of a committee or employee of a credit union who,

(a) is a party to a material contract or proposed material contract with the credit union;

(b) is a director or an officer of an entity that is a party to a material contract or proposed material contract with the credit union;

(c) has a material interest in a person who is a party to a material contract or proposed material contract with the credit union; or

(d) is a spouse, parent or child of an individual who is a party to a material contract or proposed material contract with the credit union. 2007, c. 7, Sched. 7, s. 80.

Same

(2)  The director, officer, committee member or employee shall disclose, in writing, to the credit union or ask to have the nature and extent of his or her interest entered in the minutes of board meetings. 2007, c. 7, Sched. 7, s. 80.

Time of disclosure, director

(3)  A director shall make the disclosure,

(a) at the board meeting at which a proposed contract is first considered;

(b) if the director was not then interested in a proposed contract, at the first meeting after the director becomes so interested;

(c) if the director becomes interested after a contract is made, at the first meeting after the director becomes so interested; or

(d) if a person who is interested in a contract later becomes a director, at the first meeting after he or she becomes a director. 2007, c. 7, Sched. 7, s. 80.

Same, officer or committee member

(4)  An officer, committee member or employee shall make the disclosure,

(a) promptly after he or she becomes aware that a proposed contract is to be considered or a contract has been considered at a board meeting;

(b) if he or she becomes interested after a contract is made, promptly after becoming so interested;

(c) if a person who is interested in a contract later becomes an officer, committee member or employee, promptly after becoming an officer, committee member or employee. 2007, c. 7, Sched. 7, s. 80.

Same, no board approval

(5)  If a material contract or proposed material contract is one that, in the ordinary course of business of the credit union, would not require approval by the board or the members, the director, officer, committee member or employee shall make the disclosure promptly after becoming aware of the contract or proposed contract. 2007, c. 7, Sched. 7, s. 80.

Continuing disclosure

(6)  A general notice to the board by a director, officer, committee member or employee declaring that he or she is a director or officer of an entity, or has a material interest in a person, and is to be regarded as interested in any contract made with that entity or person, is sufficient disclosure of an interest in relation to any contract so made. 2007, c. 7, Sched. 7, s. 80.

Voting

147.  (1)  A director to whom section 146 applies shall not be present at any meeting while the contract is being discussed or vote on, or attempt to influence the voting on, any resolution to approve the contract. 2007, c. 7, Sched. 7, s. 81.

Exception

(2)  Subsection (1) does not apply if the contract is,

(a) an arrangement by way of security for money lent to or obligations undertaken by the director for the benefit of the credit union or a subsidiary of it;

(b) a contract relating primarily to the director’s remuneration as a director or as a member of a committee or an officer, employee or agent of the credit union or a subsidiary of it or an entity controlled by it;

(c) a contract for indemnity under section 157 or for insurance under section 156; or

(d) a contract with a subsidiary of the credit union. 2007, c. 7, Sched. 7, s. 81.

(3)  Repealed: 2007, c. 7, Sched. 7, s. 81.

Ineligibility

(4)  A director who knowingly contravenes subsection (1) ceases to hold office as a director and is not eligible, for a period of five years after the date on which the contravention occurred, for election or appointment as a director of any financial institution that is incorporated or formed by or under an Act of the Province of Ontario. 1994, c. 11, s. 147 (4).

Avoidance standards

148.  (1)  If a director, officer, committee member or employee made a required disclosure in respect of a contract referred to in subsection 146 (1), the contract was approved by the board or by the members of the credit union and the contract was reasonable and fair to the credit union at the time it was approved, the contract is neither void nor voidable by reason only,

(a) of the relationship between the person or entity and the director, officer, committee member or employee; or

(b) that an interested director is present at or is counted to determine the presence of a quorum at the board meeting that authorized the contract. 2007, c. 7, Sched. 7, s. 82.

Application to court

(2)  If a director, officer, committee member or employee of a credit union fails to disclose an interest in a material contract in accordance with section 146, a court may, on the application of the credit union or a member of the credit union, set aside the contract on such conditions as the court thinks fit. 2007, c. 7, Sched. 7, s. 82.

Prohibition re acting for credit union

149.  (1)  This section applies with respect to a person who is a director of a credit union or a member of a committee. 2007, c. 7, Sched. 7, s. 83.

Same

(2)  The person or a partnership or corporation from which the person receives compensation shall not act, for compensation, in a professional capacity in respect of business matters related to the credit union. 1994, c. 11, s. 149 (2).

Prohibition re acting as trustee

149.1  An officer or employee of a credit union shall not act as a trustee with respect to a deposit with the credit union or any other business or transaction with the credit union unless the beneficiary is a related person of the officer or employee. 2007, c. 7, Sched. 7, s. 84.

Miscellaneous

Validity of actions

150.  An act by a director, officer or member of a committee is not invalid by reason only of a defect discovered afterward in his or her appointment, election or qualification. 2007, c. 7, Sched. 7, s. 85.

Requirement for bond

151.  (1)  Every director, officer or employee of a credit union who receives or has charge of money shall, on assuming his or her duties, furnish to the credit union a bond of an insurer licensed under the Insurance Act to write surety and fidelity insurance. 2007, c. 7, Sched. 7, s. 85.

Bond

(2)  The bond must be for an amount equal to or greater than the amount that is prescribed or determined in the prescribed manner, and must satisfy such conditions as may be prescribed. 2007, c. 7, Sched. 7, s. 85.

Liability of directors, etc.

152.  A liability imposed under this Act upon a director, officer or member of a committee is in addition to any other liability that is by law imposed upon him or her. 2007, c. 7, Sched. 7, s. 85.

Specific liability of directors

153.  (1)  The directors of a credit union who vote for or consent to a resolution of the directors authorizing the issue of shares contrary to subsection 59 (1), or the issue of subordinated indebtedness contrary to section 186 for a consideration other than money are jointly and severally liable to the credit union to make good any amount by which the consideration is less than the fair market value that the credit union would have received if the share or subordinated indebtedness had been issued for money on the date of the resolution.

Further liabilities

(2)  The directors of a credit union who vote for or consent to a resolution of the directors authorizing,

(a) a redemption or purchase of shares;

(b) a reduction of capital;

(c) a payment of a dividend;

(d) the payment of an indemnity; or

(e) any transaction with a restricted party,

contrary to this Act, are jointly and severally liable to restore to the credit union any amounts so distributed or paid and not otherwise recovered by the credit union and any amounts in relation to any loss suffered by the credit union. 1994, c. 11, s. 153.

Contribution

154.  (1)  A director who has satisfied a judgment in relation to the director’s liability under section 153 is entitled to contribution from the other directors who voted for or consented to the unlawful act on which the judgment was founded.

Recovery

(2)  A director who is liable under section 153 is entitled to apply to a court for an order compelling a member, shareholder or other person to pay or deliver to the director,

(a) any money or property that was paid or distributed to the member, shareholder or other person contrary to this Act; or

(b) an amount equal to the value of the loss suffered by the credit union as a result of any transaction contrary to Part IX or the regulations made under that Part.

Court order

(3)  Where an application is made to a court under subsection (2), the court may, where it is satisfied that it is equitable to do so,

(a) order a member, shareholder, or other person to pay or deliver to a director any money or property that was paid or distributed to the member, shareholder or other person contrary to this Act or any amount referred to in clause (2) (b);

(b) order a credit union to return or issue membership shares or shares to a member or shareholder from whom the credit union has purchased, redeemed or otherwise acquired membership shares or shares; or

(c) make any further order it thinks fit. 1994, c. 11, s. 154.

Due diligence, reliance on statement, etc.

155.  (1)  A director, officer, member of a committee or an employee of a credit union is not liable under section 153 or 209.1 and has fulfilled their duty under section 145 if they exercised the degree of care, diligence and skill that a reasonably prudent person would exercise in comparable circumstances, including reliance in good faith on,

(a) financial statements of the credit union represented to them by an officer of the credit union or in a written report of the auditor of the credit union fairly to reflect the financial condition of the credit union; or

(b) a report of an accountant, lawyer or other professional person whose profession lends credibility to a statement made by the person. 2007, c. 7, Sched. 7, s. 86.

Same

(2)  A director, officer or member of a committee of a credit union has fulfilled their duty under section 144 if they relied in good faith on,

(a) financial statements of the credit union represented to them by an officer of the credit union or in a written report of the auditor of the credit union fairly to reflect the financial condition of the credit union; or

(b) a report of an accountant, lawyer or other professional person whose profession lends credibility to a statement made by the person. 2007, c. 7, Sched. 7, s. 86.

Insurance for directors and officers

156.  (1)  A credit union may purchase and maintain insurance for the benefit of an eligible person as defined in section 157 against any liability incurred by the person in his or her capacity as,

(a) a director, officer or member of a committee; or

(b) a director or officer of another entity if the person acts or acted in that capacity at the credit union’s request.

Exception

(2)  Subsection (1) does not apply if the liability relates to the person’s failure to act honestly, in good faith and in the best interests of the credit union. 1994, c. 11, s. 156.

Indemnity for directors, etc.

157.  (1)  In this section,

“eligible person” means, with respect to a credit union,

(a) a director, officer or member of a committee,

(b) a former director, officer or member of such a committee, or

(c) a person who acts or acted at the request of the credit union as a director or an officer of an entity of which the credit union is or was a member, shareholder or creditor. 1994, c. 11, s. 157 (1); 2007, c. 7, Sched. 7, s. 87 (1).

Indemnification

(2)  A credit union may indemnify an eligible person in respect of any proceeding to which the person is made a party by reason of serving or having served in a qualifying capacity. 1994, c. 11, s. 157 (2).

Exception

(3)  Despite subsection (2), the credit union may not indemnify the person in respect of a proceeding by or on behalf of the credit union to procure a judgment in its favour. 1994, c. 11, s. 157 (3).

Advance to pay for costs, etc.

(3.1)  A credit union may advance money to an eligible person to pay for the costs, charges and expenses of any proceeding to which the person is made a party by reason of serving or having served in a qualifying capacity, but the person is required to repay the money if either of the conditions described in subsection (5) is not satisfied. 2007, c. 7, Sched. 7, s. 87 (2).

Same, derivative action

(4)  With the approval of a court, a credit union may indemnify an eligible person in respect of a proceeding by or on behalf of the credit union or entity to procure a judgment in its favour to which the person is made a party by reason of serving or having served in a qualifying capacity. 1994, c. 11, s. 157 (4).

Advance to pay for costs, etc., derivative action

(4.1)  With the approval of a court, a credit union may advance money to an eligible person to pay for the costs, charges and expenses of a proceeding described in subsection (4) to which the person is made a party by reason of serving or having served in a qualifying capacity, but the person is required to repay the money if either of the conditions described in subsection (5) is not satisfied. 2007, c. 7, Sched. 7, s. 87 (2).

Restriction

(5)  The credit union may indemnify an eligible person under this section only if,

(a) the person acted honestly and in good faith with a view to the best interests of the credit union; and

(b) in the case of a proceeding enforced by a monetary penalty, the person had reasonable grounds for believing that the impugned conduct was lawful. 1994, c. 11, s. 157 (5).

Right to indemnity

(6)  An eligible person is entitled to indemnity from the credit union in connection with the defence of a proceeding to which the person is made a party by reason of serving or having served in a qualifying capacity if the eligible person,

(a) was substantially successful on the merits in the defence of the proceeding; and

(b) fulfils the conditions set out in clauses (5) (a) and (b). 1994, c. 11, s. 157 (6).

Extent of indemnity

(7)  An indemnity under this section is against all costs, charges and expenses, including an amount paid to settle an action or satisfy a judgment reasonably incurred by the person in connection with the specified proceeding. 1994, c. 11, s. 157 (7).

Heirs

(8)  A credit union may indemnify the heirs or personal representatives of any eligible person that the credit union is authorized to indemnify under this section. 1994, c. 11, s. 157 (8).

Interpretation

(9)  In this section, to serve in a qualifying capacity means,

(a) acting or having acted as a director, officer or member of a committee; or

(b) acting or having acted at the request of the credit union as a director or an officer of an entity of which the credit union is or was a member, shareholder or creditor. 1994, c. 11, s. 157 (9); 2007, c. 7, Sched. 7, s. 87 (3).

Application for indemnification

158.  (1)  A credit union or an eligible person under section 157 may apply to a court for an order approving an indemnity under that section and the court may so order and make any further order it thinks fit. 1994, c. 11, s. 158 (1).

Notice

(2)  The applicant shall give the Superintendent written notice of the application. 1994, c. 11, s. 158 (2); 1997, c. 28, s. 53.

Other notice

(3)  The court may order notice to be given to any interested person. 1994, c. 11, s. 158 (3).

Right to participate

(4)  The Superintendent and each interested person is entitled to appear and to be heard at the hearing of the application in person or by counsel. 1994, c. 11, s. 158 (4); 1997, c. 28, s. 53.

Auditor

Appointment of auditor

159.  (1)  At their first general meeting, the members of a credit union shall appoint an auditor to hold office until the close of the first annual meeting but, if the members fail to do so, the board shall promptly make the appointment. 1994, c. 11, s. 159 (1).

Same

(2)  At each annual meeting, the members of a credit union shall appoint an auditor to hold office until the close of the next annual meeting but, if the members fail to do so, the auditor in office continues in office until a successor is appointed. 1994, c. 11, s. 159 (2).

Vacancy

(3)  In the event the office of auditor becomes vacant before the end of the incumbent auditor’s term of office, the board may appoint an auditor to hold office until the close of the next annual meeting. 2007, c. 7, Sched. 7, s. 88.

Appointment by the Superintendent

(4)  If no auditor is appointed under subsection (1) or (2), the Superintendent may require the board to appoint an auditor to hold office until the close of the next annual meeting. 1994, c. 11, s. 159 (4); 1997, c. 28, s. 53.

Notice of appointment

(5)  The credit union shall promptly notify the auditor in writing of the appointment. 1994, c. 11, s. 159 (5).

Qualification as auditor

160.  (1)  An individual or firm of accountants is qualified to be an auditor of a credit union if,

(a) in the case of an individual, the person is an accountant who,

(i) is licensed under the Public Accounting Act, 2004,

(ii) is ordinarily resident in Canada, and

(iii) is independent of the credit union; and

(b) in the case of a firm of accountants, the member or employee of the firm jointly designated by the firm and the credit union to conduct the audit of the credit union on behalf of the firm is qualified in accordance with clause (a). 1994, c. 11, s. 160 (1); 2004, c. 8, s. 46.

Independence

(2)  For purposes of subsection (1),

(a) independence is a question of fact; and

(b) a person is not independent of a credit union,

(i) if that person, any partner of that person or any member of a firm of accountants of which that person is an employee,

(A) is a director, officer, committee member or employee of the credit union, a subsidiary of the credit union or the Corporation,

(B) is a business partner of any director, officer, committee member or employee of the credit union or a subsidiary of the credit union,

(C) beneficially owns or controls, directly or indirectly, a material interest in the shares of a credit union or of any subsidiary of the credit union, or

(D) has been a liquidator, trustee in bankruptcy, receiver or receiver and manager of the credit union or of any subsidiary of the credit union within the two years immediately preceding the person’s proposed appointment as an auditor of the credit union, other than a subsidiary of the credit union acquired pursuant to section 197, or

(ii) if the firm of accountants of which that person is an employee,

(A) beneficially owns or controls, directly or indirectly, a material interest in the shares of a credit union or of any subsidiary of the credit union, or

(B) has been a liquidator, trustee in bankruptcy, receiver or receiver and manager of the credit union or of any subsidiary of the credit union within the two years immediately preceding the person’s proposed appointment as an auditor of the credit union, other than a subsidiary of the credit union acquired pursuant to section 197. 1994, c. 11, s. 160 (2); 2007, c. 7, Sched. 7, s. 89.

Ineligibility as receiver

161.  The following persons are not eligible to be appointed as a receiver, a receiver and manager or a liquidator of a credit union:

1. A person who is or has been an auditor of the credit union within the two years preceding the proposed appointment.

2. A partner or employer of the person described in paragraph 1.

3. A person who is a spouse, child or parent of the person described in paragraph 1. 1994, c. 11, s. 161; 1999, c. 6, s. 19 (5); 2005, c. 5, s. 18 (5).

Remuneration

162.  The board shall fix the remuneration of the auditor. 1994, c. 11, s. 162.

Replacement of auditor

163.  (1)  A person, other than the incumbent auditor, is not eligible to be appointed as auditor unless, at least fifteen days before the meeting at which the auditor is to be appointed, a member has given notice to the credit union of an intention to nominate the person for auditor.

Notice re nomination

(2)  The credit union shall send a copy of the member’s notice to the incumbent auditor and to the proposed nominee and shall notify the members of the credit union of the proposed nomination.

Right to make representations

(3)  The incumbent auditor is entitled to give the credit union written representations concerning the proposal not to reappoint the auditor.

Circulation of representations

(4)  If the incumbent auditor gives the representations to the credit union at least three days before notice of the meeting is to be mailed, the credit union shall, at its own expense, forward a copy of the representations together with the notice of the meeting to each member entitled to receive the notice. 1994, c. 11, s. 163.

Removal of auditor

164.  (1)  The members of a credit union may remove an auditor before the auditor’s term of office expires. 1994, c. 11, s. 164 (1).

Vote

(2)  An auditor is removed from office by a resolution passed by a majority of the votes cast at a general meeting of members duly called for that purpose. 1994, c. 11, s. 164 (2).

Notice to auditor

(3)  The credit union shall, at least fifteen days before mailing the notice of the meeting, give the following material to the auditor before calling the general meeting:

1. Written notice of the intention to call the meeting and of the date on which the notice of the meeting is to be mailed.

2. A copy of all material proposed to be sent to members in connection with the meeting. 1994, c. 11, s. 164 (3).

Right to make representations

(4)  The auditor is entitled to give the credit union written representations concerning the proposal to remove the auditor. 1994, c. 11, s. 164 (4).

Circulation of representations

(5)  If the auditor gives the representations to the credit union at least three days before notice of the meeting is to be mailed, the credit union shall, at its own expense, forward a copy of the representations together with the notice of the meeting to each member entitled to receive the notice. 1994, c. 11, s. 164 (5).

Replacement

(6)  If the members remove the auditor from office, they shall appoint another auditor at the same meeting to hold office for the remainder of the auditor’s term. 2007, c. 7, Sched. 7, s. 90.

Vote

(7)  The auditor appointed under subsection (6) must be appointed by a resolution passed by a majority of the votes cast at the meeting. 2007, c. 7, Sched. 7, s. 90.

Report

(8)  For purposes of paragraph 2 of subsection (3), the material must include a report setting out the circumstances and the reasons for the removal of the auditor. 1994, c. 11, s. 164 (8).

Notice re resignation, etc.

165.  A credit union shall promptly notify the Superintendent and the Corporation when an auditor resigns, is replaced or is removed from office and shall inform the Superintendent of the reasons. 2007, c. 7, Sched. 7, s. 91.

Auditor for subsidiaries

166.  (1)  A credit union shall take all necessary steps to ensure that its auditor is duly appointed as the auditor of each of its subsidiaries unless the Superintendent authorizes another person to act as auditor of a subsidiary. 1994, c. 11, s. 166 (1); 1997, c. 28, s. 53.

Exception

(2)  If a person is appointed as auditor by a body corporate before it becomes a subsidiary of a credit union, the person may complete the term of the appointment. 1994, c. 11, s. 166 (2).

Rights and Duties of Auditors

Right of access

167.  (1)  The auditor of a credit union has a right of access at all times to all records and documents of the credit union. 2007, c. 7, Sched. 7, s. 92.

Same

(2)  The auditor is entitled to require from the board, directors, officers, employees and agents of the credit union such information and explanations as the auditor considers necessary to enable the auditor to make such reports as are required under this Act. 2007, c. 7, Sched. 7, s. 92.

Same

(3)  On the request of the auditor, the former directors, officers, employees or agents of the credit union shall, to the extent that they are reasonably able to do so, provide such information and explanations as are, in the opinion of the auditor, necessary to enable the auditor to perform the auditor’s duties. 1994, c. 11, s. 167 (3).

Right to attend meetings

168.  (1)  The auditor is entitled,

(a) to attend any meeting of members or shareholders of the credit union;

(b) to receive all notices and other communications relating to a meeting that a member or shareholder is entitled to receive; and

(c) to be heard at a meeting on any part of the business of the meeting that concerns him or her as auditor.

Required attendance

(2)  A member of a credit union who is entitled to vote at a meeting of members may require the auditor to attend such a meeting and the auditor shall do so at the credit union’s expense.

Notice

(3)  The member must give written notice to the credit union at least five days before the meeting that the member wishes the auditor to attend. 1994, c. 11, s. 168.

Auditor’s report

169.  (1)  The auditor shall make such examinations as will enable the auditor to report to the members of the credit union in accordance with this section. 1994, c. 11, s. 169 (1).

Same

(2)  The auditor shall report to the members on the financial statements to be placed before them at the annual meeting. 1994, c. 11, s. 169 (2).

Qualified report

(3)  If the auditor’s report is not an unqualified report, the auditor shall state in the report the reasons for the qualified report. 2007, c. 7, Sched. 7, s. 93 (1).

Report to Superintendent, Corporation for certain purposes

(3.1)  Within 10 days after the annual meeting, the auditor shall provide a copy of the audited financial statements and the auditor’s report to the Superintendent and the Corporation for the purpose of assisting them in carrying out their duties and powers under this Act, including, without limiting the generality of the foregoing, for the purposes of the following:

1. Determining whether conditions on the deposit insurance of the credit union should be imposed or amended under section 270.

2. Determining whether the deposit insurance of the credit union should be cancelled under section 274.

3. Determining the annual premium for the credit union under section 276.1. 2007, c. 7, Sched. 7, s. 93 (1).

Facts discovered subsequently

(4)  If facts come to the attention of an officer, the board or the audit committee which, if they had been known before the most recent annual meeting, would have required a material adjustment to the financial statement presented at the meeting, the officer, board or audit committee shall notify the auditor who reported to the members at the meeting and the board shall promptly amend the financial statement and send it to the auditor. 2007, c. 7, Sched. 7, s. 93 (1).

Amendment of report

(5)  Upon receipt of the facts furnished under subsection (4) or from any other source, the auditor shall amend the report in respect of the financial statement furnished under that subsection if the auditor considers the amendment necessary. 1994, c. 11, s. 169 (5).

Notice of amendment

(6)  The board shall mail the amended report to the members but, if the board does not do so within a reasonable time, the auditor shall mail it to them. 1994, c. 11, s. 169 (6).

Amended report to Superintendent, Corporation

(7)  Within 10 days after providing the amended report to the credit union, the auditor shall provide a copy of the amended report to the Superintendent and the Corporation. 2007, c. 7, Sched. 7, s. 93 (2).

Auditing standards

(8)  The auditor’s examination referred to in subsection (1) shall, except as otherwise specified by the Corporation, be conducted in accordance with generally accepted auditing standards, the primary source of which is the Handbook of the Canadian Institute of Chartered Accountants. 2007, c. 7, Sched. 7, s. 93 (2).

Report to address fair value, adequacy of capital, etc.

(9)  The auditor’s report shall address the fair value of the assets and liabilities of the credit union and the credit union’s compliance with section 84. 2007, c. 7, Sched. 7, s. 93 (2).

Duty at meetings

170.  If the auditor is present at a meeting of members or shareholders, the auditor shall answer inquiries directed to the auditor concerning the basis for the auditor’s report under section 169. 2007, c. 7, Sched. 7, s. 94.

Extended examination required by Superintendent

171.  (1)  The Superintendent may, in writing, require that the auditor of a credit union,

(a) report to the Superintendent on the extent of the auditor’s procedures in the examination of the credit union’s financial statements;

(b) enlarge or extend the scope of that examination; or

(c) perform any other specific procedure. 1994, c. 11, s. 171 (1); 1997, c. 28, s. 53.

Same

(2)  The auditor shall comply with any direction by the Superintendent under subsection (1) and report to the Superintendent and to such other persons as the Superintendent may direct the results of the extended examination or a specified procedure. 1994, c. 11, s. 171 (2); 1997, c. 28, s. 53.

Special examination

(3)  The Superintendent may, in writing, require that the auditor make an examination relating to the adequacy of the procedures adopted by the credit union for the safety of its creditors, members and shareholders, or any other examination that the public interest may require. 1994, c. 11, s. 171 (3); 1997, c. 28, s. 53.

Same

(4)  The auditor shall report the results of an examination to the Superintendent or to such persons as the Superintendent may direct. 1994, c. 11, s. 171 (4); 1997, c. 28, s. 53.

Special examination by auditor appointed by Superintendent

(5)  The Superintendent may direct that a special audit of a credit union be made if, in the opinion of the Superintendent, it is necessary and may appoint, for that purpose, an auditor qualified pursuant to subsection 160 (1). 1994, c. 11, s. 171 (5); 1997, c. 28, s. 53.

Expenses payable by credit union

(6)  The credit union shall pay the expenses of an examination or audit referred to in this section after the expenses have been approved, in writing, by the Superintendent. 1994, c. 11, s. 171 (6); 1997, c. 28, s. 53.

Extended examination required by Corporation

171.1  The Corporation may exercise the powers of the Superintendent under section 171 and, for that purpose, the references to the Superintendent in section 171 shall be deemed to be references to the Corporation. 2007, c. 7, Sched. 7, s. 95.

Duty to report contravention, etc.

172.  (1)  The auditor of a credit union shall report in writing to the chair of the board and to the audit committee of the credit union any transaction or conditions that have come to the auditor’s attention adversely affecting the credit union that, in the auditor’s opinion, are not satisfactory and require rectification. 2007, c. 7, Sched. 7, s. 96 (1).

Same

(2)  Without restricting the generality of subsection (1), the auditor shall report on,

(a) transactions of the credit union that, in the auditor’s opinion, have not been within the powers of the credit union;

(b) loans made by the credit union to any person the aggregate amount of which exceeds one half of one per cent of the total assets of the credit union and in respect of which, in the auditor’s opinion, loss to the credit union is likely to occur; or

(c) any circumstances that indicate that there may have been a contravention of this Act or the regulations. 1994, c. 11, s. 172 (2); 2007, c. 7, Sched. 7, s. 96 (2).

Same

(3)  If a report is made with respect to loans described in clause (2) (b), it is not necessary to report those loans again unless, in the opinion of the auditor, the amount of the loss likely to occur has increased. 1994, c. 11, s. 172 (3).

Transmission of report

(4)  If an auditor reports under this section,

(a) the auditor shall transmit the report, in writing, to the chair of the board and to the audit committee;

(b) the report shall be presented at the first meeting of directors following its receipt;

(c) the report shall be incorporated in the minutes of that meeting; and

(d) the auditor shall, at the time of transmitting the report pursuant to clause (a), provide the Superintendent and the Corporation with a copy of the report. 1994, c. 11, s. 172 (4); 1997, c. 28, s. 53; 2007, c. 7, Sched. 7, s. 96 (3, 4).

PART VIII
BUSINESS POWERS

Permitted Business Activities

Permitted activities

173.  Subject to this Act, a credit union shall not engage in or carry on a business or business activity other than the following businesses, business activities and such others as may be authorized by this Act or prescribed:

1. Provide financial services primarily to its members, depositors, subsidiaries and affiliates.

2. Hold and deal with real property.

3. Act as a custodian of property on behalf of its members, depositors, subsidiaries and affiliates.

4. Provide administrative, educational, promotional, technical, research and consultative services to its members, depositors, subsidiaries and affiliates.

5. Make loans to officers and employees of the credit union. 1994, c. 11, s. 173; 2007, c. 7, Sched. 7, s. 97.

6., 7. Repealed: 2007, c. 7, Sched. 7, s. 97.

1994, c. 11, s. 173; 2007, c. 7, Sched. 7, s. 97.

Restrictions on Powers

Ancillary businesses

174.  (1)  A credit union shall not deal in goods or engage in any trade or business except as authorized by this Act or as prescribed. 2007, c. 7, Sched. 7, s. 98 (1).

Same

(2)  Despite subsection (1), a credit union may, with the Superintendent’s written approval, deal in goods or engage in any trade or business that is reasonably ancillary to the provision of financial services. 1994, c. 11, s. 174 (2); 1997, c. 28, s. 53.

Prohibition re financial services

(3)  A credit union shall not provide financial services prescribed as prohibited. 2007, c. 7, Sched. 7, s. 98 (2).

Networking

(4)  Subject to this Act, a credit union may act as an agent for a subsidiary or other prescribed persons or entities in respect of the provision of services to the credit union’s members, depositors, affiliates and other subsidiaries and refer members, depositors, affiliates or subsidiaries to one of its subsidiaries or other prescribed persons or entities. 1994, c. 11, s. 174 (4).

Restriction re partnerships

175.  (1)  A credit union shall not be a general partner in a limited partnership or a partner in any other partnership. 1994, c. 11, s. 175 (1).

Exception

(2)  Despite subsection (1), the Superintendent may authorize a credit union to become a general partner in a limited partnership or a partner in another partnership. 1994, c. 11, s. 175 (2); 1997, c. 28, s. 53.

Restrictions on insurance

176.  (1)  A credit union may undertake the business of insurance or act as an agent for any person in placing insurance only to the extent permitted by the regulations.

Savings

(2)  Nothing in this section precludes a credit union from,

(a) requiring insurance to be placed by a member for the security of the credit union; or

(b) obtaining group insurance for its employees, its members or the employees of a subsidiary.

Same

(3)  Nothing in this section precludes a league from obtaining group insurance for its employees, its members or the employees of its members or of a subsidiary.

No pressure

(4)  A credit union shall not exercise pressure on a member to place insurance for the security of the credit union with any particular insurance company.

Insurance requirement

(5)  A credit union may require that any insurance chosen by a member meet with its approval.

Same

(6)  The approval required under subsection (5) shall not be unreasonably withheld.

Interpretation

(7)  For the purpose of this section, the business of insurance includes the issuing of an annuity where the liability thereon is contingent on the death of a person. 1994, c. 11, s. 176.

Restrictions on fiduciary activities

177.  A credit union may undertake fiduciary activities only to the extent permitted by the regulations. 1994, c. 11, s. 177.

Guarantees

178.  (1)  A credit union may not guarantee the payment of money on behalf of another person unless,

(a) it is a fixed sum of money, with or without interest thereon; and

(b) the person has an unqualified obligation to reimburse the credit union for the full amount being guaranteed. 1994, c. 11, s. 178 (1).

Authorization by the Corporation

(2)  Despite subsection (1), the Corporation may authorize a credit union to guarantee a payment in circumstances other than those described in that subsection. 2007, c. 7, Sched. 7, s. 99 (1).

Conditions

(3)  A guarantee is subject to such conditions and restrictions as may be prescribed. 1994, c. 11, s. 178 (3).

Limit on amount

(4)  The aggregate value of a credit union’s guarantees together with those of its subsidiaries must not exceed a prescribed per cent of the regulatory capital and deposits of the credit union. 1994, c. 11, s. 178 (4).

Exemption

(5)  The Corporation may exempt a credit union from the limit under subsection (4) on the aggregate value of guarantees. 2007, c. 7, Sched. 7, s. 99 (2).

Non-application

(6)  Subsection (1) does not apply in the case of an indemnity under section 157. 1994, c. 11, s. 178 (6).

Non-application of s. (1) (a)

(7)  Clause (1) (a) does not apply with respect to a guarantee given by a credit union on behalf of a league or a financial institution that is a member of the Canadian Payments Association if the payment guaranteed represents the obligation of the league or financial institution to settle for payment items in accordance with the by-laws and rules of the Canadian Payments Association or such other guarantees as may be prescribed. 2007, c. 7, Sched. 7, s. 99 (3).

Appointment of receiver, etc.

179.  A credit union shall not give a person the right to appoint a receiver or a receiver and manager of the property or business of the credit union. 2007, c. 7, Sched. 7, s. 100.

Deposits

Deposits accepted from members, etc.

180.  (1)  A credit union may accept deposits only from,

(a) its members;

(b) the Corporation;

(c) Her Majesty in right of Canada or of a province;

(d) an agency of Her Majesty in right of either Canada or of a province;

(e) the government of a foreign country;

(f) a political subdivision or an agency of a government of a foreign country;

(g) municipalities;

(h) crown agencies;

(i) entities directly funded by the federal government, a provincial government or a municipality;

(j) leagues;

(j.1) subject to any restrictions in the by-laws of the credit union, persons who have not become members of the credit union but whose deposit accounts were acquired by the credit union as a result of the purchase of all or part of the business of another financial institution that is not a credit union;

(k) other persons or entities approved by the Superintendent. 1994, c. 11, s. 180; 1997, c. 28, s. 53; 2007, c. 7, Sched. 7, s. 101 (1, 2).

Authority to accept deposits

(2)  A credit union may, without the intervention of another person,

(a) accept a deposit from a person referred to in subsection (1) whether or not the person is qualified by law to enter into contracts; and

(b) pay all or part of the principal of the deposit and all or part of the interest earned on the deposit to or to the order of that person. 2007, c. 7, Sched. 7, s. 101 (3).

Exception

(3)  Clause (2) (b) does not apply if, before the payment is made, the money deposited with the credit union is claimed by another person,

(a) in an action or proceeding to which the credit union is a party and in respect of which service of a claim or other process originating that action or proceeding has been made on the credit union; or

(b) in an action or proceeding pursuant to which an injunction or order made by the court requiring the credit union not to make payment of that money or to make payment of it to some person other than the depositor has been served on the credit union. 2007, c. 7, Sched. 7, s. 101 (3).

Same

(4)  In the case of a claim referred to in subsection (3), the money may be paid to the depositor only with the consent of the claimant or to the claimant only with the consent of the depositor. 2007, c. 7, Sched. 7, s. 101 (3).

RRSPs for employees of a member

(5)  Despite subsection (1), a credit union may accept deposits for RRSPs for employees of a member if the member was involved in the establishment of the RRSPs at the credit union and the member makes payments into the RRSPs on behalf of the employees. 2007, c. 7, Sched. 7, s. 101 (3).

Application of other provisions

(6)  Subsections (2), (3) and (4) apply, with necessary modifications, with respect to employees referred to in subsection (5). 2007, c. 7, Sched. 7, s. 101 (3).

Definition

(7)  In subsection (5),

“RRSPs” means registered retirement savings plans within the meaning of subsection 146 (1) of the Income Tax Act (Canada). 2007, c. 7, Sched. 7, s. 101 (3).

Not bound by trust

181.  (1)  A credit union is not bound to see to the execution of any trust to which any deposit is subject. 2007, c. 7, Sched. 7, s. 102.

Application, payment when credit union has notice of trust

(2)  Subsection (1) applies whether the trust is express, implied or constructive and applies even when the credit union has notice of the trust if the credit union acts on the order of or under the authority of the holder or holders of the account into which the deposit is made. 2007, c. 7, Sched. 7, s. 102.

Unclaimed deposits

182.  (1)  If 10 years have elapsed since the day on which the last transaction by a depositor took place on the depositor’s account or a statement of account was last requested or acknowledged by the depositor, whichever is latest, the credit union shall pay the amount on deposit to the Minister. 2007, c. 7, Sched. 7, s. 102.

Obligation discharged

(2)  Payment to the Minister discharges the credit union from all liability in respect of the amounts paid. 2007, c. 7, Sched. 7, s. 102.

Payment by Minister

(3)  The Minister shall pay the amount received under subsection (1) to a person claiming to be entitled to it upon being furnished with satisfactory evidence of the person’s entitlement. 2007, c. 7, Sched. 7, s. 102.

Two-year notice

(4)  If two years have elapsed since the day on which the last transaction by a depositor took place on the depositor’s account or a statement of account was last requested or acknowledged by the depositor, whichever is latest, the credit union shall mail a notice to the depositor, at the depositor’s last known address, notifying the depositor that the deposit remains unpaid. 2007, c. 7, Sched. 7, s. 102.

Five-year notice

(5)  If five years have elapsed since the day on which the last transaction by a depositor took place on the depositor’s account or a statement of account was last requested or acknowledged by the depositor, whichever is latest, the credit union shall mail a notice to the depositor, at the depositor’s last known address, notifying the depositor that the deposit remains unpaid. 2007, c. 7, Sched. 7, s. 102.

Application despite other Act

(6)  This section applies despite the provisions of any other Act that would apply with respect to the disposition of an unclaimed and unpaid amount on deposit and the provisions of any such other Act shall not apply with respect to such an amount. 2007, c. 7, Sched. 7, s. 102.

Debt Obligations

Borrowing

183.  (1)  A credit union may borrow only if authorized to do so by its by-laws. 2007, c. 7, Sched. 7, s. 102.

Scope of authority

(2)  The by-laws may authorize the credit union to borrow money at such rates of interest and on such conditions as the board may determine. 2007, c. 7, Sched. 7, s. 102.

Limit on amount

(3)  A credit union shall not borrow an aggregate amount exceeding 50 per cent of its regulatory capital and deposits or such lesser amount as may be established by its by-laws. 2007, c. 7, Sched. 7, s. 102.

Security interests in credit union property

184.  A credit union may create a security interest in property of the credit union only as prescribed. 2007, c. 7, Sched. 7, s. 102.

Notice re acquisitions subject to security interests

185.  A credit union shall notify the Corporation in writing if it acquires, other than by way of realization on the security for a loan, a beneficial interest in property that is subject to a security interest. 2007, c. 7, Sched. 7, s. 102.

Restrictions on subordinated indebtedness

186.  (1)  A credit union shall not issue subordinated indebtedness unless it is fully paid for in money or, with the approval of the Superintendent, in property. 1994, c. 11, s. 186 (1); 1997, c. 28, s. 53.

References to subordinated indebtedness

(2)  No person shall, in any prospectus, offering statement, advertisement, correspondence or literature relating to any subordinated indebtedness issued or to be issued by a credit union, refer to the subordinated indebtedness other than as subordinated indebtedness. 1994, c. 11, s. 186 (2).

Not a deposit

(3)  Subordinated indebtedness issued by a credit union is not considered to be a deposit. 1994, c. 11, s. 186 (3).

Other currencies

(4)  When issuing subordinated indebtedness, a credit union shall provide that any aspect of the subordinated indebtedness relating to money or involving the payment of or the liability to pay money in relation to the subordinated indebtedness be in Canadian currency. 1994, c. 11, s. 186 (4).

Limit on borrowing

187.  (1)  The Corporation may inquire into the borrowing by a credit union and may, by order, limit the credit union’s authority to borrow money. 2007, c. 7, Sched. 7, s. 103.

Reasons to be given

(2)  The Corporation shall set out the reasons for its decision in the order. 2007, c. 7, Sched. 7, s. 103.

Effect

(3)  The credit union shall not exercise its borrowing power in excess of any limit set out in the order of the Corporation. 2007, c. 7, Sched. 7, s. 103.

Procedural rules

(4)  Section 240.1 applies with respect to an order under this section. 2007, c. 7, Sched. 7, s. 103.

Appeal to Tribunal

(5)  The credit union that is subject to an order under this section may appeal the order to the Tribunal in accordance with section 240.4. 2007, c. 7, Sched. 7, s. 103.

Restriction on borrowing from another credit union

188.  No credit union shall borrow money from another credit union without the written approval of the Corporation. 2007, c. 7, Sched. 7, s. 103.

Investment and lending policies

189.  (1)  A credit union shall establish investment and lending policies for the credit union and the credit union shall adhere to those policies. 2007, c. 7, Sched. 7, s. 103.

Policies to be prudent

(2)  The investment and lending policies of a credit union shall consist of policies, standards and procedures that a reasonable and prudent person would apply in respect of a portfolio of investments and loans in order to avoid undue risk of loss and obtain a reasonable return. 2007, c. 7, Sched. 7, s. 103.

Approval and review by board

(3)  The investment and lending policies of a credit union are subject to the approval of the board and the board shall review the policies at least once each year. 2007, c. 7, Sched. 7, s. 103.

Order if policies inadequate, etc.

(4)  If the Corporation considers the investment and lending policies of the credit union to be inadequate or imprudent, the Corporation may order the credit union to cease investing or lending as specified in the order until the policies are amended in accordance with the order. 2007, c. 7, Sched. 7, s. 103.

Procedural rules

(5)  Section 240.1 applies with respect to an order under this section. 2007, c. 7, Sched. 7, s. 103.

Appeal to Tribunal

(6)  The credit union that is subject to an order under this section may appeal the order to the Tribunal in accordance with section 240.4. 2007, c. 7, Sched. 7, s. 103.

Loans

Loans to members only

190.  (1)  A credit union shall loan money only,

(a) to its members; or

(b) by participating in a loan syndication in which the borrower is a member of a credit union that is one of the lenders in the loan syndicate. 2007, c. 7, Sched. 7, s. 103.

Exception – loans acquired by purchase

(2)  If a credit union acquires a loan as a result of a purchase of all or part of the business of another financial institution, the credit union may continue that loan, despite subsection (1), for one year after the loan is acquired or, if the loan is for a specified term, until the end of that term. 2007, c. 7, Sched. 7, s. 103.

Prescribed lending limits

191.  (1)  A credit union shall not make loans in excess of such lending limits as may be prescribed or as may be ordered under subsection (2) or (5). 2007, c. 7, Sched. 7, s. 103.

Lowering lending limits

(2)  The Corporation may, by order, lower a credit union’s lending limits if the Corporation believes on reasonable grounds that the credit union’s current lending limits may adversely affect the interests of the credit union’s members, depositors or shareholders. 2007, c. 7, Sched. 7, s. 103.

Procedural rules

(3)  Section 240.1 applies with respect to an order under subsection (2). 2007, c. 7, Sched. 7, s. 103.

Appeal to Tribunal

(4)  The credit union that is subject to an order under subsection (2) may appeal the order to the Tribunal in accordance with section 240.4. 2007, c. 7, Sched. 7, s. 103.

Raising lending limits

(5)  On application by a credit union, the Corporation may, by order on terms specified in the order, raise the credit union’s lending limits if the Corporation is satisfied there are reasonable grounds for doing so. 2007, c. 7, Sched. 7, s. 103.

192.-196.  Repealed: 2007, c. 7, Sched. 7, s. 103.

Loan workouts

197.  (1)  Despite anything in this Part, if a credit union has made a loan and a default has occurred, the credit union may, subject to the agreement between the credit union and entity governing the loan, 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. 1994, c. 11, s. 197 (1).

Divestment if not in compliance with investment and lending policies

(2)  If the securities acquired by a credit union because of a default on a loan are not an investment permitted by the credit union’s investment and lending policies, the credit union shall divest itself of the securities within two years after their acquisition or within such further time as the Corporation may authorize. 2007, c. 7, Sched. 7, s. 104.

Order for call of unauthorized loans

197.0.1  (1)  The Corporation may order a credit union to call any loan it has made that is not authorized by this Act, the regulations or the by-laws of the credit union. 2007, c. 7, Sched. 7, s. 105.

Time to comply

(2)  Despite section 240.3, an order under this section shall allow the credit union at least 60 days to comply with the order. 2007, c. 7, Sched. 7, s. 105.

Procedural rules

(3)  Section 240.1 applies with respect to an order under this section. 2007, c. 7, Sched. 7, s. 105.

Appeal to Tribunal

(4)  The credit union that is subject to an order under this section may appeal the order to the Tribunal in accordance with section 240.4. 2007, c. 7, Sched. 7, s. 105.

Note: On a day to be named by proclamation of the Lieutenant Governor, the Act is amended by the Statutes of Ontario, 1999, chapter 12, Schedule I, subsection 2 (6) by adding the following section:

Cost of Borrowing

Definition of “cost of borrowing”

197.1  In sections 197.2 to 197.10,

“cost of borrowing”, for a loan made by a credit union, means,

(a) the interest or discount applicable to the loan,

(b) any amount charged in connection with the loan that is payable by the borrower to the credit union,

(c) any amount charged in connection with the loan that is payable by the borrower to a person other than the credit union, where the amount is chargeable, directly or indirectly, by the person to the credit union, and

(d) any charge prescribed by the regulations as included in the cost of borrowing,

but does not include any charge prescribed by the regulations as excluded from the cost of borrowing.

See: 1999, c. 12, Sched. I, ss. 2 (6), 8 (2).

Note: On a day to be named by proclamation of the Lieutenant Governor, the Act is amended by the Statutes of Ontario, 1999, chapter 12, Schedule I, subsection 2 (6) by adding the following section:

Rebate of borrowing costs

197.2  (1)  This section applies where,

(a) a credit union makes a loan to a natural person;

(b) the loan is not secured by a mortgage on real property;

(c) the loan is required to be repaid either on a fixed future date or by instalments; and

(d) the loan is prepaid in full.

Same

(2)  In the circumstances described in subsection (1), the credit union shall, in accordance with the regulations, rebate to the borrower a portion of the cost of borrowing for the loan.

Limitation

(3)  For the purposes of subsection (2) and the regulations made under clause 197.10 (1) (b), the cost of borrowing for a loan does not include the interest or discount applicable to the loan.

See: 1999, c. 12, Sched. I, ss. 2 (6), 8 (2).

Note: On a day to be named by proclamation of the Lieutenant Governor, the Act is amended by the Statutes of Ontario, 1999, chapter 12, Schedule I, subsection 2 (6) by adding the following section:

Disclosure of cost of borrowing

197.3  (1)  A credit union shall not make a loan to a natural person unless the cost of borrowing and any other information prescribed for the purposes of this section by the regulations have been disclosed by the credit union to the person.

Same

(2)  For the purposes of disclosure required by subsection (1), the cost of borrowing,

(a) shall be calculated on the basis that all obligations of the borrower are duly fulfilled;

(b) shall be calculated in accordance with the regulations;

(c) shall be expressed as a rate per annum; and

(d) where required by the regulations, shall be expressed as an amount in dollars and cents.

See: 1999, c. 12, Sched. I, ss. 2 (6), 8 (2).

Note: On a day to be named by proclamation of the Lieutenant Governor, the Act is amended by the Statutes of Ontario, 1999, chapter 12, Schedule I, subsection 2 (6) by adding the following section:

Additional disclosure – term loans

197.4  Where a credit union makes a loan to a natural person and the loan is required to be repaid either on a fixed future date or by instalments, the credit union shall disclose the following to the borrower:

1. Whether the borrower has the right to repay the amount borrowed before the maturity of the loan.

2. Any terms and conditions relating to a right described in paragraph 1, including particulars of the circumstances in which the borrower may exercise the right.

3. Whether any portion of the cost of borrowing for the loan is to be rebated to the borrower or any charge or penalty is to be imposed on the borrower, if the borrower exercises a right described in paragraph 1.

4. The manner in which any rebate, charge or penalty referred to in paragraph 3 is to be calculated.

5. Particulars of any charges or penalties to be imposed on the borrower if the borrower fails to repay the amount of the loan at maturity or fails to pay an instalment on the day the instalment is due to be paid.

6. Particulars of any prescribed change relating to the loan agreement or the cost of borrowing for the loan.

7. Particulars of any rights or obligations of the borrower prescribed by the regulations for the purposes of this section.

8. Any other information prescribed by the regulations for the purposes of this section.

See: 1999, c. 12, Sched. I, ss. 2 (6), 8 (2).

Note: On a day to be named by proclamation of the Lieutenant Governor, the Act is amended by the Statutes of Ontario, 1999, chapter 12, Schedule I, subsection 2 (6) by adding the following section:

Disclosure in applications for credit cards, etc.

197.5  A form or other document used by a credit union for the purposes of an application for a credit card, payment card or charge card shall contain the information prescribed by the regulations for the purposes of this section or be accompanied by a document that contains that information.

See: 1999, c. 12, Sched. I, ss. 2 (6), 8 (2).

Note: On a day to be named by proclamation of the Lieutenant Governor, the Act is amended by the Statutes of Ontario, 1999, chapter 12, Schedule I, subsection 2 (6) by adding the following section:

Disclosure where credit cards, etc., issued

197.6  Where a credit union issues a credit card, payment card or charge card to a natural person, the credit union shall disclose the following to the person:

1. Particulars of any charges or penalties to be imposed on the person if he or she fails to pay an amount in accordance with the agreement governing the card.

2. Particulars of any charges for which the person becomes responsible by accepting or using the card.

3. Particulars of any prescribed change relating to the loan agreement or the cost of borrowing for any loan obtained through the use of the card.

4. Particulars of any rights or obligations of the person prescribed by the regulations for the purposes of this section.

5. Any other information prescribed by the regulations for the purposes of this section.

See: 1999, c. 12, Sched. I, ss. 2 (6), 8 (2).

Note: On a day to be named by proclamation of the Lieutenant Governor, the Act is amended by the Statutes of Ontario, 1999, chapter 12, Schedule I, subsection 2 (6) by adding the following section:

Additional disclosure: loans to which ss. 197.4 and 197.6 do not apply

197.7  (1)  Where a credit union enters into an arrangement for the making of a loan to a natural person and neither section 197.4 nor section 197.6 apply in respect of the arrangement, the credit union shall disclose the following to the person:

1. Particulars of any charges or penalties to be imposed on the person if he or she fails to pay an amount in accordance with the arrangement.

2. Particulars of any charges for which the person becomes responsible by entering the arrangement.

3. Particulars of any prescribed change relating to the arrangement or the cost of borrowing under the arrangement.

4. Particulars of any rights or obligations of the person prescribed by the regulations for the purposes of this section.

5. Any other information prescribed by the regulations for the purposes of this section.

Interpretation

(2)  For the purposes of subsection (1), an arrangement for the making of a loan includes an arrangement for a line of credit.

See: 1999, c. 12, Sched. I, ss. 2 (6), 8 (2).

Note: On a day to be named by proclamation of the Lieutenant Governor, the Act is amended by the Statutes of Ontario, 1999, chapter 12, Schedule I, subsection 2 (6) by adding the following section:

Statement re mortgage renewal

197.8  Where a credit union makes a loan to a natural person and the loan is secured by a mortgage on real property, the credit union shall disclose to the person such information respecting renewal of the loan as is prescribed by the regulations.

See: 1999, c. 12, Sched. I, ss. 2 (6), 8 (2).

Note: On a day to be named by proclamation of the Lieutenant Governor, the Act is amended by the Statutes of Ontario, 1999, chapter 12, Schedule I, subsection 2 (6) by adding the following section:

Disclosure in advertising

197.9  (1)  This section applies to an advertisement that,

(a) relates to loans, credit cards, payment cards or charge cards that are offered by a credit union to a natural person or to arrangements to which section 197.7 applies that are offered by a credit union to a natural person; and

(b) purports to contain information relating to the cost of borrowing or any other prescribed matter.

Same

(2)  No person shall authorize any advertisement described in subsection (1) unless the advertisement contains the information that may be required by the regulations and is in the form and manner that may be prescribed.

See: 1999, c. 12, Sched. I, ss. 2 (6), 8 (2).

Note: On a day to be named by proclamation of the Lieutenant Governor, the Act is amended by the Statutes of Ontario, 1999, chapter 12, Schedule I, subsection 2 (6) by adding the following section:

Regulations re disclosure

197.10  (1)  The Lieutenant Governor in Council may make regulations,

(a) prescribing, for the purposes of section 197.1, charges that are included in the cost of borrowing and charges that are excluded from the cost of borrowing;

(b) governing rebates to be made under section 197.2;

(c) prescribing information other than the cost of borrowing that must be disclosed under section 197.3;

(d) prescribing the manner of calculating the cost of borrowing for the purposes of section 197.3;

(e) prescribing the circumstances in which the cost of borrowing must be expressed as an amount in dollars and cents for the purposes of section 197.3;

(f) prescribing the manner of calculating any rebate referred to in paragraph 4 of section 197.4;

(g) prescribing changes for the purposes of paragraph 6 of section 197.4, paragraph 3 of section 197.6 and paragraph 3 of subsection 197.7 (1);

(h) prescribing rights and obligations of borrowers for the purposes of paragraph 7 of section 197.4, paragraph 4 of section 197.6 and paragraph 4 of subsection 197.7 (1);

(i) prescribing information that must be disclosed under paragraph 8 of section 197.4, paragraph 5 of section 197.6 and paragraph 5 of subsection 197.7 (1);

(j) prescribing information for the purposes of section 197.5;

(k) prescribing information for the purposes of section 197.8;

(l) prescribing matters for the purposes of clause 197.9 (1) (b) and respecting the form, manner and content of advertisements for the purposes of subsection 197.9 (2);

(m) prescribing the time, manner and form of any disclosure required under sections 197.3 to 197.9;

(n) prescribing classes of loans in respect of which some or all of the requirements of sections 197.2 to 197.9 do not apply;

(o) prohibiting the imposition of any charge or penalty referred to in section 197.4, 197.6 or 197.7;

(p) governing the nature and amount of any charge or penalty referred to in section 197.4, 197.6 or 197.7 that may be imposed by a credit union, including but not limited to,

(i) regulations providing that such a charge or penalty shall not exceed an amount prescribed in the regulation, and

(ii) regulations respecting the costs of the credit union that may be included or must be excluded in the determination of the charge or penalty;

(q) respecting any other matter or thing that is necessary to carry out the purposes of sections 197.2 to 197.9.

Same

(2)  A regulation made under clause (1) (a) may exclude charges described in clause (a), (b) or (c) of the definition of “cost of borrowing” in section 197.1.

Same

(3)  A regulation made under subsection (1) may be general or particular in its application and may be restricted in its application to the class or classes of loans set out in the regulation.

See: 1999, c. 12, Sched. I, ss. 2 (6), 8 (2).

Investments

Eligible investments

198.  A credit union shall invest only in such types of securities or property and on such conditions as are prescribed for its class. 2007, c. 7, Sched. 7, s. 106.

Exception to restriction re single investment

199.  (1)  A credit union may directly or indirectly invest, by way of purchase from or loans to a single person or to two or more connected persons, more than the amount prescribed for its class only if,

(a) the investment is in the form of deposits with or loans to,

(i) a financial institution that is not a credit union or a securities dealer,

(ii) the Corporation, or

(iii) a prescribed person or entity; or

(b) the investment is in 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. 2007, c. 7, Sched. 7, s. 106.

Connected persons

(2)  For the purposes of this section, two or more persons are connected persons if they satisfy the prescribed conditions. 2007, c. 7, Sched. 7, s. 106.

Establishing or acquiring subsidiary

200.  (1)  A credit union may establish or acquire a subsidiary only if the subsidiary is prescribed and only with the approval of the Corporation and the establishment or acquisition of a subsidiary is subject to such restrictions as may be prescribed and to such additional conditions as the Corporation may, by order, impose. 2007, c. 7, Sched. 7, s. 106.

Deemed prescribed subsidiary

(2)  On written application by a credit union, the Corporation may, by order and on such conditions as are specified in the order, deem a body corporate named in the order to be, for all purposes of this Act, a prescribed subsidiary if its activities are substantially similar to those of a body corporate identified as a prescribed subsidiary. 2007, c. 7, Sched. 7, s. 106.

Refusal of approval to be by order

(3)  If the Corporation refuses to approve the establishment or acquisition of a subsidiary, the Corporation shall do so by order. 2007, c. 7, Sched. 7, s. 106.

Anti-avoidance

(4)  The Corporation shall issue an order refusing to approve the establishment or acquisition of a subsidiary if it considers that the establishment or acquisition is primarily for the purpose of allowing the credit union to avoid the limits under this Act or the regulations on its investments. 2007, c. 7, Sched. 7, s. 106.

Revocation of approval

(5)  The Corporation may, by order, revoke its approval if,

(a) the credit union has failed to comply with the conditions and restrictions applicable to the investment; or

(b) the body corporate is no longer a prescribed subsidiary. 2007, c. 7, Sched. 7, s. 106.

Effect of revocation

(6)  Upon a revocation of an approval, the credit union shall divest itself of the investment in accordance with the order effecting the revocation. 2007, c. 7, Sched. 7, s. 106.

Restriction on investments in subsidiaries

(7)  A credit union shall ensure that the total book value of investments held by the credit union in subsidiaries of the credit union and of guarantees by the credit union of the obligations of such subsidiaries does not exceed the prescribed percentage of the regulatory capital of the credit union. 2007, c. 7, Sched. 7, s. 106.

Procedural rules

(8)  Section 240.1 applies with respect to an order under this section. 2007, c. 7, Sched. 7, s. 106.

Appeal to Tribunal

(9)  The credit union that is subject to an order under this section may appeal the order to the Tribunal in accordance with section 240.4. 2007, c. 7, Sched. 7, s. 106.

Variation of requirements

201.  (1)  A credit union may apply to the Corporation for a variation of the requirements under section 198, subsection 199 (1) or subsection 200 (7). 2007, c. 7, Sched. 7, s. 106.

Application

(2)  An application must be in a form approved by the Corporation. 2007, c. 7, Sched. 7, s. 106.

Variation

(3)  The Corporation may grant the variation subject to any terms it considers appropriate if it considers that granting the variation is in the interest of the members of the credit union. 2007, c. 7, Sched. 7, s. 106.

Investment in another credit union

201.1  (1)  A credit union shall not invest in another credit union without the approval of the Corporation. 2007, c. 7, Sched. 7, s. 106.

Refusal of approval to be by order

(2)  If the Corporation refuses to approve an investment in another credit union, the Corporation shall do so by order. 2007, c. 7, Sched. 7, s. 106.

Procedural rules

(3)  Section 240.1 applies with respect to an order under this section. 2007, c. 7, Sched. 7, s. 106.

Appeal to Tribunal

(4)  The credit union that is subject to an order under this section may appeal the order to the Tribunal in accordance with section 240.4. 2007, c. 7, Sched. 7, s. 106.

Status of investments upon amalgamation, etc.

202.  (1)  The Corporation may authorize the acceptance by a credit union of securities or other assets not fulfilling the requirements of this Act,

(a) obtained under an arrangement made in good faith for the reorganization of a body corporate whose securities were previously owned by the credit union;

(b) obtained under an amalgamation with another body corporate of the body corporate whose securities were previously owned by the credit union;

(c) obtained in good faith for the purpose of protecting investments of the credit union;

(d) obtained by virtue of the purchase by the credit union of the assets of another credit union;

(e) obtained by virtue of realizing on the security for a loan where the security is shares in a body corporate; or

(f) obtained in payment or part payment for securities sold by the credit union. 1994, c. 11, s. 202 (1); 1997, c. 28, s. 53; 2007, c. 7, Sched. 7, s. 107 (1).

Divestment

(2)  The credit union shall divest itself of the securities or other assets within two years after their acquisition or within such further time as the Corporation may authorize. 2007, c. 7, Sched. 7, s. 107 (2).

Exception

(3)  The Corporation may relieve the credit union of the obligation to divest itself of the securities or other assets if the Corporation is satisfied that they are not inferior in status or value to the securities for which they have been substituted. 2007, c. 7, Sched. 7, s. 107 (2).

Order for disposal of unauthorized investments

202.1  (1)  The Corporation may order a credit union to dispose of any investment that was not made or is not held in accordance with this Act, the regulations, the Corporation’s by-laws or the credit union’s investment and lending policies. 2007, c. 7, Sched. 7, s. 108.

Time to comply

(2)  Despite section 240.3, an order under this section shall allow the credit union at least 60 days to comply with the order. 2007, c. 7, Sched. 7, s. 108.

Procedural rules

(3)  Section 240.1 applies with respect to an order under this section. 2007, c. 7, Sched. 7, s. 108.

Appeal to Tribunal

(4)  The credit union that is subject to an order under this section may appeal the order to the Tribunal in accordance with section 240.4. 2007, c. 7, Sched. 7, s. 108.

Directors’ liability

(5)  Subject to subsection (8), if the amount realized from the disposal of the investment is less than the amount paid by the credit union for it, the directors of the credit union are jointly and severally liable for the payment to the credit union of the amount of the difference. 2007, c. 7, Sched. 7, s. 108.

Objection to investment

(6)  A director who is present at a directors’ meeting at which an investment to which the director objects is authorized may,

(a) immediately deliver or send to the credit union by registered mail a protest against the investment; and

(b) within 30 days after delivering or sending the protest referred to in clause (a), send a copy of the protest by registered mail to the Corporation. 2007, c. 7, Sched. 7, s. 108.

Same

(7)  A director who is absent from a meeting at which an investment to which the director objects is authorized may,

(a) within 14 days after he or she becomes aware of the investment and is able to do so, deliver or send to the credit union by registered mail a protest against the investment; and

(b) within 30 days after delivering or sending the protest referred to in clause (a), send a copy of the protest by registered mail to the Corporation. 2007, c. 7, Sched. 7, s. 108.

Exoneration

(8)  A director who takes the steps set out in subsection (6) or (7) has no liability with respect to an investment to which he or she objected. 2007, c. 7, Sched. 7, s. 108.

Purchase and Sale of Assets

Interpretation

203.  For the purposes of section 204, a sale of property includes a sale, lease, exchange or other disposition of property and a purchase of property includes a lease, exchange of property or other acquisition of property. 2007, c. 7, Sched. 7, s. 109.

Purchase or sale of substantial assets

204.  (1)  A credit union shall not do any of the following unless authorized to do so by special resolution of the members of the credit union:

1. Sell assets if the market value of the assets is 15 per cent or more of the value of the credit union’s total assets.

2. Purchase assets of a financial institution if the market value of the assets is 15 per cent or more of the value of the credit union’s total assets. 2007, c. 7, Sched. 7, s. 109.

Alternative for certain sales

(2)  A credit union may proceed with a sale described in paragraph 1 of subsection (1) without a special resolution of the members if the sale is in the ordinary course of business and the purchaser pays the purchase price by paying cash. 2007, c. 7, Sched. 7, s. 109.

Determination of value of total assets

(3)  For the purposes of subsection (1), the value of the credit union’s total assets shall be as set out in the audited financial statements placed before the members at the most recent annual meeting. 2007, c. 7, Sched. 7, s. 109.

If more than one class of shares

(4)  If the credit union has more than one class of issued shares, the special resolution referred to in subsection (1) shall be in the form of a special resolution passed by the holders of each class of shares. 2007, c. 7, Sched. 7, s. 109.

Agreement and Corporation approval required

(5)  A credit union shall not proceed with a sale or purchase described in subsection (1), including a sale to which subsection (2) applies, unless there is an agreement for the sale or purchase and that agreement has been approved by the Corporation. 2007, c. 7, Sched. 7, s. 109.

Corporation approval required before authorization of members, etc.

(6)  A credit union shall not seek the authorization of the members and shareholders required under subsection (1) until the Corporation has approved the agreement under subsection (5). 2007, c. 7, Sched. 7, s. 109.

Refusal of approval to be by order

(7)  If the Corporation refuses to approve an agreement under subsection (5), the Corporation shall do so by order. 2007, c. 7, Sched. 7, s. 109.

Procedural rules

(8)  Section 240.1 applies with respect to an order under subsection (7). 2007, c. 7, Sched. 7, s. 109.

Appeal to Tribunal

(9)  The credit union that is subject to an order under subsection (7) may appeal the order to the Tribunal in accordance with section 240.4. 2007, c. 7, Sched. 7, s. 109.

Purchase price if transaction is between credit unions

(10)  In a purchase or sale described in subsection (1) in which both the purchaser and the seller are credit unions, the purchaser may pay the purchase price only in one or more of the following ways:

1. By assuming liabilities of the seller.

2. By paying cash.

3. By issuing shares that are not membership shares or patronage shares.

4. By issuing promissory notes. 2007, c. 7, Sched. 7, s. 109.

No splitting to avoid requirements

(11)  A credit union shall not structure a sale or purchase as two or more sales or purchases for the purpose of avoiding a requirement under this section. 2007, c. 7, Sched. 7, s. 109.

205., 206.  Repealed: 2007, c. 7, Sched. 7, s. 109.

PART IX
RESTRICTED PARTY TRANSACTIONS

General prohibition

207.  Except to the extent permitted under this Act or the regulations, a credit union or a subsidiary shall not directly or indirectly enter into any transaction with a restricted party of the credit union. 1994, c. 11, s. 207.

Loans to officers and directors

208.  (1)  A credit union may lend to an officer or a director an amount in excess of the aggregate of deposits of the officer or director pledged as collateral for the loan only if the board approves the loan before it is made. 2007, c. 7, Sched. 7, s. 110.

Delegation of authority to approve loan to committee

(2)  The board may delegate its authority to grant an approval under subsection (1) to a committee of the board on such terms and with such restrictions as may be specified by the board. 2007, c. 7, Sched. 7, s. 110.

Committee to report

(3)  A committee referred to in subsection (2) shall report details of the loans approved by the committee to the board at the first meeting of the board after the approval is given. 2007, c. 7, Sched. 7, s. 110.

Regulations

209.  The Lieutenant Governor in Council may make regulations governing transactions between a credit union or subsidiary and a restricted party. 1994, c. 11, s. 209.

Setting aside transactions

209.1  (1)  If a transaction with a restricted person that is prohibited or restricted by this Act or the regulations takes place, any interested person, including the Superintendent or Corporation, may apply to the court for an order,

(a) setting aside the transaction and directing that the restricted party account to a credit union for any profit or gain realized; and

(b) that each person who participated in or facilitated the transaction pay to the credit union on a joint and several basis the damages suffered, the face value of the transaction or the amount expended by the credit union in the transaction. 2007, c. 7, Sched. 7, s. 111.

Order

(2)  The court may make the order applied for or such other order as it thinks appropriate. 2007, c. 7, Sched. 7, s. 111.

Same

(3)  An order under subsection (2) may order compensation for a loss or damage suffered by the credit union and punitive damages from the restricted party. 2007, c. 7, Sched. 7, s. 111.

Exemption

(4)  A person who is not a director is not liable under clause (1) (b) unless the person knew or ought reasonably to have known that the transaction was made in contravention of a restricted party provision. 2007, c. 7, Sched. 7, s. 111.

Interpretation

210.  In this Part,

“restricted party” and “transaction” have the meaning given to those expressions in the regulation. 1994, c. 11, s. 210.

PART X
MEETINGS

Members’ and Shareholders’ Meetings

Notice of meetings

211.  (1)  Notice of the time and place for holding a meeting of the members of a credit union shall be given at the time and in the manner specified in the by-laws of the credit union to each member of the credit union who, on the record date for the notice, appears in the records of the credit union as a member. 2007, c. 7, Sched. 7, s. 112.

Same

(2)  Despite the by-laws of the credit union, notice of the time and place for holding a meeting shall be given at least 10 day