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Indian Economic Development Guarantee Order (SOR/78-21)

Regulations are current to 2019-08-28

Revision of Loan Terms and Default

 Where a borrower is in default in respect of a guaranteed loan, other than a guaranteed loan made by way of a line of credit, or informs the bank that any terms of the agreement in respect of such a loan are such that he may have to default, and the bank is of the opinion that a revision or alteration of any of the terms of the agreement may enable the borrower to meet his obligations thereunder, the bank may, with the consent of the borrower, revise or alter the terms of the agreement by

  • (a) increasing or decreasing the periods between repayments, except that repayments shall be due no less frequently than annually; or

  • (b) extending the time within which the guaranteed loan is to be repaid, so long as such extension

    • (i) does not, without the approval of the Minister, exceed one year from the date on which the loan was originally scheduled to be repaid,

    • (ii) does not, without the approval of the Minister and the Minister of Finance, exceed 15 years from the date on which the guarantee was approved, and

    • (iii) is not granted without the approval of the Minister of Finance, where that Minister originally approved the guarantee.

 Where a borrower is in default in respect of a loan made by way of a line of credit, or the bank reasonably believes that the borrower will have to default in respect of such a loan, the bank may, with the consent of the borrower, revise or alter the terms of the loan to enable the borrower to meet his obligation, except that no extension of the expiry date or no revision of the security requirements and the interest rate shall be given without the approval of the Minister and, where the Minister of Finance has originally approved the line of credit under subsection 4(2), the approval of the Minister of Finance.

Claim by Bank

  •  (1) A claim by a bank for a loss as a result of a guaranteed loan shall be made to the Minister at any time not less than 90 days after the entire amount of the balance outstanding becomes due and repayable and shall comprise

    • (a) the unpaid principal amount of the guaranteed loan;

    • (b) any uncollected taxed costs for or incidental to legal proceedings in respect of the guaranteed loan;

    • (c) the uncollected earned interest outstanding at the time the claim is approved for payment by the Minister at the full rate of interest specified in the loan terms for

      • (i) a period of 180 days after the entire amount of the balance outstanding becomes due and repayable and for such further period as, in the opinion of the Minister, is justified for reasons beyond the control of the bank, and

      • (ii) thereafter, at one-half the rate of interest specified in the loan terms;

    • (d) legal fees, legal costs and disbursements, whether taxable or not, actually incurred by the bank, whether with or without litigation, in collecting or endeavouring to collect the outstanding balance of the guaranteed loan or in protecting the interests of the Minister but only to the extent that the Deputy Minister of Justice taxes or allows; and

    • (e) any other disbursements actually incurred by the bank in collecting or endeavouring to collect the outstanding balance of the guaranteed loan or in protecting the interests of the Minister but only to the extent that the Minister allows.

  • (2) For the purposes of subsection (1), the expression “loan terms” includes any agreement entered into by the bank with the borrower on a promissory note.

  • (3) A valid claim by a bank under subsection (1) shall be approved for payment by the Minister within 60 days from the acceptance thereof and shall thereupon be paid forthwith unless a longer period has been mutually agreed to by the bank and the Minister.

  • SI/84-4, s. 2

 Subject to section 11, the Minister shall not be obligated to accept a claim under section 8 unless he is satisfied that the steps required by section 12 have been taken.

  • SI/84-4, s. 2

Assignment by Bank

 Where, under this Order, the Minister has paid to a bank the amount of a loss sustained by a bank as a result of a guaranteed loan, the bank shall forthwith execute an assignment in a form satisfactory to the Minister of all the rights of the bank in respect of that loan and, without limiting the generality of the foregoing, shall execute an assignment of all rights and powers of the bank in respect of

  • (a) the loan;

  • (b) any judgment obtained by the bank in respect of the loan; and

  • (c) any security taken by the bank for the repayment of the loan.

  •  (1) Where a loan has been guaranteed in part and where the Minister has instructed a bank not to realize on its securities pursuant to subparagraph 12(2)(a)(iii), the Minister shall become liable for the total loss of the bank as if the loan had been guaranteed by the Minister for the full amount thereof, and, on payment of the claim by the Minister, the bank shall execute an assignment, in a form satisfactory to the Minister, of all the rights of the bank in respect of that loan as described in section 10.

  • (2) Where a loan has been guaranteed in part and the bank is unable to realize on any or all of its securities, the bank may submit a claim for loss pursuant to section 8 for the estimated amount of the net loss as mutually agreed between the bank and the Minister, and the bank on payment of a valid claim shall, at the option of the Minister,

    • (a) execute an assignment in a form satisfactory to the Minister of all rights of the bank in respect of that loan as described in section 10; or

    • (b) continue to take all reasonable steps to realize on the outstanding securities.

  • (3) Where a loan has been guaranteed in part and funds are recovered from any source, including the disposal of assets, subsequent to the payment of a claim in respect of the guaranteed loan, such funds, less realization costs, shall be divided between the Minister and the bank in proportion to their respective shares of the net loss as agreed between the bank and the Minister.

  • SI/84-4, s. 3

General

  •  (1) Where a borrower is in default in respect of any term or condition of a guaranteed loan, the bank shall, within 30 days thereafter, advise the Minister of the default of the borrower and, subject to sections 6 and 7, the entire amount of the balance outstanding on the loan shall, at the option of the bank and the Minister, become repayable.

  • (2) Where a guaranteed loan becomes repayable pursuant to subsection (1), the bank shall

    • (a) take such steps, whether by legal proceedings or otherwise, as it considers necessary to

      • (i) effect collection of the balance outstanding,

      • (ii) obtain additional security,

      • (iii) realize on any or all of the security it has taken unless it is instructed by the Minister not to do so, or

      • (iv) effect any compromise with, or grant any concession to, any person other than the borrower with the approval of the Minister; and

    • (b) within 30 days of receipt by the Minister of advice of the date the loan becomes repayable, take such additional steps for the realization or protection of the security as the Minister may reasonably require.

  • SI/84-4, s. 3

 The Minister shall maintain a registry for the purpose of recording loans made under this Order.

 A bank that makes a guaranteed loan under this Order shall furnish to the Minister such reports or information as the Minister may from time to time require.

 Where an application for a guaranteed loan has been scrutinized and checked as described in paragraph 4(1)(b) and it is subsequently discovered that a false material statement has been made in the application or that the proceeds of the loan have been or are being used otherwise than for the purpose specified in the application, the liability of the Minister under the guarantee issued under this Order is not affected thereby.

 The Minister shall in January of each year prepare a report with respect to the administration of this Order during the immediately preceding fiscal year and shall include that report in the report submitted by him to Parliament pursuant to section 7 of the Department of Indian Affairs and Northern Development Act.

 
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