Federal Credit Union Conversion Regulations (SOR/2012-268)

Interpretation

• 1 (1) The following definitions apply in these Regulations.

  Act

  Act means the Bank Act. (Loi)

  board authorization

  board authorization means the decision by the board of directors of a federal credit union to pursue conversion. (autorisation du conseil)

  conversion

  conversion means a federal credit union becoming a bank with common shares as a result of the issuance of letters patent by the Minister under section 216.08 of the Act. (transformation)

  converted credit union

  converted credit union means a federal credit union that has been converted into a bank with common shares. (transformée)

  converting credit union

  converting credit union means a federal credit union that is proposing to convert into a bank with common shares. (en transformation)

  market terms and conditions

  market terms and conditions has the same meaning as in subsection 501(2) of the Act. (conditions du marché)

  related party

  related party has the same meaning as in section 486 of the Act. (apparenté)

  value of the converting credit union

  value of the converting credit union means the market value of the converting credit union as of the day on which the conversion occurs or such other day as may be specified by the Superintendent under paragraph 7(a), including that of its membership shares and shares, if any, but excluding

  • (a) any capital to be contributed as part of the conversion proposal; and

  • (b) any expense to be incurred by the converting credit union to effect conversion. (valeur de la coopérative de crédit en transformation)

  valuation expert

  valuation expert means a person capable of providing an independent and fair certification of the value of the converting credit union. (évaluateur expert)

• (2) In these Regulations, any reference to an estimated value may be read as a reference to a range of estimated values.

Application

2 These Regulations apply in respect of the conversion of a federal credit union into a bank with common shares under section 216.08 of the Act.

Conversion Proposal

• 3 (1) A conversion proposal must be written in language that is clear and simple and in a manner that is not misleading, and must include all information that members and shareholders, if any, of the converting credit union would reasonably require or expect to be given to make an informed decision about the proposed conversion, including

  • (a) the proposed date of conversion or a description of the event with which the converting credit union proposes that its conversion coincide;

  • (b) the proposed name of the converted credit union;

  • (c) a description of the advantages and disadvantages of the proposed conversion in relation to the converting credit union and to its members and shareholders, if any, as a whole;

  • (d) a description of the alternatives to conversion that the converting credit union’s board of directors considered, and the reasons why, in their opinion, the conversion is in the best interests of the converting credit union and its members and shareholders, if any, as a whole;

  • (e) a description of the converting credit union’s business plan for the three-year period following the day on which the conversion occurs, including

    • (i) a description of the services it intends to provide,

    • (ii) a description of any services it no longer intends to provide,

    • (iii) if any service is proposed to be provided by another entity, the name of that entity and its relationship to the converting credit union and its related parties, if any, and

    • (iv) a description of any anticipated changes to the geographic area within which the converting credit union intends to provide its services;

  • (f) a description, including the value, of any securities that are proposed to be issued, or cash that is proposed to be paid, as a result of the conversion, to a person that owns a membership share or share of the converting credit union;

  • (g) a statement of the number of members and shareholders, if any, of the converting credit union that, on the day on which the conversion occurs, will become common or other shareholders of the converted credit union;

  • (h) information as to whether the converted credit union is expected, within the three-year period following the day on which the conversion occurs, to be controlled by a shareholder or shareholder group or to have any shareholder with a significant interest in any class of its shares;

  • (i) a description of any proposed changes to the following that would arise from conversion:

    • (i) the number of directors of the converting credit union, and

    • (ii) the rights of its members and shareholders, if any, with respect to its governance, including their rights to participate in meetings and elect directors and the rights of shareholders to control the converted credit union;

  • (j) a description of any changes to the rights of shareholders arising from the requirements of section 5;

  • (k) for the one-year period before the day on which the board authorization occurs,

    • (i) a statement of any related party’s interest in or relationship to the converting credit union and any change in a related party’s ownership of membership shares or shares of the converting credit union, and

    • (ii) a description of any transactions between the converting credit union and a related party;

  • (l) a discussion of the fairness of the conversion proposal to the converting credit union’s members and shareholders, if any, as a whole, as well as an independent opinion on the fairness of the proposal by a person with the necessary skills and experience to provide such an opinion;

  • (m) a summary of the valuation report referred to in paragraph 6(k), which must include the certification of the reasonableness of the values and assumptions contained in the report and the information referred to in subparagraphs 6(k)(iii) to (v);

  • (n) summary pro forma financial statements for the converted credit union for the three-year period following the day on which the conversion occurs that are based on one of the following and prepared in a manner consistent with the annual statement, as well as a report or comments on those statements by the converting credit union’s auditor:

    • (i) if the date of the most recent annual financial statement for the converting credit union is more than 120 days before the giving of notice in respect of a special resolution referred to in paragraph (s), the financial statement for the converting credit union for the most recently completed quarter, or

    • (ii) in any other case, the annual statement for the most recently completed financial year of the converting credit union;

  • (o) an indication of the expected capital requirements of the converted credit union, based on the summary statements referred to in paragraph (n), and the anticipated sources of that capital;

  • (p) a description of the terms of and date proposed for any offering of securities by the converted credit union during the three-year period following the day on which the conversion occurs;

  • (q) a description of any corporate reorganization that is expected to be participated in by the converted credit union during the three-year period following the day on which the conversion occurs;

  • (r) a description of the converted credit union’s dividends and patronage allocation policy, compared to that of the converting credit union;

  • (s) a copy of any special resolution that the members and shareholders, if any, of the converting credit union are to consider under subsection 216.09(1) of the Act;

  • (t) a copy of any proposed by-law for the converted credit union;

  • (u) the name of the proposed auditor and any proposed transfer agent for the converted credit union;

  • (v) a statement that the board of directors of the converting credit union may withdraw the conversion proposal at any time before the issuance of letters patent;

  • (w) a summary of the restrictions referred to in section 9; and

  • (x) a summary of the tax consequences of conversion for members and shareholders, if any, of the converting credit union.

• (2) A copy of the conversion proposal that has been approved by the Superintendent must be provided with the notice of the meeting at which the special resolution referred to in subsection 216.09(1) of the Act is to be considered.

Amendment or Withdrawal of Conversion Proposal

• 4 (1) The converting credit union’s board of directors may amend the conversion proposal at any time before conversion so long as the amended conversion proposal is approved by the Superintendent and by the members and shareholders, if any, of the converting credit union in accordance with paragraph 216.09(1)(a) of the Act.

• (2) The converting credit union’s board of directors may withdraw the conversion proposal at any time before conversion.

By-Law Requirements

5 Unless the conversion proposal provides that the common shares of the converted credit union will be listed on a public market within the three-year period following the day on which the conversion occurs, the converted credit union’s by-laws must include

• (a) a limitation on the number of common shares of the converted credit union that may be issued;

• (b) a restriction on a shareholder’s right to transfer a common share if the transfer is not approved by a special resolution of the common shareholders and, as a result of the transfer, the transferee acquires a significant interest in or control of the converted credit union that is not anticipated by the conversion proposal; and

• (c) a statement that any certificate issued for a common share must note conspicuously that the transfer of the share is restricted under the by-laws of the converted credit union.

Material to Superintendent

6 The converting credit union must supply to the Superintendent, along with a copy of its conversion proposal for the Superintendent’s approval, the following items:

• (a) the proposed name of the converted credit union;

• (b) the proposed date of conversion or a description of the event with which the converted credit union proposes that its conversion coincide;

• (c) a certified copy of the resolution of the converting credit union’s board of directors authorizing conversion, and a certificate from the converting credit union indicating that its board of directors has approved the conversion proposal as being fair and reasonable to its members and shareholders, if any, as a whole;

• (d) a copy of any special resolution that the members and shareholders, if any, of the converting credit union are to consider under subsection 216.09(1) of the Act;

• (e) the proposed letters patent of conversion;

• (f) a copy of any by-law proposed for the converted credit union;

• (g) a description of any information in addition to that contained in the conversion proposal that is proposed to be provided to the members and shareholders, if any, of the converting credit union for review before the date for the making of the special resolution;

• (h) details of any information sessions for members and shareholders, if any, that have been or will be held by the converting credit union and a description of any public advertising proposed by the converting credit union to advertise those sessions;

• (i) the pro forma financial statements and auditor’s report or comments referred to in paragraph 3(1)(n) and statements of any necessary reconciliations;

• (j) the information required in paragraph 3(1)(o);

• (k) a report prepared by a valuation expert setting out the following information and certifying that the values and assumptions contained in the report are reasonable:

  • (i) the name of the valuation expert,

  • (ii) the estimated value of the converting credit union, the estimated market value of its membership shares and the estimated market value of its shares, if any, as of the day on which the conversion occurs or such other day as may be specified by the Superintendent under paragraph 7(a),

  • (iii) the manner in which those estimates have been rendered, including an indication of any assumptions relied upon in doing so,

  • (iv) the day or days, if any, on which those estimates are to be adjusted, and the manner of doing so, and

  • (v) the day on which the value of the converting credit union, the market value of its membership shares and the market value of its shares, if any, as of the day on which the conversion occurs will be calculated, and the manner of doing so;

• (l) a description, including the value, of any securities that are proposed to be issued, or cash that is proposed to be paid, as a result of the conversion, to a person that owns a membership share or share of the converting credit union;

• (m) the independent fairness opinion required by paragraph 3(1)(l);

• (n) the name of any person that will, as a result of conversion, own more than five per cent of the common shares or a class of shares of the converted credit union, or that is expected to own that amount in accordance with a statement of anticipated sources of capital under paragraph 3(1)(o), and an indication of whether that person is expected to be a related party; and

• (o) in respect of any offering of securities for public subscription, a copy of any offering document for any current offering and a copy of any offering document, or the most recent draft of such a document, for any offering that is anticipated to occur no later than 30 days following the day on which the conversion occurs.