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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


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.

Same

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

Additional requirements

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

         (a)    to increase its capital; or

         (b)    to provide additional liquidity in such forms and amounts as the Superintendent Corporation may require.  1994, c. 11, s. 85 (1); 1997, c. 28, s. 53.

Circumstances

      (2) Despite a credit union's compliance with the regulations governing adequate capital and liquidity, the Superintendent 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 Superintendent Corporation considers that imposing the requirement is necessary to protect the interests of members, shareholders or depositors; or

         (c)    if the Superintendent Corporation considers that imposing the requirement is necessary to ensure the financial security and integrity of the credit union.  1994, c. 11, s. 85 (2); 1997, c. 28, s. 53.

Compliance

      (3) The credit union shall comply with the requirement order within such time as the Superintendent Corporation specifies in the order.  1994, c. 11, s. 85 (3); 1997, c. 28, s. 53.

Procedural rules

      (4) Section 240.1 applies with respect to an order under this section.

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.

 

Variation of requirements

      86. (1) A credit union may apply to the Superintendent Corporation for a variation of the requirements under section 84.  1994, c. 11, s. 86 (1); 1997, c. 28, s. 53.

Application

      (2) An application must be in a form approved by the Superintendent Corporation and must describe how and when the credit union will meet the requirements under section 84. 1994, c. 11, s. 86 (2); 1997, c. 28, s. 53.

Variation

      (3) The Superintendent Corporation may grant the variation subject to any terms he or she it considers appropriate if he or she 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.  1994, c. 11, s. 86 (3); 1997, c. 28, s. 53.

Appeal of decision

      87.  Repeal

Valuation of asset

      88. If the Superintendent Corporation has appraised the value of an asset held by a credit union or a subsidiary and the value determined by the Superintendent varies materially from the value placed by the credit union or the subsidiary on the asset, the Superintendent Corporation shall send to the credit union, its auditor, its audit committee and the stabilization authority for the credit union a written notice of the value of the asset as determined by the Superintendent Corporation.  1994, c. 11, s. 88; 1997, c. 28, s. 53.

Report re adequacy

      89. A credit union shall provide a report in a form approved by the Superintendent concerning its compliance with section 84 to such persons and at such times as required by the Superintendent.  1994, c. 11, s. 89; 1997, c. 28, s. 53.

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.

 

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.

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

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 more than ninety 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.

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

           5.    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 (4) and who has not received a pardon for the offence.

           6.    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.

           7.    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.

           8.    A professional advisor who has provided services to the credit union in his or her professional capacity.

           9.    An employee of the Corporation.

         10.    A public servant employed in regulating credit unions.

         11.    One who has not met the training requirements or qualifications for directors set out in the by-laws of the credit union.

         12.    One who has not met any reasonable condition or qualification set out in the by-laws of the credit union.

Exception

      (2)  An individual is not an employee for the purposes of paragraph 7 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.

      (3)  Repeal (already spent)

Type of offence

      (4)  offence referred to in paragraph 5 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 punishable by a term of imprisonment for five years or more;

         (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.  1994, c. 11, s. 92 (4).

Number of directors

      93. (1) A credit union may, by by-law, change the number of its directors.

Minimum

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

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.

Chair of board

      94.1 Directors hold office for such term as the by-laws provide.

Term of office, directors

     95. (1) Directors hold office for such term as the by-laws provide.

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.

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.

Maximum number

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

 

Term of office, chair

      95.1 (1) The chair of the board shall hold office for such term as the by-laws provide.

Maximum number

      (2) The by-laws shall provide for a maximum number of consecutive terms for the chair of the board.

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 credit union.

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.

Members may change number of directors

      (3) The members may, by a special resolution passed at the next annual meeting referred to in subsection (1) or at the general meeting called under subsection (2), change the number of directors of the credit union, subject to subsection 93 (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 deposit insurer corporation replaces the board and appoints a person to assume the powers of the board under subsection 295 (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.

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.

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 legal counsel or an agent on his or her behalf.

Right to counsel

      (5)  Repeal

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.

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.

Procedural rules

      (3) Section 240.1 applies with respect to an order under this section.

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.

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.

Circulation of statement

      (2) The credit union shall, within thirty days after receipt of the statement, send a copy of the statement to the Superintendent and a notice to every member stating that a copy of the statement is available on request.  1994, c. 11, s. 102 (2); 1997, c. 28, s. 53.

Same

      (3) Repeal

Immunity

      (4) A credit union and a person acting on its behalf does not incur any liability by reason only of sending the statement as required by subsection (2).  1994, c. 11, s. 102 (3, 4).

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.

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.

Advising members that statement available

      (4) TThe credit union shall, within thirty days after receipt of the statement under subsection (3), advise every member that a copy of the statement is available on request.

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.

Duty to give copy of statement

      (6) The credit union shall give a copy of the statement to every member who requests it.

Immunity

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

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 or the by-laws of the credit union or the by-laws.

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.

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.

By-law powers

      105. (1) The board may pass by-laws governing the conduct of the affairs of the credit union.

Required matters

     (1.1) The board may pass by-laws governing the conduct of the affairs of the credit union.

     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.

     3 Training requirements and qualifications required for persons to be eligible to be directors or members of the audit committee.

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.

Limitation

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

Same

      (4) By-laws that relieve a person of obligations or requirements under this Act or the regulations are void.

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.

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.

Salary and benefits reported in financial statements

      108. (1) 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.

Executive Committee

Executive committee

      109. Repeal

 

Credit Committee

Credit committee

      110. Repeal

Eligibility for membership

      111.  Repeal

Election of members

      112.Repeal

Training program

      113. Repeal

Quorum

      114. Repeal

Vacancies

      115. Repeal

Ceasing to hold office

      116. Repeal

Removal by committee

      117. Repeal

Removal by members

      118.  Repeal

Committee meetings

      119. Repeal

Reports by committee

      120.Repeal

Duties of Credit Committee

Duties of committee

      121. Repeal

Delegation of loan approvals

      123.Repeal

Prohibition re loans

      124. Repeal

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.

Minimum number of members

      (2) The audit committee must have at least three members.

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.

Training

      (4) Every member of an audit committee shall satisfy the training requirements or qualifications for audit committee members that are set out in the by-laws of the credit union.

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.

Quorum

      (6) A majority of the members of the audit committee constitutes a quorum.

Minutes

      (7) The audit committee shall keep minutes of its meetings.

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.

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.

Powers and duties of audit committee

      126. (1) 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.

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 adversely affects the credit union.

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.

Remuneration

      (3) The committee shall fix the remuneration payable to the persons retained under subsection (2) and the credit union shall pay it.

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.

Quorum

      129. Repeal

Vacancies on elected committees

      130. Repeal

Vacancies on appointed committees

      131. Repeal

Ceasing to hold office

      132. Repeal

Committee meetings

      133. Repeal

Reports by committee

      134. Repeal

Removal by committee

      135. Repeal

Removal by members

      136. Repeal

Powers and Duties of Audit Committee

General

      137. Repeal

Duties re misappropriation

      138. Repeal

Power to call meeting

      139. Repeal

Officers

Officers

      140. (1) In addition to the chair of the board required under section 94.1, 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.

Same

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

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.

Chief executive officer

      (3.1) The chief executive officer shall be an employee of the credit union appointed by the board.

Remuneration

      (4) Officers are entitled to receive such remuneration and other payments as the board approves.

Remuneration reported in financial statements

      (5) A credit union's annual audited financial statements must disclose the total remuneration paid during the year to each of the three officers or employees of the credit union who had the highest remuneration for the year.

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.

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.

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' transactions with the credit union.

Exception

      (2) 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;

         (b.1)    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;

         (b.2)    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;

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

         (d)    to the Superintendent and the Corporation; and

         (e)    to any other person entitled to the information by law.  1994, c. 11, s. 143 (2); 1997, c. 28, s. 53.

Duty of care

      144. (1) Every director, officer and member of a committee established under this Act 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.

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.

Duty to comply

      145. (1) Every director, officer, member of a committee established under this Act 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.  1994, c. 11, s. 145 (1).

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.  1994, c. 11, s. 146 (1); 1999, c. 6, s. 19 (4); 2005, c. 5, s. 18 (4).

Same

      (2) The director, officer or committee member, 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.  1994, c. 11, s. 146 (2).

Time of disclosure, director

      (3) The 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.  1994, c. 11, s. 146 (3).

Same, officer or committee member

      (4) The An officer or committee member, 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 or committee member, committee member or employee promptly after becoming an officer or committee member, committee member or employee .  1994, c. 11, s. 146 (4).

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 or committee member, committee member or employee shall make the disclosure promptly after becoming aware of the contract or proposed contract. 1994, c. 11, s. 146 (5).

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.  1994, c. 11, s. 146 (6).

Voting

      147. (1) A director to whom section 146 applies shall not be present or vote on any resolution to approve the contract unless 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 established under this Act 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.

Same

      (2) A director to whom section 146 applies shall not take part in the discussion on any resolution to approve an investment or a transaction in relation to which disclosure is required under section 146 and the director shall not be present at any meeting of the board while it is dealing with the matter.

Director not to use influence

      (3) A director referred to in subsection (2) shall not attempt in any way to influence the voting on any resolution to approve an investment or a transaction in relation to which disclosure is required under section 146.

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.

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.

Application to court

      (2) If a director, officer, committee member or employyee 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.  1994, c. 11, s. 148.

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 established under this Act.

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.

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.

Miscellaneous

Validity of actions

      150. An act by a director, officer or member of a committee established under this Act is not invalid by reason only of a defect discovered afterward in his or her appointment, election or qualification.  1994, c. 11, s. 150.

Requirement for bond

      151. (1) The following persons 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:

      1. Every director of the credit union.

      2. TEvery officer of the credit union.

      3.  Every employee who receives or has charge of money.

Bond

      (2) The bond must be in an amount that is not less than any minimum that may be prescribed.  1994, c. 11, s. 151.

Liability of directors, etc.

      152. A liability imposed under this Act upon a director, officer, or member of a committee established under this Act or a person authorized under section 123 to approve loans is in addition to any other liability that is by law imposed upon him or her.  1994, c. 11, s. 152.

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.

Reliance on statement

      155. A director, officer, member of a committee or an employee of a credit union is not liable under sections 144, 145 and 153 if the individual relies, 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.  1994, c. 11, s. 155.

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 established under this Act,

         (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.

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.

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.

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.

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.

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).

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.

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.

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 established under this Act; 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.

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.

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.

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.

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 is,

                                      (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).

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.

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.

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.

Right to make representations

      (4) The auditor is entitled to give the credit union written representations concerning the proposal to remove the auditor.

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.

Replacement

      (6) If the members remove the auditor from office, they shall elect another auditor at the same meeting to hold office for the remainder of the auditor's term.

Vote

      (7) The auditor elected under subsection (6) must be elected by a resolution passed by a majority of the votes cast at the meeting.

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.

Notice re resignation, etc.

      165. A credit union shall promptly notify the Superintendent, deposit insurer and stabilization authority for the credit unionand the Corporation when an auditor resigns, is replaced or is removed from office and shall inform the Superintendent of the reasons.  1994, c. 11, s. 165; 1997, c. 28, s. 53.

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, documents, accounts and vouchers records and documents of the credit union.

Same

      (2) The auditor is entitled to require from the board, directors, officers, employees, agents of the credit union and members of the audit committee or the credit committee, if any, such information and explanations as the auditor considers necessary to enable the auditor to make such reports as are required under this Act.

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.

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.

Same

      (2) The auditor shall report to the members on the financial statements to be placed before them at the annual meeting.

Qualified report

      (3) If the auditor's opinion Report is not an unqualified opinion Report opinion, the auditor shall state in the report the reasons for the qualified opinion Report.

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.

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.

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.

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 (1-6).

Amended report to Superintendent, Corporation

      (6.1) Within ten 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.

Auditing standards

      (7) The auditor's examination referred to in subsection (1) shall, except as otherwise specified by the Superintendent 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.  1994, c. 11, s. 169 (7); 1997, c. 28, s. 53.

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

      (8) 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.

Duty at meetings

      170. If the auditor is present at a meeting of members or shareholders, the auditor shall answer inquiries directed to him or herthe auditor concerning the basis for the auditor's report upon which he or she formed the opinion given under section 169.  1994, c. 11, s. 170.

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.

Duty to report contravention, etc.

      172. (1) The auditor of a credit union shall report in writing to the chair of the board, the chief executive officer, chief financial officer and and to the audit committee of the credit union any transaction or conditions that have come to the auditor's attention affecting the well-being of the credit union that, in the auditor's opinion, are not satisfactory and require rectification.

Same

      (2) Without restricting the generality of subsection (1), the auditor shall report to the persons described in subsection (1) 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.

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 (1-3).

Transmission of report

      (4) If an auditor reports under this section,

         (a)    the auditor shall transmit the report, in writing, to the persons described in subsection (1)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, deposit insurer and stabilization authority for that credit union and the Corporation with a copy of the report.  1994, c. 11, s. 172 (4); 1997, c. 28, s. 53.

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