Modernizing the Credit Unions and Caisses Populaires Act

Modernizing the Credit Unions and Caisses Populaires Act
A Consultation Draft of Amendments to Legislation and Capital and Lending Regulation

PROPOSED BY THE MINISTRY OF FINANCE
AUGUST 2006

This Consultation Draft is intended to facilitate constructive dialogue concerning its contents.
Note that the legislation will only become law if the Legislative Assembly passes the legislation.
Note that the regulation will only become law if the Lieutenant Governor in Council promulgates the regulation.

Dear Stakeholder:

The Ministry of Finance is pleased to enclose for your review and comment a Consultation Draft of proposed amendments to the Credit Unions and Caisses Populaires Act, 1994 and a Consultation Draft of proposed amendments to O. Reg. 76/95 concerning capital and lending.

The government, in collaboration with the Financial Services Commission of Ontario and the Deposit Insurance Corporation of Ontario, has been working with representatives of credit unions and caisses populaires to identify improvements to the Credit Unions and Caisses Populaires Act, 1994. This exercise is part of the government's commitment to modernize financial sector regulation and support a new generation of economic growth.

The proposals described in this document are intended to enable credit unions and caissess populaires to serve their customers better and enhance the sector's stability, which is an essential component of its competitiveness.

The ministry is interested in receiving input from individual credit unions and caisses populaires, their members and others. Your views will assist the ministry in finalizing proposals to update the Act and regulations.

The enclosure contains information on how you can submit comments on these proposals. Submissions will be accepted until September 11, 2006.

Thank you for contributing to this important review.

signature of Wayne Arthurs

Wayne Arthurs
Parliamentary Assistant to the Minister of Finance

INVITATION FOR COMMENTS

The Ministry of Finance invites your comments on the issue outlined in this consultation draft. Interested parties are asked to provide their written submissions by September 11, 2006.

If you have any comments or questions about this consultation or how any element of your submission may be used or disclosed, please contact:

Luba Mycak
Senior Manager
Industrial & Financial Policy Branch
Ministry of Finance
777 Bay Street, 10th Floor
Toronto, ON M5G 2C8
Tel: 416-326-9227
Fax: 416-327-0941
E-Mail: cucpconsultations@fin.gov.on.ca

A copy of this consultation document can be reviewed online at www.fin.gov.on.ca

The content, structure, and form of the draft legislation and regulations are subject to change as a result of the consultation process and as a result of review by the government. These proposals will only become law if they are passed by the Legislative Assembly (in the case of draft legislation) or approved by Cabinet (in the case of draft regulations).

Please note that this is a public consultation. All comments received will be considered public and may be used by the ministry to help evaluate and revise the legislative proposals. This may involve disclosing some or all comments or materials, or summaries of them, to other interested parties during and after the consultation. Personal information will not be disclosed without prior consent.

If for any reason you feel your comments should not be shared with other parties, please indicate this in your covering letter. Please note that all submissions received are subject to the Freedom of Information and Protection of Privacy Act.

Queen's Printer for Ontario, 2006
ISBN 1-4249-1867-7 (print)
ISBN 1-4249-1868-5 (HTML)
ISBN 1-4249-1869-3 (PDF)


CONSULTATION DRAFT

DRAFT CREDIT UNIONS AND CAISSES POPULAIRES ACT FOR CONSULTATION PURPOSES

Credit Unions and Caisses Populaires Act, 1994

S.O. 1994, CHAPTER 11

Amended by: 1997, c. 19, s. 5; 1997, c. 28, ss. 52-63; 1999, c. 6, s. 19; 1999, c. 12, Sched. I, s. 2; 2001, c. 8, s. 30; 2002, c. 18, Sched. H, s. 3; 2002, c. 24, Sched. B, ss. 25, 32; 2004, c. 8, ss. 46, 47 (1); 2004, c. 17, s. 32; 2005, c. 5, s. 18; 2006, c. 8, s. 142; 2006, c. 19, Sched. C, s. 1 (1).

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CONTENTS

PART I
INTERPRETATION

1.

Definitions

2.

Joint shareholders

3.

Subsidiary

4.

Holding body corporate

5.

Affiliation

6.

Controlling body corporate

7.

Member

8.

Shareholder

PART III
ESTABLISHING A CREDIT UNION

Incorporation

12.

Corporate charter

13.

Articles of incorporation

14.

Contents of articles

15.

Application for incorporation

16.

Certificate of incorporation

17.

Effect of certificate

18.

Appeal re refusal of certificate

19.

Language and form of name

19.1

Use of other name

20.

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

21.

Restrictions re corporate names

22.

Reserving a corporate name

22.1

Corporate seal

23.

Location of head office

Objects and Powers

24.

Objects

25.

Powers

26.

Acting outside powers

Miscellaneous

27.

Indoor management rule

27.1

Financial years

27.2

Corporations Act not to apply

PART IV
MEMBERSHIP

Who May Be Member

28.

Membership

29.

Becoming a member

30.

Limitation on membership

31.

Admissions outside bond of association

32.

Retaining membership

33.

Record, information relating to membership

34.

Corporate and partnership members

Rights and Liabilities

37.

Liability of members

38.

Not bound by trust

39.

Trusts for named beneficiaries

40.

Joint accounts

41.

Members under age of 18 years

Death, etc.

43.

Limited payment re deceased member

Liens and Credits

44.

Lien for liability

Withdrawals and Expulsions

46.

Withdrawal of members

47.

Expulsion of members

Representative Actions by Members

50.

Members may maintain representative actions

PART V
CAPITAL STRUCTURE

Shares

51.

Classes of shares

52.

Membership shares

52.1

Patronage shares

53.

Rights of classes

54.

Shares in series

56.

Pre-emptive right

57.

Conversion privileges

Issuing Shares

58.

Power to issue shares

59.

Consideration

60.

Shares non-assessable

Redemption and Cancellation of Shares

61.

Holding own shares

62.

Purchase and redemption of shares

63.

Cancellation of shares

64.

Shares acquired through realization of security

Dividends and Patronage Returns

65.

Declaration of dividend

66.

Declaration of patronage return

67.

Restriction on dividends, etc.

Stated Capital

68.

Stated capital account

69.

Adjustment due to conversion

70.

Addition due to debt conversion

71.

Reduction due to purchase, etc.

72.

Reduction by special resolution

73.

Recovery by action

Transfer of Securities

74.

Application of Business Corporations Act

74.1

Restrictions on transfer of securities

Offering Statement

75.

Selling securities

76.

Permitted sellers

77.

Offering statement

78.

Receipt for offering statement

79.

Renewal of receipt

80.

Material change

81.

Distribution of statements

82.

Effect of misrepresentation

Restriction on Commission for Purchase or Sale

83.1

Restrictions on transfer of securities

PART VI
CAPITAL AND LIQUIDITY

84.

Adequacy of capital and liquidity

85.

Additional requirements

86.

Variation of requirements

88.

Valuation of asset

89.

Report re adequacy

89.1

Notification if credit union insolvent

90.

Provision for losses and accrued interest

PART VII
GOVERNING THE CREDIT UNION

Directors

91.

Qualifications of directors

92.

Disqualified individuals

93.

Number of directors

94.

Election of board

94.1

Chair of the board

95.

Term of office, directors

95.1

Term of office, chair

96.

Quorum

97.

Vacancies

98.

Ceasing to hold office

99.

Removal by board

100.

Removal by members

101.

Removal by Superintendent

102.

Statement re opposition

103.

Statement on resignation

Powers and Duties of the Board

104.

Duties of the board

105.

By-law powers

106.

Remuneration of directors

107.

When by-law effective

108.

Salary and benefits reported in financial statements

Audit Committee

125.

Audit committee

126.

Powers and duties of audit committee

127.

Notification about certain matters

128.

Power to call board meeting

Officers

140.

Officers

141.

Duties of corporate secretary

Duties of Directors, Officers and Committee Members

142.

Duty of confidentiality

143.

Confidentiality re members

144.

Duty of care

145.

Duty to comply

Conflicts of Interest

146.

Disclosure of interest

147.

Voting

148.

Avoidance standards

149.

Prohibition re acting for credit union

149.1

Prohibition re acting as trustee

Miscellaneous

150.

Validity of actions

151.

Requirement for bond

152.

Liability of directors, etc.

153.

Specific liability of directors

154.

Contribution

155.

Reliance on statement

156.

Insurance for directors and officers

157.

Indemnity for directors, etc.

158.

Application for indemnification

Auditor

159.

Appointment of auditor

160.

Qualification as auditor

161.

Ineligibility as receiver

162.

Remuneration

163.

Replacement of auditor

164.

Removal of auditor

165.

Notice re resignation, etc.

166.

Auditor for subsidiaries

Rights and Duties of Auditors

167.

Right of access

168.

Right to attend meetings

169.

Auditor's report

170.

Duty at meetings

171.

Extended examination required by Superintendent

171.1

Extended examination required by Corporation

172.

Duty to report contravention, etc.

PART VIII
BUSINESS POWERS

Permitted Business Activities

173.

Permitted activities

Restrictions on Powers

174.

Ancillary businesses

175.

Restriction re partnerships

176.

Restrictions on insurance

177.

Restrictions on fiduciary activities

178.

Guarantees

179.

Appointment of receiver, etc.

Deposits

180.

Deposits accepted from members, etc.

181.

Not bound by trust

182.

Unclaimed deposits

Debt Obligations

183.

Borrowing

184.

Security interests in credit union property

185.

Notice re acquisitions subject to security interests

186.

Restrictions on subordinated indebtedness

187.

Limit on borrowing

188.

Restriction on borrowing from another credit union

Investment and Lending Policies

190.

Investment and lending policies

Loans

194.

Loans to members only

195.

Prescribed lending limits

197.

Loan workouts

197.0.1

Order for call of unauthorized loans

Cost of Borrowing

197.1

Definition of "cost of borrowing"

197.2

Rebate of borrowing costs

197.3

Disclosure of cost of borrowing

197.4

Additional disclosure - term loans

197.5

Disclosure in applications for credit cards, etc.

197.6

Disclosure where credit cards, etc., issued

197.7

Additional disclosure: loans to which ss. 197.4 and 197.6 do not apply

197.8

Statement re mortgage renewal

197.9

Disclosure in advertising

197.10

Regulations re disclosure

Investments

198.

Eligible investments

199.

Restriction re single investment

200.

Establishing or acquiring subsidiary

201.

Investment in another credit union

202.

Status of investments upon amalgamation, etc.

202.1

Order for disposal of unauthorized investments

Purchase and Sale of Assets

203.

Interpretation

204.

Purchase or sale of substantial assets

PART IX
RESTRICTED PARTY TRANSACTIONS

207.

General prohibition

208.

Loans to officers, directors, etc.

209.

Regulations

209.1

Setting aside transactions

210.

Interpretation

PART X
MEETINGS

Members' and Shareholders' Meetings

211.

Notice of meetings

212.

Annual meeting

213.

Financial statements

214.

General meetings

215.

Proposals

216.

Refusing proposal

217.

Requisition for members' meeting

217.1

Voting rights at members' meetings

217.2

Different ways of member voting

217.3

Proxies, members

217.4

Proxies, other shareholders

217.5

Telephone and electronic meetings

Directors' Meetings

218.

Telephone and electronic meetings

219.

Dissent of director

220.

Meeting required by Superintendent

Miscellaneous

221.

Annual statement to be given to members

222.

Inspection of books

223.

Financial statements of subsidiaries

224.

Branches and other member groups

PART XI
RETURNS EXAMINATIONS AND RECORDS

Returns and Examinations

225.

Information required by Superintendent

225.1

Information required by Corporation

226.

Annual return

227.

Examinations by Superintendent

228.

Examination by Corporation

229.

Examination powers

Records and Documents

230.

Register of members, shareholders, etc.

231.

Requirement to maintain records and documents, etc.

232.

Form of records and documents

233.

Copies of by-laws

PART XII
ENFORCEMENT

Certain Orders

234.

Superintendent's order – general

239.

Order, if assets shown at more than fair value

240.

Suspension of business

General Provisions Relating To Orders

240.1

Procedural rules for certain orders

240.2

Copies of orders to be given

240.3

When orders take effect

240.4

Appeals of orders to Tribunal

240.5

Orders not stayed by judicial review

PART XIII
LEAGUES

241.

Incorporating leagues

243.

Application of Act

244.

Application of Federal Act

244.1

Corporations Act not to apply

245.

Members

PART XIV
DEPOSIT INSURANCE CORPORATION OF ONTARIO

249.

Corporation continued

250.

Board of directors

251.

Term of office

252.

Duties of board

253.

No liability for acts in good faith

254.

Keeping books

255.

Auditor

256.

Annual report

259.

Tabling reports

260.

Information to Minister

261.

Objects

262.

Ancillary powers

263.

Subsidiaries

Powers and Duties of Corporation

264.

By-laws

268.

Fiscal year

269.

Investment of funds

Deposit Insurance

270.

Insurance of deposits with credit unions

270.1

Payment for insured deposits

271.

Insurance of deposits with amalgamating credit unions

272.

Preparatory examination

274.

Cancellation of deposit insurance

274.1

Prohibition, advertising, holding out as insured

Deposit Insurance Reserve Fund and Premium

276.

Deposit Insurance Reserve Fund

276.1

Annual premiums

277.

Overdue charges

278.

Repayments

Supervision

285.

Supervision by Corporation

289.

Powers when credit union supervised

290.

Expenses of Corporation

Administration

294.

Administration by Corporation

295.

Administrator's powers

295.1

Expenses of Corporation

PART XV
DISSOLUTION, AMALGAMATION AND REORGANIZATION

296.

Definition

Dissolution

297.

Dissolution where no assets

298.

Voluntary winding up

299.

Notice and dissolution

300.

Winding up by court order

301.

Dissolution by Superintendent

302.

Liability of members and shareholders to creditors

303.

Forfeiture of undisposed property

304.

Responsibilities of liquidator

305.

Distribution of property

306.

Payment of costs and expenses

307.

Powers of liquidator

308.

Notice of winding-up proceedings

308.1

Security interests remaining after dissolution

Amalgamations

309.

Amalgamation of credit unions

310.

Amalgamation of credit unions under administration

Reorganization

311.

Articles of amendment

312.

Class vote

313.

Required documentation

314.

Certificate of amendment

315.

Restatement of articles

Continuing as or Ceasing to be an Ontario Credit Union

316.

Continuance as an Ontario credit union

316.1

Transfer to another jurisdiction

316.2

Continuation under other Ontario Act

PART XVI
REGULATIONS, APPROVAL OF FORMS AND ESTABLISHMENT OF FEES

Regulations

317.

Regulations: general

318.

Regulations: offering statements

319.

Regulations: capital adequacy

319.1

Regulations: deposit insurance premiums

321.

Regulations: audit committee

321.0.1

Regulations: administrative penalties

Approval of Forms, Etc.

321.1

Forms

321.2

Reports

321.3

Circulars and proxies

321.4

Statements

Establishment of Fees

321.6

Fees

PART XVII
OFFENCES AND ADMINISTRATIVE PENALTIES

Offences

322.

Offence, general

324.

Order to comply

325.

Restitution

326.

Repaying benefits

327.

Order to comply

329.

Effect of contravention

330.

Effect of penalty

331.

Limitation period

Administrative Penalities

331.1

Administrative penalties

331.2

Superintendent – administrative penalties

331.3

Corporation – administrative penalties

331.4

Effect of paying penalty

331.5

Maximum administrative penalties

331.6

Enforcement of administrative penalties

PART XVIII
MISCELLANEOUS

332.

Extra-provincial credit unions

334.

Initial review

335.

Delivery of notice

335.1

Existing stabilization funds

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