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APPROPRIATION ACT NO. 1, 1970APPROPRIATION ACTSIndian Economic Development Guarantee OrderTerms and Conditions Respecting the Guaranteeing of Loans for the Purpose of the Economic Development of IndiansP.C.1977-3608197712
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His Excellency the Governor General in Council, on the recommendation of the Minister of Finance, the Minister of Indian Affairs and Northern Development and the Treasury Board, pursuant to Vote L53b of Appropriation Act No. 1, 1970, is pleased hereby to approve the revocation of the Indian Economic Development Regulations made by Order in Council P.C. 1972-1498 of 4th July, 19721, as amended2, and to approve the annexed terms and conditions respecting the guaranteeing of loans for the purpose of the economic development of Indians.SOR/72-247, Canada Gazette Part II, Vol. 106, No. 14, July 26, 1972SOR/74-502, Canada Gazette Part II, Vol. 108, No. 17, September 11, 1974Short Title
These Terms and Conditions may be cited as the Indian Economic Development Guarantee Order.
Interpretation
In this Order,applicant means an individual, a group of Indians, an Indian band, a partnership or a corporation in respect of whom an application is made by a bank pursuant to section 3; (requérant)bank meansa bank to which the Bank Act applies,a credit union, caisse populaire or other cooperative credit society that has been designated as a bank for the purposes of the Farm Improvement Loans Act, the Small Businesses Loans Act or the Fisheries Improvement Loans Act or is designated by the Minister on the application of that society as a bank for purposes of this Order,a corporation thatcarries on the business of a trust company within the meaning of the Trust Companies Act, the business of a loan company within the meaning of the Loan Companies Act or the business of insurance within the meaning of the Canadian and British Insurance Companies Act,has been designated as a bank for the purposes of the Farm Improvement Loans Act, the Small Businesses Loans Act or the Fisheries Improvement Loans Act, oris designated by the Minister on the application of that corporation as a bank for the purposes of this Order, orthe Province of Alberta Treasury Branch established pursuant to the Treasury Branches Act as enacted by the Province of Alberta; (banque)borrower means an applicant who has received a guaranteed loan pursuant to this Order; (emprunteur)business enterprise means, regardless of a change in ownership or control,any business carried on in Canada for gain or profit,a cooperative association incorported under a law of the Parliament of Canada or the legislature of a province, orthe business of a profession recognized as such under a law of the Parliament of Canada or the legislature of a province,but does not includea business having as its object the furtherance of a charitable or religious purpose, ora business carried on for the purpose of money lending, insurance or finance; (entreprise commerciale)guaranteed loan means a loan, including a loan pursuant to a line of credit, made by a bank and guaranteed by the Minister pursuant to section 4; (prêt garanti)Indian means an Indian as defined in the Indian Act; (Indien)Minister means the Minister of Indian Affairs and Northern Development; (ministre)responsible officer of the bank meansthe manager or assistant manager of a bank or a branch thereof,the person for the time acting as manager of a bank or a branch thereof,the credit committee of a bank or a branch thereof, orany person duly authorized by a bank to supervise the granting of loans. (préposé compétent de la banque)SI/84-4, s. 1
Applications by Banks
A bank may apply to the Minister, in a form satisfactory to him, for the guarantee by the Minister of a loan to be made by the bank to an applicant whose activities contribute or may contribute to the economic development of Indians.
Guarantee by the Minister
Subject to subsections (2) to (4), the Minister may guarantee, in whole or in part, a loan in respect of which an application is made pursuant to section 3 wherehe is satisfied that the loan is required to finance a business enterprise that will or may contribute to the economic development of Indians;the application for the loan was scrutinized and checked by a responsible officer of the bank, with the care required in the conduct of its ordinary business, prior to the making of the loan;the terms and conditions of the loan were fixed by the bank in consultation with the borrower; andthe loan is to be repaid within a period that does not exceed 15 years and repayments are to be made not less frequently than annually.The Minister shall not, without the approval of the Minister of Finance, guarantee to a bank a loan in excess of $100,000.The Minister shall not guarantee to a bank any loan where the aggregate ofthe principal amount of the guaranteed loan,the amount outstanding and the undisbursed amount in respect of all other guaranteed loans, made pursuant to Vote L53b of Appropriation Act No. 1, 1970,the amount outstanding and the undisbursed amount of all direct loans made pursuant to Vote L53b of Appropriation Act No. 1, 1970,grants, contributions or other payments made or authorized by the Minister for the purposes of Indian economic development,the amount outstanding and the undisbursed amount in respect of all loans, grants, contributions and development incentives made under statutory authority vested in the Minister of Regional Economic Expansion, andloans made or guaranteed under statutory authority by any federal Department, Crown Corporation or Agencyto or on behalf of the applicant or in respect of the business enterprise for the purpose of which the guaranteed loan is required exceeds $500,000 or may, in the opinion of the Minister be reasonably expected to exceed $500,000, unless he has obtained, in addition to any approval required under subsection (2), the approval of the Treasury Board.The Minister shall, on giving any guarantee without the approval of the Treasury Board, certify to the Treasury Board that the aggregate referred to in subsection (3) does not exceed $500,000.Where a guaranteed loan is made by a bank other than to an Indian, an Indian band or a corporation controlled by one or more Indians, the Minister shall not guarantee more than 90 per cent of any loss sustained by the bank as a result of the guaranteed loan.
Security by Bank
The Minister shall require that a bank take security for a guaranteed loan in one or more of the following forms:a promissory note;any security instrument pursuant to section 88 of the Bank Act;an assignment of book debts;a chattel mortgage or commercial pledge;a mortgage or hypothecation on real property;an assignment of rights and interest of the borrower under an agreement for sale; orany security in place of or in addition to that referred to in paragraphs (a) to (f) that the Minister deems appropriate.Every bank shall, throughout the term of a guaranteed loan, keep and maintain in accordance with normal banking practice, the security taken for the guaranteed loan under subsection (1).No bank shall release the security taken for a guaranteed loan under subsection (1)without the prior approval of the Minister; orwhere the Minister of Finance originally approved the loan, without the prior approval of the Minister and the Minister of Finance.
Revision of Loan Terms and Default
Where a borrower is in default in respect of a guaranteed loan, other than a guaranteed loan made by way of a line of credit, or informs the bank that any terms of the agreement in respect of such a loan are such that he may have to default, and the bank is of the opinion that a revision or alteration of any of the terms of the agreement may enable the borrower to meet his obligations thereunder, the bank may, with the consent of the borrower, revise or alter the terms of the agreement byincreasing or decreasing the periods between repayments, except that repayments shall be due no less frequently than annually; orextending the time within which the guaranteed loan is to be repaid, so long as such extensiondoes not, without the approval of the Minister, exceed one year from the date on which the loan was originally scheduled to be repaid,does not, without the approval of the Minister and the Minister of Finance, exceed 15 years from the date on which the guarantee was approved, andis not granted without the approval of the Minister of Finance, where that Minister originally approved the guarantee.
Where a borrower is in default in respect of a loan made by way of a line of credit, or the bank reasonably believes that the borrower will have to default in respect of such a loan, the bank may, with the consent of the borrower, revise or alter the terms of the loan to enable the borrower to meet his obligation, except that no extension of the expiry date or no revision of the security requirements and the interest rate shall be given without the approval of the Minister and, where the Minister of Finance has originally approved the line of credit under subsection 4(2), the approval of the Minister of Finance.
Claim by Bank
A claim by a bank for a loss as a result of a guaranteed loan shall be made to the Minister at any time not less than 90 days after the entire amount of the balance outstanding becomes due and repayable and shall comprisethe unpaid principal amount of the guaranteed loan;any uncollected taxed costs for or incidental to legal proceedings in respect of the guaranteed loan;the uncollected earned interest outstanding at the time the claim is approved for payment by the Minister at the full rate of interest specified in the loan terms fora period of 180 days after the entire amount of the balance outstanding becomes due and repayable and for such further period as, in the opinion of the Minister, is justified for reasons beyond the control of the bank, andthereafter, at one-half the rate of interest specified in the loan terms;legal fees, legal costs and disbursements, whether taxable or not, actually incurred by the bank, whether with or without litigation, in collecting or endeavouring to collect the outstanding balance of the guaranteed loan or in protecting the interests of the Minister but only to the extent that the Deputy Minister of Justice taxes or allows; andany other disbursements actually incurred by the bank in collecting or endeavouring to collect the outstanding balance of the guaranteed loan or in protecting the interests of the Minister but only to the extent that the Minister allows.For the purposes of subsection (1), the expression “loan terms” includes any agreement entered into by the bank with the borrower on a promissory note.A valid claim by a bank under subsection (1) shall be approved for payment by the Minister within 60 days from the acceptance thereof and shall thereupon be paid forthwith unless a longer period has been mutually agreed to by the bank and the Minister.SI/84-4, s. 2
Subject to section 11, the Minister shall not be obligated to accept a claim under section 8 unless he is satisfied that the steps required by section 12 have been taken.SI/84-4, s. 2
Assignment by Bank
Where, under this Order, the Minister has paid to a bank the amount of a loss sustained by a bank as a result of a guaranteed loan, the bank shall forthwith execute an assignment in a form satisfactory to the Minister of all the rights of the bank in respect of that loan and, without limiting the generality of the foregoing, shall execute an assignment of all rights and powers of the bank in respect ofthe loan;any judgment obtained by the bank in respect of the loan; andany security taken by the bank for the repayment of the loan.
Where a loan has been guaranteed in part and where the Minister has instructed a bank not to realize on its securities pursuant to subparagraph 12(2)(a)(iii), the Minister shall become liable for the total loss of the bank as if the loan had been guaranteed by the Minister for the full amount thereof, and, on payment of the claim by the Minister, the bank shall execute an assignment, in a form satisfactory to the Minister, of all the rights of the bank in respect of that loan as described in section 10.Where a loan has been guaranteed in part and the bank is unable to realize on any or all of its securities, the bank may submit a claim for loss pursuant to section 8 for the estimated amount of the net loss as mutually agreed between the bank and the Minister, and the bank on payment of a valid claim shall, at the option of the Minister,execute an assignment in a form satisfactory to the Minister of all rights of the bank in respect of that loan as described in section 10; orcontinue to take all reasonable steps to realize on the outstanding securities.Where a loan has been guaranteed in part and funds are recovered from any source, including the disposal of assets, subsequent to the payment of a claim in respect of the guaranteed loan, such funds, less realization costs, shall be divided between the Minister and the bank in proportion to their respective shares of the net loss as agreed between the bank and the Minister.SI/84-4, s. 3
General
Where a borrower is in default in respect of any term or condition of a guaranteed loan, the bank shall, within 30 days thereafter, advise the Minister of the default of the borrower and, subject to sections 6 and 7, the entire amount of the balance outstanding on the loan shall, at the option of the bank and the Minister, become repayable.Where a guaranteed loan becomes repayable pursuant to subsection (1), the bank shalltake such steps, whether by legal proceedings or otherwise, as it considers necessary toeffect collection of the balance outstanding,obtain additional security,realize on any or all of the security it has taken unless it is instructed by the Minister not to do so, oreffect any compromise with, or grant any concession to, any person other than the borrower with the approval of the Minister; andwithin 30 days of receipt by the Minister of advice of the date the loan becomes repayable, take such additional steps for the realization or protection of the security as the Minister may reasonably require.SI/84-4, s. 3
The Minister shall maintain a registry for the purpose of recording loans made under this Order.
A bank that makes a guaranteed loan under this Order shall furnish to the Minister such reports or information as the Minister may from time to time require.
Where an application for a guaranteed loan has been scrutinized and checked as described in paragraph 4(1)(b) and it is subsequently discovered that a false material statement has been made in the application or that the proceeds of the loan have been or are being used otherwise than for the purpose specified in the application, the liability of the Minister under the guarantee issued under this Order is not affected thereby.
The Minister shall in January of each year prepare a report with respect to the administration of this Order during the immediately preceding fiscal year and shall include that report in the report submitted by him to Parliament pursuant to section 7 of the Department of Indian Affairs and Northern Development Act.