Insurance Companies Act (S.C. 1991, c. 47)

Marginal note:Duty of care

• 166 (1) Every director and officer of a company in exercising any of the powers of a director or an officer and discharging any of the duties of a director or an officer shall

  • (a) act honestly and in good faith with a view to the best interests of the company; and

  • (b) exercise the care, diligence and skill that a reasonably prudent person would exercise in comparable circumstances.

• Marginal note:Duty to comply

  (2) Every director, officer and employee of a company shall comply with this Act, the regulations, the company’s incorporating instrument and the by-laws of the company.

• Marginal note:No exculpation

  (3) No provision in any contract, in any resolution or in the by-laws of a company relieves any director, officer or employee of the company from the duty to act in accordance with this Act and the regulations or relieves a director, officer or employee from liability for a breach thereof.

Qualification and Number — Directors

Marginal note:Minimum number of directors

• 167 (1) A company shall have at least seven directors.

• Marginal note:Residency requirement

  (2) At least one half of the directors of a company that is a subsidiary of a foreign institution or of a prescribed holding body corporate of a foreign institution and a majority of the directors of any other company must be, at the time of each director’s election or appointment, resident Canadians.

Marginal note:Disqualified persons

• 168 (1) The following persons are disqualified from being directors of a company:

  • (a) a person who is less than eighteen years of age;

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

  • (c) a person who has the status of a bankrupt;

  • (d) a person who is not a natural person;

  • (e) a person who is prohibited by subsection 164.08(8) or section 418 or 430 from exercising voting rights attached to shares of the company or whose voting rights attached to the shares are suspended under section 432.1 or subsection 1016.3(4);

  • (f) a person who is an officer, director or full time employee of an entity that is prohibited by subsection 164.08(8) or section 418 or 430 from exercising voting rights attached to shares of the company or whose voting rights attached to the shares are suspended under section 432.1 or subsection 1016.3(4);

  • (f.1) a person who is an officer, director, employee or agent of — or any other person acting on behalf of — an eligible agent within the meaning of section 406.1;

  • (g) [Repealed, 2013, c. 40, s. 164]

  • (h) a minister of Her Majesty in right of Canada or in right of a province;

  • (i) a person who is an agent or employee of the government of a foreign country or any political subdivision thereof; and

  • (j) a person who is an insurance agent or broker of the company.

• Marginal note:Shareholders disqualified

  (2) A shareholder of a company is disqualified from being a policyholders’ director of the company.

• (3) [Repealed, 2013, c. 40, s. 164]

Marginal note:No requirement to hold shares or policies

169 A director of a company is not required to hold shares of or a policy issued by the company.

Marginal note:Affiliated person

170 The Governor in Council may make regulations specifying the circumstances under which a natural person is affiliated with a company for the purposes of this Act.

Marginal note:Affiliated director determination

• 170.1 (1) Notwithstanding section 170, the Superintendent may determine that a particular director is affiliated with a company for the purposes of this Act if, in the opinion of the Superintendent, the director has a significant or sufficient commercial, business or financial relationship with the company or with an affiliate of the company to the extent that the relationship can be construed as being material to the director and can reasonably be expected to affect the exercise of the director’s best judgment.

• Marginal note:Notification by Superintendent

  (2) A determination by the Superintendent under subsection (1)

  • (a) becomes effective on the day of the next annual meeting of the shareholders and policyholders unless a notice in writing by the Superintendent revoking the determination is received by the company prior to that day; and

  • (b) ceases to be in effect on the day of the next annual meeting of the shareholders and policyholders after a notice in writing by the Superintendent revoking the determination is received by the company.

Marginal note:Unaffiliated directors

• 171 (1) At the election of directors at each annual meeting of the shareholders and policyholders of a company and at all times until the day of the next annual meeting no more than two thirds of the directors may be persons affiliated with the company.

• Marginal note:Exception

  (2) Subsection (1) does not apply where

  • (a) all the voting shares of a company, other than directors’ qualifying shares, if any, are beneficially owned by a Canadian financial institution incorporated by or under an Act of Parliament; and

  • (b) there are no policyholders who are entitled to vote.

• Marginal note:Determination of affiliation

  (3) For the purposes of subsection (1), whether or not a person is affiliated with a company shall be determined as of the day the notice of the annual meeting is sent to shareholders and policyholders pursuant to section 143 and that determination becomes effective on the day of that meeting, and a person shall be deemed to continue to be affiliated or unaffiliated, as the case may be, until the next annual meeting of shareholders and policyholders.

Marginal note:Limit on directors

172 No more than 15 per cent of the directors of a company may, at each director’s election or appointment, be employees of the company or a subsidiary of the company, except that up to four persons who are employees of the company or a subsidiary of the company may be directors of the company if those directors constitute not more than one half of the directors of the company.

Election and Tenure — Directors

Marginal note:Number of directors

• 173 (1) Subject to subsection 167(1) and sections 176 and 238, the directors of a company shall, by by-law, determine the number of directors or the minimum and maximum number of directors, but no by-law that decreases the number of directors shortens the term of an incumbent director.

• Marginal note:Shareholders’ and policyholders’ directors

  (2) Subject to subsection 167(1) and sections 176 and 238, the directors of a company that has common shares and policyholders who are entitled to vote at an annual meeting of shareholders and policyholders shall by by-law determine the number of directors, or the minimum and maximum number of directors, who are to be elected by the shareholders and the number, or the minimum and maximum number, who are to be elected by the policyholders.

• Marginal note:Election at annual meeting

  (3) A by-law made pursuant to subsection (1) that provides for a minimum and maximum number of directors may provide that the number of directors, shareholders’ directors or policyholders’ directors to be elected at any annual meeting of the shareholders and policyholders be such number as is fixed by the directors prior to the annual meeting.

• Marginal note:Minimum

  (4) If a company has common shares and policyholders who are entitled to vote at an annual meeting of shareholders and policyholders, the number of shareholders’ directors and the number of policyholders’ directors, whether determined by by-law or fixed by the directors, must each be at least one third of the total number of directors.

• Marginal note:Mutual company

  (4.1) Where the shareholders of a mutual company are entitled to elect one or more directors of the company, not more than one third of the directors may be elected by the shareholders.

• Marginal note:Shareholders’ and policyholders’ directors

  (5) In making by-laws for the purposes of subsection (2), the directors shall designate every member of the board as being either a shareholders’ director or a policyholders’ director.

Marginal note:Election or appointment as director

173.1 The election or appointment of a person as a director is subject to the following conditions:

• (a) the person was present at the meeting when the election or appointment took place and did not refuse to hold office as a director; or

• (b) the person was not present at the meeting when the election or appointment took place but

  • (i) consented in writing to hold office as a director before the election or appointment or within 10 days after it, or

  • (ii) acted as a director after the election or appointment.

Marginal note:Term of directors

• 174 (1) Except where this Act or the by-laws of a company provide for cumulative voting, the company may, by by-law, provide that the directors be elected for terms of one, two or three years.

• Marginal note:Idem

  (2) Where this Act or the by-laws of a company provide for cumulative voting to elect the shareholders’ directors, the company may, by by-law, provide that the policyholders’ directors be elected for terms of one, two or three years.

• Marginal note:Term of one, two or three years

  (3) A director elected for a term of one, two or three years holds office until the close of the first, second or third annual meeting of shareholders and policyholders, as the case may be, following the election of the director.

• Marginal note:No stated term

  (4) A director who is not elected for an expressly stated term of office ceases to hold office at the close of the next annual meeting of shareholders and policyholders following the election of the director.

• Marginal note:Tenure of office

  (5) It is not necessary that all directors elected at a meeting of shareholders or policyholders hold office for the same term.

• Marginal note:Idem

  (6) If a by-law of a company provides that the directors be elected for a term of two or three years, it may also provide that the term of office of each director be for the whole of that term, or that, as nearly as may be, one half of the directors retire each year if the term is two years, and that one third of the directors retire each year if the term is three years.

• Marginal note:Composition requirements

  (7) Where a director of a company is elected or appointed for a term of more than one year, the company shall comply with subsections 167(2) and 171(1), section 172 and subsection 173(4) at each annual meeting of shareholders and policyholders during the director’s term of office as if that director were elected or appointed on that date.

• Marginal note:Transitional

  (8) Subsection (7) does not apply in respect of a former-Act company until the day of the third annual meeting of shareholders and policyholders after the coming into force of this section.

Marginal note:Determining election of directors

• 175 (1) Except where this Act or the by-laws of a company provide for cumulative voting, the persons, to the number authorized to be elected, who receive the greatest number of votes at an election of directors of a company shall be the directors thereof.

• Marginal note:No right to vote

  (2) A shareholder of a company that has common shares and policyholders who are entitled to vote at an annual meeting of shareholders and policyholders

  • (a) is not entitled to vote for the policyholders’ directors if the shareholder is not a policyholder; and

  • (b) is not entitled to vote any shares for the policyholders’ directors.

• Marginal note:Idem

  (3) The holder of a policy issued by a company that has common shares and policyholders who are entitled to vote at an annual meeting of shareholders and policyholders

  • (a) is not entitled to vote for the shareholders’ directors if the policyholder is not a shareholder; and

  • (b) is not entitled to vote as a policyholder for the shareholders’ directors.

• Marginal note:Equal number of votes

  (4) If, at any election of directors referred to in subsection (1), two or more persons receive an equal number of votes and there are not sufficient vacancies remaining to enable all the persons receiving an equal number of votes to be elected, the directors who receive a greater number of votes or the majority of them shall, in order to complete the full number of directors, determine which of the persons so receiving an equal number of votes are to be elected.

Marginal note:Cumulative voting

• 176 (1) Where this Act or the by-laws provide for cumulative voting,

  • (a) there shall be a stated number determined by by-law, and not a minimum and maximum number, of directors, in the case of a company that has no policyholders who are entitled to vote at an annual meeting of shareholders and policyholders, or of shareholders’ directors, in the case of a company that has such policyholders;

  • (b) each shareholder entitled to vote at an election of directors to be elected by cumulative voting has the right to cast a number of votes equal to the number of votes attached to the shares held by the shareholder multiplied by the number of directors to be elected by cumulative voting, and the shareholder may cast all such votes in favour of one candidate or distribute them among the candidates in any manner;

  • (c) a separate vote shall be taken with respect to each candidate nominated for a position that is to be filled by cumulative voting unless a resolution is passed unanimously permitting two or more persons to be elected by a single vote;

  • (d) if a shareholder has voted for more than one candidate without specifying the distribution of the votes among the candidates, the shareholder is deemed to have distributed the votes equally among the candidates for whom the shareholder voted;

  • (e) if the number of candidates nominated exceeds the number of positions to be filled, the candidates who receive the least number of votes shall be eliminated until the number of candidates remaining equals the number of positions to be filled;

  • (f) each director elected by cumulative voting ceases to hold office at the close of the next annual meeting of shareholders and policyholders following the director’s election;

  • (g) a director elected by cumulative voting may be removed from office only if the number of votes cast in favour of a motion to remove the director is greater than the product of the number of directors required by the by-laws to be elected by cumulative voting and the number of votes cast against the motion; and

  • (h) the number of directors required by the by-laws to be elected by cumulative voting may be decreased only if the number of votes cast in favour of a motion to decrease the number of directors is greater than the product of the number of directors required by the by-laws to be elected by cumulative voting and the number of votes cast against the motion.

• Marginal note:Mandatory cumulative voting

  (2) Where the aggregate of the voting shares beneficially owned by a person and any entities controlled by the person carries more than 10 per cent of the voting rights attached to all the outstanding voting shares of a company, the directors to be elected by shareholders shall be elected by cumulative voting.

• Marginal note:Exception

  (3) Subsection (2) does not apply where all the voting shares of the company that are outstanding, other than directors’ qualifying shares, if any, are beneficially owned by

  • (a) one person;

  • (b) one person and one or more entities controlled by that person; or

  • (c) one or more entities controlled by the same person.

• Marginal note:Exception

  (3.1) Subsection (2) does not apply to a converted company in respect of which subsection 407(4) applies or a company to which subsection 407(5) applies.

• Marginal note:Transitional election

  (4) Where this Act or the by-laws of a company provide for cumulative voting, the shareholders of the company shall,

  • (a) at the first annual meeting of shareholders and policyholders held not earlier than ninety days following the date that cumulative voting is required under subsection (2) or provided for in the by-laws, and

  • (b) at each succeeding annual meeting,

  elect the stated number of directors to hold office until the close of the next annual meeting of shareholders and policyholders following their election.

• Marginal note:Class or series of shares

  (5) Nothing in this Act precludes the holders of any class or series of shares of a company from having an exclusive right to elect one or more directors.