Mutual Property and Casualty Insurance Company with Non-mutual Policyholders Conversion Regulations (SOR/2015-168)

Interpretation

Marginal note:Definitions

1 The following definitions apply in these Regulations.

Act

Act means the Insurance Companies Act. (Loi)

conversion

conversion means the conversion of a mutual property and casualty insurance company into a company with common shares. (transformation)

converted company

converted company means a property and casualty insurance company that was a mutual company and has been converted into a company with common shares and, except for the purpose of paragraphs 13(1)(g), 14(2)(n) and 16(2)(i), includes a holding corporation of that company. (société transformée)

converting company

converting company means a mutual property and casualty insurance company whose directors have passed a resolution under section 3 recommending conversion of the company. (société en transformation)

eligibility date

eligibility date means the date on which the directors of a mutual property and casualty insurance company pass a resolution under section 3 recommending conversion of the company. (date d’admissibilité)

eligible mutual policyholder

eligible mutual policyholder means a person who holds a mutual policy if

• (a) they held it on the eligibility date;

• (b) they applied for it before the date specified in the resolution passed under section 3 and it was issued after the eligibility date but before the day on which the special resolution referred to in section 5 is passed; or

• (c) they held it before the eligibility date but it lapsed before that date and was reinstated after that date but before the day on which the special resolution referred to in section 5 is passed. (souscripteur admissible d’une police mutuelle)

eligible non-mutual policyholder

eligible non-mutual policyholder means a person who

• (a) holds a non-mutual policy and has done so for the 12-month period ending on the eligibility date; or

• (b) belongs to any other group of policyholders specified in the resolution passed under section 3. (souscripteur admissible d’une police non mutuelle)

eligible policyholder

eligible policyholder means

• (a) an eligible mutual policyholder; or

• (b) an eligible non-mutual policyholder. (souscripteur admissible)

holding corporation

holding corporation means a body corporate that is incorporated as a company under the Act and that holds all of the voting shares of a converted company. (société mère)

independent

independent means, in respect of an actuary, financial market expert or valuation expert, that the actuary, financial market expert or valuation expert

• (a) does not have a conflict of interest with a converting company, any of its eligible policyholders or any persons or classes of persons who are to be provided with benefits as a result of a conversion;

• (b) is not a related party of the converting company; and

• (c) is appointed on mutual agreement of the converting company and the two policyholder committees. (indépendant)

mutual policy

mutual policy means a policy the holding of which entitles its holder to vote at all policyholder meetings of a converting company, but does not include a policy issued or assumed by a company with common shares that amalgamated with a mutual company after the eligibility date. (police mutuelle)

mutual property and casualty insurance company

mutual property and casualty insurance company means a mutual company that is also a property and casualty company. (société mutuelle d’assurances multirisques)

non-mutual policy

non-mutual policy means a policy, other than a mutual policy, that is issued by a mutual property and casualty insurance company. (police non mutuelle)

related party

related party has the meaning assigned by section 518 of the Act. (personne apparentée)

value of the converting company

value of the converting company means the estimated market value or range of market values of a converting company, excluding

• (a) the value of capital contributions made at the time of incorporation as a mutual property and casualty insurance company;

• (b) amounts recorded in any account maintained under section 70 or 83.04 of the Act; and

• (c) any expenses expected to be incurred to effect the conversion. (valeur de la société en transformation)

Application

Marginal note:Companies with non-mutual policyholders

2 These Regulations apply to mutual property and casualty insurance companies in which some of the policyholders hold non-mutual policies.

Initiation of Conversion Process

Marginal note:Resolution of directors

3 If the directors of a mutual property and casualty insurance company wish to pursue its conversion, they must pass a resolution recommending conversion and setting out

• (a) a date before the eligibility date by which any mutual policy that will be issued after the eligibility date and before the day on which the special resolution referred to in section 5 is passed must have been applied for so that its holder qualifies as an eligible mutual policyholder; and

• (b) any group of policyholders who hold non-mutual policies — other than those who have held their policies for the 12-month period ending on the eligibility date — who are to qualify as eligible non-mutual policyholders.

Marginal note:Before special meeting of eligible policyholders

4 Before seeking authorization from the Superintendent to send a notice referred to in paragraph 237(1.2)(a) of the Act, a converting company must ensure that a conversion proposal has been developed in accordance with sections 5 to 13 and that the right to vote on that conversion proposal and on the authorization referred to in paragraph 237(1.1)(c) of the Act has been extended to all eligible non-mutual policyholders at a special meeting referred to in section 14.

Negotiations Between Classes of Policyholders

Marginal note:Vote to negotiate

5 Not less than 30 days after the eligibility date, the eligible mutual policyholders must vote by special resolution on whether to negotiate, with the eligible non-mutual policyholders, the elements referred to in section 12.

Marginal note:Authorization to send notice of intent to negotiate

• 6 (1) Within 30 days of an affirmative vote under section 5, a converting company must, for the purpose of obtaining the Superintendent’s authorization to send to its eligible policyholders a notice of intent to negotiate, submit to the Superintendent the notice, which must

  • (a) indicate that the eligible mutual policyholders have passed a special resolution authorizing the negotiations referred to in section 12 with the eligible non-mutual policyholders and set out the criteria for determining who qualifies as an eligible mutual policyholder or eligible non-mutual policyholder;

  • (b) indicate when and how all necessary information relevant to the conversion process will be published on the converting company’s website and how the policyholders may request to receive that information by mail; and

  • (c) contain a summary of the conversion process.

• Marginal note:Sending and publication of notice

  (2) On receipt of the Superintendent’s authorization, the converting company must send the notice to all of its eligible policyholders and publish it on its website.

Marginal note:Application for initial court order

• 7 (1) Not less than 30 days and not more than 45 days after the day on which a notice is sent under subsection 6(2), the converting company must file with the court an application for an initial order.

• Marginal note:Content of initial order

  (2) Within 60 days after the filing of the application, the court must make an initial order setting out

  • (a) any information and documents that the converting company must publish on its website in addition to those required by these Regulations;

  • (b) the procedures for making applications or filing submissions for the purpose of subsections 8(1) and (5) and 9(1), (3) and (5);

  • (c) the manner of effecting service for the purpose of subsections 8(3) and 9(3);

  • (d) the date, time and location of the hearings referred to in subsections 8(6) and 9(6); and

  • (e) the procedures for submitting costs and expenses to the court for the purpose of section 11.

• Marginal note:Subsequent orders

  (3) The court may make any subsequent order that it considers necessary to ensure the efficiency, transparency and fairness of the negotiations referred to in section 12.

• Marginal note:Publication on website

  (4) A converting company must publish on its website all orders made by the court for the purpose of these Regulations.

Marginal note:Application by counsel

• 8 (1) A member in good standing of the bar — or of the Chambre des notaires du Québec — of the province in which the application for the initial order is made may apply to the court, in the time and manner set out in the initial order, to be appointed as counsel for either the eligible mutual policyholders or the eligible non-mutual policyholders of a converting company in respect of the negotiations referred to in section 12.

• Marginal note:Restrictions

  (2) Counsel must not have any interest that is in conflict with that of the class of policyholders they seek to represent and must not be an officer, employee or related party of the converting company.

• Marginal note:Service

  (3) Counsel who submit an application under subsection (1) must serve a copy of it on the converting company.

• Marginal note:Publication

  (4) The converting company must publish on its website the names of all counsel who have submitted applications under subsection (1) for each class of policyholders, as well as the content of their applications or a summary of their experience.

• Marginal note:Objections

  (5) Eligible policyholders may file, in the time and manner set out by the court in the initial order, an objection to the candidacy of any counsel who has submitted an application.

• Marginal note:Appointment

  (6) The court must appoint counsel for each of the two classes of policyholders and must notify the converting company of its decision following a hearing at which the court assesses the ability of each applicant to fairly and adequately represent the interests of the class of policyholders in question, including by taking into account their experience in financial law, corporate law, securities law or mediation and arbitration and by having regard to any objections filed under subsection (5).

• Marginal note:Publication

  (7) The converting company must publish on its website the name and contact information of the selected counsel for each class of policyholders.

• Marginal note:Communication

  (8) All communication with the policyholder committees is to be made through counsel for the class of policyholders that the committee represents.

• Marginal note:Duration of appointment

  (9) Counsel’s appointment ends on the day on which the notice referred to in subsection 14(1) is sent or the day on which the conversion process is terminated, whichever is earlier.

Marginal note:Committee membership

• 9 (1) Any eligible policyholder may submit to counsel for the class of policyholders to which they belong, in the time and manner set out in the initial order, an application for membership on the policyholder committee for that class.

• Marginal note:Restrictions

  (2) Applicants must not have any interest that is in conflict with that of the eligible policyholders they seek to represent and must not be an officer, employee or related party of the converting company.

• Marginal note:Filing and service

  (3) Counsel must file with the court all applications received under subsection (1) and must serve on counsel for the other class of policyholders and on the converting company the names of the applicants from the class of policyholders they represent.

• Marginal note:Publication

  (4) The converting company must publish on its website the names of all applicants for membership on each policyholder committee.

• Marginal note:Objections

  (5) Any eligible policyholder or counsel for a class of policyholders may file, in the time and manner set out by the court in the initial order, an objection to the candidacy of a policyholder who has submitted an application for membership on a policyholder committee.

• Marginal note:Appointment

  (6) The court must appoint at least three and not more than nine eligible policyholders to be members of each policyholder committee and must notify the converting company and counsel for the class of policyholders represented by that committee of its decision following a hearing at which the court assesses the ability of each applicant to fairly and adequately represent the interests of the class of policyholders in question, including by taking into account their experience in negotiations and business and financial affairs and by having regard to any objections filed under subsection (5).

• Marginal note:Publication

  (7) The converting company must publish on its website the names of the members of each policyholder committee.

• Marginal note:Obligations of company in respect of policyholder committee members

  (8) In any legal proceeding, the converting company is bound to take up the interest for and assume the defence of any member of the policyholder committees for anything done or omitted to be done in good faith in the performance of their functions and, if applicable, indemnify that member.

• Marginal note:Duration of representation

  (9) The policyholder committees are disbanded on the day on which the notice referred to in subsection 14(1) is sent or the day on which the conversion process is terminated, whichever is earlier.

Marginal note:Provision of information

• 10 (1) A converting company must, subject to the Supervisory Information (Insurance Companies) Regulations and the Supervisory Information (Insurance Holding Companies) Regulations, provide to counsel for each class of policyholders whatever information or documents they reasonably require to facilitate the negotiations referred to in section 12.

• Marginal note:Access to information and documents

  (2) Any information or document that the converting company provides to counsel for one class of policyholders must be provided to counsel for the other class.

• Marginal note:Confidentiality

  (3) The court may make orders respecting the confidentiality of information provided by the converting company and determine under what circumstances the information can be used or disclosed.

Marginal note:Costs payable by converting company

• 11 (1) The court must determine, having regard to their reasonableness, the amounts payable by a converting company in relation to the negotiations referred to in section 12, including the costs of counsel and any experts consulted by the policyholder committees, remuneration for policyholder committee members and reimbursement of their expenses for travel, accommodation and meals in respect of attendance at policyholder committee meetings.

• Marginal note:Payment

  (2) All amounts determined by the court must be paid by the converting company no later than the day on which it seeks the Superintendent’s authorization to send the notice referred to in paragraph 237(1.2)(a) of the Act or the day on which the conversion process is terminated under section 21, whichever comes first, or on any other day that the court may set.