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

Marginal note:Information and documents to eligible policyholders

17 The notice referred to in paragraph 237(1.2)(a) of the Act must be sent with

• (a) a description of the steps that have been taken in the conversion process and the steps that are to be taken;

• (b) the conversion proposal;

• (c) a description of the advantages and disadvantages of the proposed conversion to the converting company and its policyholders;

• (d) a description of the alternatives to conversion that the directors of the converting company have considered, and the reasons why, in their opinion, the conversion is in the best interests of the company and its policyholders;

• (e) a description of the form, amount and estimated market value or range of market values of the benefits to be provided as a result of the conversion to the eligible policyholder to whom the notice is sent;

• (f) a description of any right of policyholders to vote after the conversion, as policyholders or shareholders of the converted company;

• (g) for each jurisdiction in which at least one per cent of all eligible policyholders reside, a description of the income tax treatment accorded the benefits referred to in paragraph (e) in that jurisdiction;

• (h) summaries of

  • (i) the opinions referred to in paragraphs 14(2)(b) to (e), other than those that are subject to an exemption under section 22, and

  • (ii) the documents referred to in paragraph 16(2)(i);

• (i) the financial statements referred to in paragraphs 14(2)(f) and 16(2)(a) and (b), other than those that are subject to an exemption under section 22;

• (j) the documents referred to in paragraphs 14(2)(c) and (d), other than those that are subject to an exemption under section 22;

• (k) a brief description of the business carried on by the converting company and its subsidiaries, and the general development of that business, during the three years preceding a day that is not more than 120 days before the day on which the notice is sent to the eligible policyholders, and any future business foreseen as of that day;

• (l) a brief description of any substantial variations in the operating results of the converting company during the three most recently completed financial years preceding the notice and, if the notice is sent to the eligible policyholders more than 120 days after the end of the most recently completed financial year of the converting company, during the portion of the current financial year ending on a day that is not more than 120 days before the day on which the notice is sent;

• (m) the names of all persons who, on the day on which the notice is sent to the eligible policyholders, have a significant interest in the converting company or who, as a result of the conversion, will have a significant interest in the converted company, and a description of the type and number of shares held or to be held by those persons;

• (n) the name and address of the converted company’s auditor;

• (o) the names and addresses of the proposed transfer agents and registrars;

• (p) the proposed location for the securities registers for the initial issuance of common shares;

• (q) a description of any sales by the converting company, within the 12 months preceding a day that is not more than 120 days before the day on which the notice is sent to the eligible policyholders, of securities of the same type as those to be provided as benefits to the eligible policyholders under the conversion proposal;

• (r) a copy of any prospectus referred to in paragraph 16(2)(f);

• (s) a description of the restrictions set out in sections 23 and 24 and of any plans that the converting company has for the establishment of stock option or stock incentive plans for the persons referred to in those sections after the period referred to in section 24;

• (t) a description of any measures, including the establishment of toll-free lines and websites, the holding of information sessions, and the placement of advertisements in widely circulated publications, that the converting company has taken or will take before holding the special meeting to provide eligible policyholders with information about the proposed conversion and an opportunity to raise questions or concerns about the proposed conversion;

• (u) a description of the measures that the converting company has taken or will take to encourage eligible policyholders to vote on the conversion proposal, in person or by proxy, at the special meeting;

• (v) an indication of the eligible policyholders’ right under section 164.01 of the Act to appoint a proxyholder to attend and act at the special meeting on their behalf; and

• (w) any other information that the Superintendent has required under paragraph 16(6)(a).

Marginal note:Notice to policyholders

18 Within 30 days after the approval of a conversion proposal by the eligible policyholders, the directors of a converting company must send a notice to all of its policyholders informing them of the approval and indicating the company’s intention to make an application under section 19.

Ministerial Approval

Marginal note:Application to Minister

19 Within three months after the approval of a conversion proposal by the eligible policyholders, the directors of a converting company must make an application referred to in subsection 237(1) of the Act.

Marginal note:Contents of application

• 20 (1) An application referred to in subsection 237(1) of the Act must be submitted to the Superintendent and must include

  • (a) the conversion proposal;

  • (b) the documents referred to in paragraphs 14(2)(b) to (f) and 16(2)(a) to (d), (i) and (j), other than those that are subject to an exemption under section 22;

  • (c) the notice referred to in paragraph 237(1.2)(a) of the Act and the documents sent with that notice;

  • (d) the proposed letters patent of conversion and any by-laws, amendments to by-laws or repeals of by-laws that are necessary to implement the conversion proposal; and

  • (e) the special resolutions of the eligible policyholders referred to in subsection 237(1.5) of the Act, accompanied by a certificate issued by the converting company indicating the results of the votes held in respect of those resolutions.

• Marginal note:Information and documents already submitted

  (2) The converting company is not required to resubmit to the Superintendent any information or document referred to in subsection (1) that is unchanged from that submitted to the Superintendent under subsection 14(2) or 16(2).

• Marginal note:Additional information

  (3) The Superintendent may request any additional information that he or she considers necessary to make a recommendation to the Minister for the purpose of subsection 237(1) of the Act.

Termination of Conversion Process

Marginal note:Resolution

• 21 (1) The directors of a converting company may pass a resolution terminating the conversion process at any time before the letters patent of conversion are issued.

• Marginal note:Failure to meet deadlines

  (2) The conversion process is terminated if the required documents are not submitted to the Superintendent within the time limit set out in subsection 14(5) or if no notice referred to in paragraph 237(1.2)(a) of the Act is sent within one year after the day on which the Superintendent authorizes its sending.

Exemption by Superintendent

Marginal note:Exemption

22 The Superintendent may exempt a converting company from any of the requirements of paragraphs 14(2)(d) to (i), subsection 14(5) and paragraphs 15(g), (l) and (r), 16(2)(a) to (c) and 17(g), (l) and (r), on such terms and conditions as he or she considers appropriate.

Restrictions

Marginal note:Compensation to directors, officers or employees

• 23 (1) A converting company or converted company must not pay any fee, compensation or other consideration in relation to the conversion of the company to any director, officer or employee of the company, other than

  • (a) the regular compensation provided to the person in that person’s capacity as a director, officer or employee of the company; and

  • (b) any benefits provided to eligible policyholders or the persons or classes of persons referred to in paragraph 13(1)(c) as a result of a conversion.

• Marginal note:Contracts for services

  (2) A converting company or converted company must not pay any fee, compensation or other consideration under a contract for services in relation to the conversion of the company to an entity with which a director, an officer or an employee of the company is associated in any way unless the terms and conditions of that contract are at least as favourable to the company as market terms and conditions, as defined in subsection 534(2) of the Act.

Marginal note:Issuance of shares

24 A converted company must not, prior to the listing of its shares on a recognized stock exchange in Canada and for a period of one year after that listing, issue or provide shares, share options or rights to acquire shares to the following persons, other than shares issued to eligible policyholders or the persons or classes of persons referred to in paragraph 13(1)(c) as a result of a conversion:

• (a) any director, officer or employee of the company; or

• (b) any person who was a director, officer or employee of the converted company during the year preceding the day on which the conversion takes effect.

Marginal note:Acquisition

• 25 (1) During a company’s first four years as a converted company, the Minister may only give an approval under subsection 407(1) of the Act in respect of the company if

  • (a) the proposed acquisition would not result in the converted company having a major shareholder; or

  • (b) the Minister is of the opinion that the converted company is, or is about to be, in financial difficulty and that the proposed acquisition would facilitate an improvement in its financial condition.

• Marginal note:Restriction

  (2) A body corporate that holds all of the voting shares of a converted company and makes an application under paragraph 39(1)(b) of the Act must, for the duration of the four-year period, include in that body corporate’s incorporating instrument a provision that restricts the issue, transfer or ownership of that body corporate’s shares, of any class or series, so as to prevent that body corporate from having a major shareholder.

• Marginal note:Removal of provision

  (3) Despite subsection (2), the body corporate may amend its incorporating instrument to remove the provision included in it under that subsection, if the Minister has given an approval under paragraph (1)(b).

Coming into Force

Marginal note:Publication

Footnote ^*26 These Regulations come into force on the day on which they are published in the Canada Gazette, Part II.

• Return to footnote ^*[Note: Regulations in force July 1, 2015.]