Trust and Loan Companies Act (S.C. 1991, c. 45)

Marginal note:Related party of company

• 474 (1) For the purposes of this Part, a person is a related party of a company where the person

  • (a) is a person who has a significant interest in a class of shares of the company;

  • (b) is a director or senior officer of the company or of a body corporate that controls the company or is acting in a similar capacity in respect of an unincorporated entity that controls the company;

  • (c) is the spouse or common-law partner, or a child who is less than eighteen years of age, of a person described in paragraph (a) or (b);

  • (d) is an entity that is controlled by a person referred to in any of paragraphs (a) to (c);

  • (e) is an entity in which a person who controls the company has a substantial investment;

  • (f) is an entity in which the spouse or common-law partner, or a child who is less than eighteen years of age, of a person who controls the company has a substantial investment; or

  • (g) is a person, or a member of a class of persons, designated under subsection (3) or (4) as, or deemed under subsection (5) to be, a related party of the company.

  • (h) [Repealed, 1997, c. 15, s. 398]

• Marginal note:Exception — subsidiaries and substantial investments of companies

  (2) If an entity in which a company has a substantial investment would, but for this subsection, be a related party of the company only because a person who controls the company controls the entity or has a substantial investment in the entity, and the person does not control the entity or have a substantial investment in the entity otherwise than through the person’s controlling interest in the company, the entity is not a related party of the company.

• Marginal note:Designated related party

  (3) For the purposes of this Part, the Superintendent may, with respect to a particular company, designate as a related party of the company

  • (a) any person or class of persons whose direct or indirect interest in or relationship with the company or a related party of the company might reasonably be expected to affect the exercise of the best judgment of the company in respect of a transaction; or

  • (b) any person who is a party to any agreement, commitment or understanding referred to in section 9 if the company referred to in that section is the particular company.

• Marginal note:Idem

  (4) Where a person is designated as a related party of a company pursuant to subsection (3), the Superintendent may also designate any entity in which the person has a substantial investment and any entity controlled by such an entity to be a related party of the company.

• Marginal note:Deemed related party

  (5) Where, in contemplation of a person becoming a related party of a company, the company enters into a transaction with the person, the person is deemed for the purposes of this Part to be a related party of the company in respect of that transaction.

• Marginal note:Holders of exempted shares

  (6) The Superintendent may, by order, designate a class of non-voting shares of a company for the purpose of this subsection. If a class of non-voting shares of a company is so designated, a person is deemed, notwithstanding paragraph (1)(a), not to be a related party of the company if the person would otherwise be a related party of the company only because the person has a significant interest in that class.

• Marginal note:Determination of substantial investment

  (7) For the purpose of determining whether an entity or a person has a substantial investment for the purposes of paragraph (1)(e) or (f), the references to “control” and “controlled” in section 10 shall be construed as references to “control, within the meaning of section 3, determined without regard to paragraph 3(1)(d)” and “controlled, within the meaning of section 3, determined without regard to paragraph 3(1)(d)”, respectively.

• Marginal note:Determination of control

  (8) For the purposes of paragraph (1)(d), “controlled” means “controlled, within the meaning of section 3, determined without regard to paragraph 3(1)(d)”.

Marginal note:Non-application of Part

• 475 (1) This Part does not apply in respect of any transaction entered into prior to the coming into force of this Part but, after the coming into force of this Part, any modification of, addition to, or renewal or extension of a prior transaction is subject to this Part.

• Marginal note:Idem

  (2) This Part does not apply in respect of

  • (a) money or other assets held in trust, other than guaranteed trust money and assets held in respect thereof;

  • (b) the issue of shares of any class of shares of a company when fully paid for in money or when issued

    • (i) in accordance with any provisions for the conversion of other issued and outstanding securities of the company into shares of that class of shares,

    • (ii) as a share dividend,

    • (iii) in exchange for shares of a body corporate that has been continued as a company under Part III,

    • (iv) in accordance with the terms of an amalgamation under Part VI,

    • (v) by way of consideration in accordance with the terms of a sale agreement under Part VI, or

    • (vi) with the approval in writing of the Superintendent, in exchange for shares of another body corporate;

  • (c) the payment of dividends by a company;

  • (d) transactions that consist of the payment or provision by a company to persons who are related parties of the company of salaries, fees, stock options, pension benefits, incentive benefits or other benefits or remuneration in their capacity as directors, officers or employees of the company;

  • (e) transactions approved by the Minister under subsection 678(1) of the Bank Act or subsection 715(1) of the Insurance Companies Act; or

  • (f) if a company is controlled by a widely held bank holding company or a widely held insurance holding company, transactions approved by the Superintendent that are entered as part of, or in the course of, a restructuring of the holding company or of any entity controlled by it.

• Marginal note:Exception

  (3) Nothing in paragraph (2)(d) exempts from the application of this Part the payment by a company of fees or other remuneration to a person for

  • (a) the provision of services referred to in paragraph 483(1)(a); or

  • (b) duties outside the ordinary course of business of the company.

• Marginal note:Exception for holding body corporate

  (4) A holding body corporate of a company is not a related party of a company if the holding body corporate is a Canadian financial institution that is referred to in any of paragraphs (a) to (d) of the definition “financial institution” in section 2.

• Marginal note:Substantial investment — related party exception

  (5) Where a holding body corporate of a company is, because of subsection (4), not a related party of the company, any entity in which the holding body corporate has a substantial investment is not a related party of the company if no related party of the company has a substantial investment in the entity otherwise than through the control of the holding body corporate.

Marginal note:Meaning of “transaction”

• 476 (1) For the purposes of this Part, entering into a transaction with a related party of a company includes

  • (a) making a guarantee on behalf of the related party;

  • (b) making an investment in any securities of the related party;

  • (c) taking an assignment of or otherwise acquiring a loan made by a third party to the related party; and

  • (d) taking a security interest in the securities of the related party.

• Marginal note:Interpretation

  (2) For the purposes of this Part, the fulfilment of an obligation under the terms of any transaction, including the payment of interest on a loan or deposit, is part of the transaction, and not a separate transaction.

• Marginal note:Meaning of loan

  (3) For the purposes of this Part, loan includes a deposit, a financial lease, a conditional sales contract, a repurchase agreement and any other similar arrangement for obtaining funds or credit, but does not include investments in securities or the making of an acceptance, endorsement or other guarantee.

• Marginal note:Security of a related party

  (4) For the purposes of this Part, security of a related party includes an option, transferable by delivery, to demand delivery of a specified number or amount of shares of the related party at a fixed price within a specified time.

Prohibited Related Party Transactions

Marginal note:Prohibited transactions

• 477 (1) Except as provided in this Part, a company shall not, directly or indirectly, enter into any transaction with a related party of the company.

• Marginal note:Transaction of entity

  (2) Without limiting the generality of subsection (1), a company is deemed to have indirectly entered into a transaction in respect of which this Part applies where the transaction is entered into by an entity that is controlled by the company.

• Marginal note:Exception

  (3) Subsection (2) does not apply where an entity that is controlled by a company is a financial institution incorporated or formed under the laws of a province and is subject to regulation and supervision, satisfactory to the Minister, regarding transactions with related parties of the company.

• Marginal note:Idem

  (4) Subsection (2) does not apply in respect of transactions entered into by an entity that is controlled by a company if the transaction is a prescribed transaction or is one of a class of prescribed transactions.

Permitted Related Party Transactions

Marginal note:Nominal value transactions

478 Notwithstanding anything in this Part, a company may enter into a transaction with a related party of the company if the value of the transaction is nominal or immaterial to the company when measured by criteria that have been established by the conduct review committee of the company and approved in writing by the Superintendent.

Marginal note:Secured loans

479 A company may make a loan to or a guarantee on behalf of a related party of the company or take an assignment of or otherwise acquire a loan to a related party of the company if

• (a) the loan or guarantee is fully secured by securities of or guaranteed by the Government of Canada or the government of a province; or

• (b) the loan is a loan permitted by section 418 made to a related party who is a natural person on the security of a mortgage of the principal residence of that related party.

Marginal note:Deposits

480 A company may enter into a transaction with a related party of the company if the transaction consists of a deposit by the company with a financial institution that is a direct clearer or a member of a clearing group under the by-laws of the Canadian Payments Association and the deposit is made for clearing purposes.

Marginal note:Borrowing, etc., from related party

481 A company may borrow money from, take deposits from, or issue debt obligations to, a related party of the company.

Marginal note:Acquisition of assets

• 482 (1) A company may purchase or otherwise acquire from a related party of the company

  • (a) securities of, or securities guaranteed by, the Government of Canada or the government of a province;

  • (b) assets fully secured by securities of, or securities guaranteed by, the Government of Canada or the government of a province; or

  • (c) goods for use in the ordinary course of business.

• Marginal note:Sale of assets

  (2) Subject to section 470, a company may sell any assets of the company to a related party of the company if

  • (a) the consideration for the assets is fully paid in money; and

  • (b) there is an active market for those assets.

• Marginal note:Asset transactions with financial institutions

  (3) Notwithstanding any of the provisions of subsections (1) and (2), a company may, in the normal course of business and pursuant to arrangements that have been approved by the Superintendent in writing, acquire or dispose of any assets, other than real property, from or to a related party of the company that is a financial institution.

• Marginal note:Asset transactions in restructuring

  (4) Notwithstanding any of the provisions of subsections (1) and (2), a company may acquire any assets from, or dispose of any assets to, a related party of the company as part of, or in the course of, a restructuring, if the acquisition or disposition has been approved in writing by the Superintendent.

• Marginal note:Goods or space for use in business

  (5) A company may lease assets

  • (a) from a related party of the company for use in the ordinary course of business of the company, or

  • (b) to a related party of the company,

  if the lease payments are made in money.

• Marginal note:Approval under section 241

  (6) A company may acquire any assets from, or dispose of any assets to, a related party of the company under a sale agreement that is approved by the Minister under section 241.

Marginal note:Services

• 483 (1) A company may enter into a transaction with a related party of the company if the transaction

  • (a) subject to subsection (2), consists of a written contract for the purchase by the company of services used in the ordinary course of business;

  • (b) subject to subsection (4), involves the provision by the company of services, other than loans or guarantees, normally offered to the public by the company in the ordinary course of business;

  • (c) consists of a written contract with a financial institution or an entity in which the company is permitted to have a substantial investment pursuant to section 453 that is a related party of the company

    • (i) for the networking of any services provided by the company or the financial institution or entity, or

    • (ii) for the referral of any person by the company to the financial institution or entity, or for the referral of any person by the financial institution or entity to the company;

  • (d) consists of a written contract for such pension or benefit plans or their management or administration as are incidental to directorships or to the employment of officers or employees of the company or its subsidiaries; or

  • (e) involves the provision by the company of management, advisory, accounting, information processing or other services in relation to any business of the related party.

• Marginal note:Order concerning management by employees

  (2) Where a company has entered into a contract pursuant to paragraph (1)(a) and the contract, when taken together with all other such contracts entered into by the company, results in all or substantially all of the management functions of the company being exercised by persons who are not employees of the company, the Superintendent may, by order, if the Superintendent considers that result to be inappropriate, require the company, within such time as may be specified in the order, to take all steps necessary to ensure that management functions that are integral to the carrying on of business by the company are exercised by employees of the company to the extent specified in the order.

• Marginal note:Exception

  (3) Despite subsection 477(2), a company is deemed not to have indirectly entered into a transaction in respect of which this Part applies if the transaction is entered into by an entity that is controlled by the company and the business of which is limited to the activity referred to in 453(2)(c) and the transaction is on terms and conditions at least as favourable to the company as market terms and conditions, as defined in subsection 489(2).

• Marginal note:Loans or guarantees not included

  (4) The provision of services, for the purposes of paragraph (1)(b), does not include the making of loans or guarantees.