550. Sections 551 to 570 do not apply in respect of

(a) any interest in real property arising through the holding of a security interest in real property;

(b) any interest in an entity arising through the holding of a security interest in securities of that entity; or

(c) assets of a segregated fund maintained as required by subsection 542.03(2).

1991, c. 47, s. 550; 1997, c. 15, s. 289.

551. The directors of a society shall establish and the society shall adhere to investment and lending policies, standards and procedures that a reasonable and prudent person would apply in respect of a portfolio of investments and loans to avoid undue risk of loss and obtain a reasonable return.

552. (1) Subject to subsections (2) and (3), no society shall acquire control of, or hold, acquire or increase a substantial investment in, any entity other than a permitted entity.

(2) A society may acquire control of, or acquire or increase a substantial investment in, an entity other than a permitted entity by way of

(a) an acquisition of control of an entity referred to in any of paragraphs 554(1)(a) to (c), or of a prescribed entity, that controls or has a substantial investment in the entity; or

(b) an acquisition of shares or ownership interests in the entity by

(i) an entity referred to in any of paragraphs 554(1)(a) to (c), or a prescribed entity, that is controlled by the society, or

(ii) an entity controlled by an entity referred to in any of paragraphs 554(1)(a) to (c), or a prescribed entity, that is controlled by the society.

(3) A society may acquire control of, or acquire or increase a substantial investment in, an entity by way of

(a) a temporary investment permitted by section 557;

(b) an acquisition of shares of a body corporate or of ownership interests in an unincorporated entity permitted by section 558; or

(c) a realization of security permitted by section 559.

(4) A society is deemed not to contravene subsection (1) if the society acquires control of, or acquires or increases a substantial investment in, an entity solely as the result of an event not within the control of the society.

1991, c. 47, s. 552; 1997, c. 15, s. 290; 1999, c. 31, s. 144; 2001, c. 9, s. 437.

553. The Governor in Council may make regulations

(a) respecting the determination of the amount or value of loans, investments and interests for the purposes of sections 550 to 570;

(b) respecting the loans and investments, and the maximum aggregate amount of all loans and investments, that may be made or acquired by a society and its prescribed subsidiaries to or in a person and any persons connected with that person; and

(c) specifying the classes of persons who are connected with any person for the purposes of paragraph (b).

1991, c. 47, s. 553; 2001, c. 9, s. 437.

554. (1) Subject to subsections (4) and (5), a society may acquire control of, or acquire or increase a substantial investment in,

(a) a company or a society;

(b) an insurance corporation incorporated or formed by or under an Act of the legislature of a province; or

(c) an entity that is incorporated or formed, and regulated, otherwise than by or under an Act of Parliament or of the legislature of a province and that is primarily engaged outside Canada in a business that, if carried on in Canada, would be the business of insurance.

(2) Subject to subsections (3) to (5), a society may acquire control of, or acquire or increase a substantial investment in, an entity, other than an entity referred to in any of paragraphs (1)(a) to (c), whose business is limited to one or more of the following:

(a) engaging in any financial service activity or in any other activity that a property and casualty company is permitted to engage in under subsection 440(2) or section 441 or 442, other than paragraph 441(1)(h);

(b) acquiring or holding shares of, or ownership interests in, entities in which a society is permitted under this Part to hold or acquire;

(c) engaging in the provision of any services exclusively to any or all of the following, so long as the entity is providing those services to the society or any member of the society’s group:

(i) the society,

(ii) any member of the society’s group,

(iii) any entity that is primarily engaged in the business of providing financial services,

(iv) any permitted entity in which an entity referred to in subparagraph (iii) has a substantial investment, or

(v) any prescribed person, if it is doing so under prescribed terms and conditions, if any are prescribed;

(d) engaging in any activity that a society is permitted to engage in, other than an activity referred to in paragraph (a) or (e), that relates to

(i) the promotion, sale, delivery or distribution of a financial product or financial service that is provided by the society or any member of the society’s group, or

(ii) if a significant portion of the business of the entity involves an activity referred to in subparagraph (i), the promotion, sale, delivery or distribution of a financial product or financial service that is provided by any other entity that is primarily engaged in the business of providing financial services;

(e) engaging in the activities referred to in the definition “mutual fund entity” or “mutual fund distribution entity” in subsection 490(1); and

(f) engaging in prescribed activities, under prescribed terms and conditions, if any are prescribed.

(3) A society may not acquire control of, or acquire or increase a substantial investment in, an entity whose business includes any activity referred to in any of paragraphs (2)(a) to (e) if the entity engages in the business of accepting deposit liabilities or if the activities of the entity include

(a) activities that a property and casualty company is not permitted to engage in under any of sections 466, 469 and 478;

(b) any financial intermediary activity that exposes the entity to material market or credit risk, including the activities of a finance entity, a factoring entity and a financial leasing entity;

(b.1) the activities of a specialized financing entity;

(c) dealing in securities, except as may be permitted under paragraph (2)(e) or as may be permitted to a company under paragraph 440(2)(b);

(d) acquiring control of or acquiring or holding a substantial investment in another entity unless

(i) in the case of an entity that is controlled by the society, the society itself would be permitted under this Part to acquire a substantial investment in the other entity, or

(ii) in the case of an entity that is not controlled by the society, the society itself would be permitted to acquire a substantial investment in the other entity under subsection (1) or (2) or 552(2) or paragraph 552(3)(b) or (c); or

(e) any prescribed activity.

(4) Subject to subsection (6) and the regulations, a society may not acquire control of, or acquire or increase a substantial investment in,

(a) an entity referred to in any of paragraphs (1)(a) to (c), unless the society controls, within the meaning of paragraph 3(1)(d), the entity, or would thereby acquire control, within the meaning of that paragraph, of the entity; or

(b) an entity whose business includes an activity referred to in paragraph (2)(b), unless

(i) the society controls, within the meaning of paragraph 3(1)(d), the entity, or

(ii) subject to prescribed terms and conditions, if any are prescribed, the activities of the entity do not include the acquisition or holding of control of, or the acquisition or holding of shares or other ownership interests in, an entity referred to in paragraph (a) or an entity that is not a permitted entity.

(5) Subject to the regulations, a society may not, without the prior written approval of the Minister, acquire control of, or acquire or increase a substantial investment in, a permitted entity.

(6) A society need not control an entity referred to in paragraph (1)(c), or an entity that is incorporated or formed otherwise than by or under an Act of Parliament or of the legislature of a province, if the laws or customary business practices of the country under the laws of which the entity was incorporated or formed do not permit the society to control the entity.

(7) A society that, under subsection (4), controls an entity may not, without the prior written approval of the Minister, give up control, within the meaning of paragraph 3(1)(d), of the entity while it continues to control the entity.

(8) If a society controls, within the meaning of paragraph 3(1)(a), (b) or (c), an entity, subsection (5) does not apply in respect of any subsequent increases by the society to its substantial investment in the entity so long as the society continues to control the entity.

(9) The Governor in Council may make regulations

(a) for the purposes of subsection (4), permitting the acquisition of control or the acquisition or increase of substantial investments, or prescribing the circumstances under which that subsection does not apply or the societies or other entities in respect of which that subsection does not apply, including prescribing societies or other entities on the basis of the activities they engage in; and

(b) for the purposes of subsection (5), permitting the acquisition of control or the acquisition or increase of substantial investments, or prescribing the circumstances under which that subsection does not apply or the societies or other entities in respect of which that subsection does not apply, including prescribing societies or other entities on the basis of the activities they engage in.

1991, c. 47, s. 554; 1997, c. 15, s. 291; 2001, c. 9, s. 437.

555. If a society obtains the approval of the Minister under subsection 554(5) to acquire control of, or to acquire or increase a substantial investment in, an entity and, through that acquisition or increase, the society indirectly acquires control of, or acquires or increases a substantial investment in, another entity that would require the approval of the Minister under subsection 554(5) and that indirect acquisition or increase is disclosed to the Minister in writing before the approval is obtained, the society is deemed to have obtained the approval of the Minister for that indirect acquisition or increase.

1991, c. 47, s. 555; 2001, c. 9, s. 437.

556. (1) If a society controls a permitted entity, other than an entity referred to in any of paragraphs 554(1)(a) to (c), the society shall provide the Superintendent with any undertakings that the Superintendent may require regarding

(a) the activities of the entity; and

(b) access to information about the entity.

(2) If a society acquires control of an entity referred to in paragraph 554(1)(b) or (c), the society shall provide the Superintendent with any undertakings concerning the entity that the Superintendent may require.

(3) The Superintendent may enter into an agreement with the appropriate official or public body responsible for the supervision of any entity referred to in paragraph 554(1)(b) or (c) in each province or in any other jurisdiction concerning any matters referred to in paragraphs (1)(a) and (b) or any other matter the Superintendent considers appropriate.

(4) Despite any other provision of this Part, a society shall not control a permitted entity, other than an entity referred to in paragraph 554(1)(a), unless, in the course of the acquisition of control or within a reasonable time after the control is acquired, the society obtains from the permitted entity an undertaking to provide the Superintendent with reasonable access to the records of the permitted entity.

1991, c. 47, s. 556; 2001, c. 9, s. 437.

557. (1) Subject to subsection (4), a society may, by way of a temporary investment, acquire control of, or acquire or increase a substantial investment in, an entity but, within two years, or any other period that may be specified or approved by the Superintendent, after acquiring control or after acquiring or increasing the substantial investment, as the case may be, it shall do all things necessary to ensure that it no longer controls the entity or has a substantial investment in the entity.

(2) Despite subsection (1), if a society that was in existence immediately before June 1, 1992 had an investment in an entity on September 27, 1990 that is a substantial investment within the meaning of section 10 and the society subsequently increases that substantial investment by way of a temporary investment, the society shall, within two years, or any other period that is specified or approved by the Superintendent, after increasing the substantial investment, do all things necessary to ensure that its substantial investment in the entity is no greater than it was on September 27, 1990.

(3) The Superintendent may, in the case of any particular society that makes an application under this subsection, extend the period of two years, or the other period specified or approved by the Superintendent, that is referred to in subsection (1) or (2) for any further period or periods, and on any terms and conditions, that the Superintendent considers necessary.

(4) If a society, by way of temporary investment, acquires control of, or acquires or increases a substantial investment in, an entity for which the approval of the Minister under subsection 554(5) is required, the society must, within 90 days after acquiring control or after acquiring or increasing the substantial investment,

(a) apply to the Minister for approval to retain control of the entity or to continue to hold the substantial investment in the entity for a period specified by the Minister or for an indeterminate period on any terms and conditions that the Minister considers appropriate; or

(b) do all things necessary to ensure that, on the expiry of the 90 days, it no longer controls the entity or does not have a substantial investment in the entity.

1991, c. 47, s. 557; 2001, c. 9, s. 437.

558. (1) Despite anything in this Part, if a society or any of its subsidiaries has made a loan to an entity and, under the terms of the agreement between the society, or any of its subsidiaries, and the entity with respect to the loan and any other documents governing the terms of the loan, a default has occurred, the society may acquire

(a) if the entity is a body corporate, all or any of the shares of the body corporate;

(b) if the entity is an unincorporated entity, all or any of the ownership interests in the entity;

(c) all or any of the shares or all or any of the ownership interests in any entity that is an affiliate of the entity; or

(d) all or any of the shares of a body corporate that is primarily engaged in holding shares of, ownership interests in or assets acquired from the entity or any of its affiliates.

(2) If a society acquires shares or ownership interests in an entity under subsection (1), the society shall, within five years after acquiring them, do all things necessary to ensure that the society does not control the entity or have a substantial investment in the entity.

(3) Despite subsection (1), if a society that was in existence immediately before June 1, 1992 had an investment in an entity on September 27, 1990 that is a substantial investment within the meaning of section 10 and the society later increases that substantial investment by way of an investment made under subsection (1), the society shall, within five years after increasing the substantial investment, do all things necessary to ensure that its substantial investment in the entity is no greater than it was on September 27, 1990.

(4) The Superintendent may, in the case of any particular society that makes an application under this subsection, extend the period of five years referred to in subsection (2) or (3) for any further period or periods, and on any terms and conditions, that the Superintendent considers necessary.

(5) Despite anything in this Part, if a society has made a loan to, or holds a debt obligation of, the government of a foreign country or an entity controlled by the government of a foreign country and, under the terms of the agreement between the society and that government or the entity, as the case may be, and any other documents governing the terms of the loan or debt obligation, a default has occurred, the society may acquire all or any of the shares of, or ownership interests in, that entity or in any other entity designated by that government, if the acquisition is part of a debt restructuring program of that government.

(6) If a society acquires any shares or ownership interests under subsection (5), the society may, on any terms and conditions that the Superintendent considers appropriate, hold those shares or ownership interests for an indeterminate period or for any other period that the Superintendent may specify.

(7) If, under subsection (1), a society acquires control of, or acquires or increases a substantial investment in, an entity that it would otherwise be permitted to acquire or increase under section 554, the society may retain control of the entity or continue to hold the substantial investment for an indeterminate period, if the approval in writing of the Minister is obtained before the end of the period referred to in subsection (2) or (3), including any extension of it granted under subsection (4).

1991, c. 47, s. 558; 1997, c. 15, s. 292; 2001, c. 9, s. 437.

559. (1) Despite anything in this Act, a society may acquire

(a) an investment in a body corporate,

(b) an interest in an unincorporated entity, or

(c) an interest in real property,

if the investment or interest is acquired through the realization of a security interest held by the society or any of its subsidiaries.

(2) If a society acquires control of, or acquires a substantial investment in, an entity by way of the realization of a security interest held by the society or any of its subsidiaries, the society shall, within five years after the day on which control or the substantial investment is acquired, do all things necessary, or cause its subsidiary to do all things necessary, as the case may be, to ensure that the society no longer controls the entity or has a substantial investment in the entity.

(3) Despite subsection (2), if a society that was in existence immediately before June 1, 1992 had an investment in an entity on September 27, 1990 that is a substantial investment within the meaning of section 10 and the society later increases that substantial investment by way of a realization of a security interest under subsection (1), the society shall, within five years after increasing the substantial investment, do all things necessary to ensure that its substantial investment in the entity is no greater than it was on September 27, 1990.

(4) The Superintendent may, in the case of any particular society that makes an application under this subsection, extend the period of five years referred to in subsection (2) or (3) for any further period or periods, and on any terms and conditions, that the Superintendent considers necessary.

(5) If, under subsection (1), a society acquires control of, or acquires or increases a substantial investment in, an entity that it would otherwise be permitted to acquire or increase under section 554, the society may retain control of the entity or continue to hold the substantial investment for an indeterminate period if the approval in writing of the Minister is obtained before the end of the period referred to in subsection (2) or (3), including any extension of it granted under subsection (4).

1991, c. 47, s. 559; 1997, c. 15, s. 293; 2001, c. 9, s. 437.

560. The Governor in Council may make regulations restricting the ownership under sections 554 to 559 by a society of shares of a body corporate or of ownership interest in an unincorporated entity and imposing terms and conditions applicable to societies that own such shares or interests.

1991, c. 47, s. 560; 2001, c. 9, s. 437.

561. (1) The value of all loans, investments and interests acquired by a society and any of its prescribed subsidiaries as a result of a realization of a security interest or pursuant to section 558 shall not be included in calculating the value of loans, investments and interests of the society and its prescribed subsidiaries under sections 562 to 566

(a) for a period of twelve years following the day on which the interest was acquired, in the case of an interest in real property; and

(b) for a period of five years after the day on which the loan, investment or interest was acquired, in the case of a loan, investment or interest, other than an interest in real property.

(2) The Superintendent may, in the case of any particular society, extend any period referred to in subsection (1) for such further period or periods, and on such terms and conditions, as the Superintendent considers necessary.

1991, c. 47, s. 561; 1997, c. 15, s. 294.

562. A society shall not, and shall not permit its prescribed subsidiaries to,

(a) make or acquire a commercial loan or a loan to a natural person, or

(b) acquire control of a permitted entity that holds commercial loans or loans to natural persons

where the aggregate value of all such loans held by the society and its prescribed subsidiaries exceeds, or the acquisition or making of the loan or the acquisition of control of the body corporate would cause the aggregate value of all such loans held by the society and its prescribed subsidiaries to exceed, the prescribed percentage of the total assets of the society.

1991, c. 47, s. 562; 2001, c. 9, s. 438.

563. A society shall not, and shall not permit its prescribed subsidiaries to,

(a) purchase or otherwise acquire an interest in real property, or

(b) make an improvement to any real property in which the society or any of its prescribed subsidiaries has an interest

if the aggregate value of all interests of the society in real property exceeds, or the acquisition of the interest or the making of the improvement would cause that aggregate value to exceed, an amount determined in accordance with the regulations.

1991, c. 47, s. 563; 2001, c. 9, s. 439.

564. For the purposes of this Part, the Governor in Council may make regulations

(a) defining the interests of a society in real property;

(b) determining the method of valuing those interests; and

(c) respecting the determination of an amount for the purpose of each of sections 563, 565 and 566.

1991, c. 47, s. 564; 2001, c. 9, s. 439.

565. A society shall not, and shall not permit its prescribed subsidiaries to,

(a) purchase or otherwise acquire any participating shares of any body corporate or any ownership interests in any unincorporated entity, other than those of a permitted entity in which the society has, or by virtue of the acquisition would have, a substantial investment, or

(b) acquire control of an entity that holds shares or ownership interests referred to in paragraph (a),

if the aggregate value of

(c) all participating shares, excluding participating shares of permitted entities in which the society has a substantial investment, and

(d) all ownership interests in unincorporated entities, other than ownership interests in permitted entities in which the society has a substantial investment,

beneficially owned by the society and its prescribed subsidiaries exceeds, or the purchase or acquisition would cause that aggregate value to exceed, an amount determined in accordance with the regulations.

1991, c. 47, s. 565; 1993, c. 34, s. 84(F); 1997, c. 15, s. 295; 2001, c. 9, s. 439.

566. A society shall not, and shall not permit its prescribed subsidiaries to,

(a) purchase or otherwise acquire

(i) participating shares of a body corporate, other than those of a permitted entity in which the society has, or by virtue of the acquisition would have, a substantial investment,

(ii) ownership interests in an unincorporated entity, other than ownership interests in a permitted entity in which the society has, or by virtue of the acquisition would have, a substantial investment, or

(iii) interests in real property, or

(b) make an improvement to real property in which the society or any of its prescribed subsidiaries has an interest

if the aggregate value of

(c) all participating shares and ownership interests referred to in subparagraphs (a)(i) and (ii) that are beneficially owned by the society and its prescribed subsidiaries, and

(d) all interests of the society in real property referred to in subparagraph (a)(iii)

exceeds, or the acquisition or the making of the improvement would cause that aggregate value to exceed, an amount determined in accordance with the regulations.

1991, c. 47, s. 566; 1997, c. 15, s. 296; 2001, c. 9, s. 439.

567. (1) The Superintendent may, by order, direct a society to dispose of, within such period as the Superintendent considers reasonable, any loan, investment or interest made or acquired in contravention of this Part.

(2) Where

(a) a society

(i) fails to provide or obtain within a reasonable time the undertakings referred to in section 556, or

(ii) is in default of an undertaking referred to in section 556 and the default is not remedied within ninety days after the day of receipt by the society of a notice from the Superintendent of the default, or

(b) a body corporate referred to in section 556 is in default of an undertaking referred to in section 556 and the default is not remedied within ninety days after the day of receipt by the society of a notice from the Superintendent of the default,

the Superintendent may, by order, require the society, within such period as the Superintendent considers reasonable, to do all things necessary to ensure that the society no longer has a substantial investment in the body corporate to which the undertaking relates.

568. If a society controls or has a substantial investment in an entity as permitted by this Part and the society becomes aware of a change in the business or affairs of the entity that, if the change had taken place before the acquisition of control or of the substantial investment, would have caused the entity not to be a permitted entity or would have been such that approval for the acquisition would have been required under subsection 554(5), the society is deemed to have acquired, on the day the society becomes aware of the change, a temporary investment in respect of which section 557 applies.

1991, c. 47, s. 568; 1997, c. 15, s. 297; 2001, c. 9, s. 440.

569. (1) A society shall not, and shall not permit its subsidiaries to, without the approval of the Superintendent, acquire assets from a person or transfer assets to a person if

A + B > C

where

A is the value of the assets;

B is the total value of all assets that the society and its subsidiaries acquired from or transferred to that person in the twelve months ending immediately before the acquisition or transfer; and

C is ten per cent of the total value of the assets of the society, as shown in the last annual statement of the society prepared before the acquisition or transfer.

(2) The prohibition in subsection (1) does not apply in respect of

(a) an asset that is a debt obligation referred to in subparagraphs (b)(i) to (v) of the definition “commercial loan” in subsection 490(1); or

(b) a transaction or series of transactions by a society with another financial institution as a result of the society’s participation in one or more syndicated loans with that financial institution.

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

(a) the society sells assets under a sale agreement that is approved by the Minister under subsection 254(2); or

(b) the society or its subsidiary acquires shares of, or ownership interests in, an entity for which the approval of the Minister under Part VII or subsection 554(5) is required.

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

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

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

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

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

1991, c. 47, s. 569; 2001, c. 9, s. 440.

570. Nothing in this Part requires

(a) the termination of a loan or a commitment to make a loan or investment or to increase a loan or investment, or

(b) the disposal of an investment

made before the coming into force of this Part but, if the loan or investment would be precluded or limited by this Part, the amount of the loan or investment shall not, except as provided in sections 557, 558 and 559, or pursuant to a commitment referred to in paragraph (a), be increased after the coming into force of this Part.

570.001 A loan or investment referred to in section 570 is deemed not to be prohibited by the provisions of this Part.

2001, c. 9, s. 441.