Bank Act (S.C. 1991, c. 46)

Marginal note:Conversion privileges

• 713 (1) A bank holding company may issue conversion privileges, options or rights to acquire securities of the bank holding company, and shall set out the conditions thereof

  • (a) in the documents that evidence the conversion privileges, options or rights; or

  • (b) in the securities to which the conversion privileges, options or rights are attached.

• Marginal note:Transferable rights

  (2) Conversion privileges, options and rights to acquire securities of a bank holding company may be made transferable or non-transferable, and options and rights to acquire such securities may be made separable or inseparable from any securities to which they are attached.

• Marginal note:Reserved shares

  (3) Where a bank holding company has granted privileges to convert any securities issued by the bank holding company into shares, or into shares of another class or series, or has issued or granted options or rights to acquire shares, if the by-laws limit the number of authorized shares, the bank holding company shall reserve and continue to reserve sufficient authorized shares to meet the exercise of such conversion privileges, options and rights.

Marginal note:Holding of own shares

714 Except as provided in sections 715 to 717, or unless permitted by the regulations, a bank holding company shall not

• (a) hold shares of the bank holding company or of any body corporate that controls the bank holding company;

• (b) hold any ownership interests of any unincorporated entity that controls the bank holding company;

• (c) permit any of its subsidiaries to hold any shares of the bank holding company or of any body corporate that controls the bank holding company; or

• (d) permit any of its subsidiaries to hold any ownership interests of any unincorporated entity that controls the bank holding company.

Marginal note:Purchase and redemption of shares

• 715 (1) Subject to subsection (2) and to its by-laws, a bank holding company may, with the consent of the Superintendent, purchase, for the purpose of cancellation, any shares issued by it, or redeem any redeemable shares issued by it at prices not exceeding the redemption price thereof calculated according to a formula stated in its by-laws or the conditions attaching to the shares.

• Marginal note:Restrictions on purchase and redemption

  (2) A bank holding company shall not make any payment to purchase or redeem any shares issued by it if there are reasonable grounds for believing that the bank holding company is, or the payment would cause the bank holding company to be, in contravention of any regulation referred to in subsection 949(1) or (2) or any direction made pursuant to subsection 949(3).

• Marginal note:Donated shares

  (3) A bank holding company may accept from any shareholder a share of the bank holding company surrendered to it as a gift, but may not extinguish or reduce a liability in respect of an amount unpaid on any such share except in accordance with section 718.

Marginal note:Holding as personal representative

• 716 (1) A bank holding company may permit its subsidiaries to hold, in the capacity of a personal representative, shares of the bank holding company or of any body corporate that controls the bank holding company or ownership interests in any unincorporated entity that controls the bank holding company, but only if the subsidiary does not have a beneficial interest in the shares or ownership interests.

• Marginal note:Security interest

  (2) A bank holding company may permit its subsidiaries to hold by way of a security interest shares of the bank holding company or of any body corporate that controls the bank holding company, or any ownership interests of any entity that controls the bank holding company, if the security interest is nominal or immaterial when measured by criteria established by the bank holding company that have been approved in writing by the Superintendent.

Marginal note:Exception — conditions before acquisition

• 716.1 (1) A bank holding company may permit any of its subsidiaries to acquire shares of the bank holding company through the issuance of those shares by the bank holding company to the subsidiary if the conditions prescribed for the purposes of this subsection are met before the subsidiary acquires the shares.

• Marginal note:Conditions after acquisition

  (2) After a subsidiary has acquired shares under the purported authority of subsection (1), the conditions prescribed for the purposes of this subsection must be met.

• Marginal note:Non-compliance with conditions

  (3) If a bank holding company permits any of its subsidiaries to acquire shares of the bank holding company under the purported authority of subsection (1) and one or more of the conditions prescribed for the purposes of subsections (1) and (2) were not met, are not met or cease to be met, as the case may be, then, despite section 665 and subsection 710(2), the bank holding company must comply with the prescribed requirements.

Marginal note:Cancellation of shares

• 717 (1) Subject to subsection (2), where a bank holding company purchases shares of the bank holding company or fractions thereof or redeems or otherwise acquires shares of the bank holding company, the bank holding company shall cancel those shares.

• Marginal note:Requirement to sell

  (2) If a subsidiary of a bank holding company, through the realization of security, acquires any shares of the bank holding company or of any body corporate that controls the bank holding company or any ownership interests in an unincorporated entity that controls the bank holding company, the bank holding company shall cause its subsidiary to, within six months after the day of the realization, sell or otherwise dispose of the shares or ownership interests.

Marginal note:Reduction of capital

• 718 (1) The stated capital of a bank holding company may be reduced by special resolution.

• Marginal note:Limitation

  (2) A bank holding company shall not reduce its stated capital by special resolution if there are reasonable grounds for believing that the bank holding company is, or the reduction would cause the bank holding company to be, in contravention of any regulation referred to in subsection 949(1) or (2) or any direction made pursuant to subsection 949(3).

• Marginal note:Contents of special resolution

  (3) A special resolution to reduce the stated capital of a bank holding company shall specify the stated capital account or accounts from which the reduction of stated capital effected by the special resolution will be deducted.

• Marginal note:Approval by Superintendent

  (4) A special resolution to reduce the stated capital of a bank holding company has no effect until it is approved in writing by the Superintendent.

• Marginal note:Exception

  (4.1) Subsection (4) does not apply if

  • (a) the reduction in the stated capital is made solely as a result of changes made to the accounting principles referred to in subsection 308(4); and

  • (b) there is to be no return of capital to shareholders as a result of the reduction.

• Marginal note:Conditions for approval

  (5) No approval to reduce the stated capital of a bank holding company may be given by the Superintendent unless application therefor is made within three months after the time of the passing of the special resolution and a copy of the special resolution, together with a notice of intention to apply for approval, has been published in the Canada Gazette.

• Marginal note:Statements to be submitted

  (6) In addition to evidence of the passing of a special resolution to reduce the stated capital of a bank holding company and of the publication thereof, statements showing

  • (a) the number of the bank holding company’s shares issued and outstanding,

  • (b) the results of the voting by class of shares of the bank holding company,

  • (c) the bank holding company’s assets and liabilities, and

  • (d) the reason why the bank holding company seeks the reduction of capital

  shall be submitted to the Superintendent at the time of the application for approval of the special resolution.

Marginal note:Recovery by action

• 719 (1) Where any money or property was paid or distributed to a shareholder or other person as a consequence of a reduction of capital made contrary to section 718, a creditor of the bank holding company may apply to a court for an order compelling the shareholder or other person to pay the money or deliver the property to the bank holding company.

• Marginal note:Shares held by personal representative

  (2) No person holding shares in the capacity of a personal representative and registered on the records of the bank holding company as a shareholder and therein described as the personal representative of a named person is personally liable under subsection (1), but the named person is subject to all the liabilities imposed by that subsection.

• Marginal note:Limitation

  (3) An action to enforce a liability imposed by subsection (1) may not be commenced more than two years after the date of the act complained of.

• Marginal note:Remedy preserved

  (4) This section does not affect any liability that arises under section 794.

Marginal note:Adjustment of stated capital account

• 720 (1) On a purchase, redemption or other acquisition by a bank holding company of shares or fractions thereof issued by it, the bank holding company shall deduct from the stated capital account maintained for the class or series of shares so purchased, redeemed or otherwise acquired an amount equal to the result obtained by multiplying the stated capital in respect of the shares of that class or series by the number of shares of that class or series so purchased, redeemed or otherwise acquired and dividing by the number of shares of that class or series outstanding immediately before the purchase, redemption or other acquisition.

• Marginal note:Adjustment of stated capital account

  (2) A bank holding company shall adjust its stated capital account or accounts in accordance with any special resolution referred to in section 718.

• Marginal note:Shares converted to another class

  (3) On a conversion of outstanding shares of a bank holding company into shares of another class or series, or on a change of outstanding shares of the bank holding company into shares of another class or series, the bank holding company shall

  • (a) deduct from the stated capital account maintained for the class or series of shares converted or changed an amount equal to the result obtained by multiplying the stated capital of the shares of that class or series by the number of shares of that class or series converted or changed, and dividing by the number of outstanding shares of that class or series immediately before the conversion or change; and

  • (b) record the result obtained under paragraph (a) and any additional consideration received pursuant to the conversion or change in the stated capital account maintained or to be maintained for the class or series of shares into which the shares have been converted or changed.

• Marginal note:Stated capital of convertible shares

  (4) For the purposes of subsection (3) and subject to the bank holding company’s by-laws, where a bank holding company issues two classes of shares and there is attached to each class a right to convert a share of one class into a share of the other class and a share is so converted, the amount of stated capital attributable to a share in either class is the aggregate of the stated capital of both classes divided by the number of outstanding shares of both classes immediately before the conversion.

• Marginal note:Conversion or change of shares

  (5) Shares issued by a bank holding company and converted into shares of another class or series, or changed under subsection 217(1) into shares of another class or series, become issued shares of the class or series of shares into which the shares have been converted or changed.

Marginal note:Addition to stated capital account

721 On a conversion of any debt obligation of a bank holding company into shares of a class or series of shares, the bank holding company shall

• (a) deduct from the liabilities of the bank holding company the nominal value of the debt obligation being converted; and

• (b) record the result obtained under paragraph (a) and any additional consideration received for the conversion in the stated capital account maintained or to be maintained for the class or series of shares into which the debt obligation has been converted.

Marginal note:Declaration of dividend

• 722 (1) The directors of a bank holding company may declare and a bank holding company may pay a dividend by issuing fully paid shares of the bank holding company or options or rights to acquire fully paid shares of the bank holding company and, subject to subsection (4), the directors of a bank holding company may declare and a bank holding company may pay a dividend in money or property, and where a dividend is to be paid in money, the dividend may be paid in a currency other than the currency of Canada.

• Marginal note:Notice to Superintendent

  (2) The directors of a bank holding company shall notify the Superintendent of the declaration of a dividend at least 15 days before the day fixed for its payment.

• Marginal note:Share dividend

  (3) If shares of a bank holding company are issued in payment of a dividend, the bank holding company shall record in the stated capital account maintained or to be maintained for the shares of the class or series issued in payment of the dividend the declared amount of the dividend stated as an amount of money.

• Marginal note:When dividend not to be declared

  (4) The directors of a bank holding company shall not declare and a bank holding company shall not pay a dividend if there are reasonable grounds for believing that the bank holding company is, or the payment would cause the bank holding company to be, in contravention of any regulation referred to in subsection 949(1) or (2) or any direction made pursuant to subsection 949(3).

Subordinated Indebtedness

Marginal note:Restriction on subordinated indebtedness

• 723 (1) A bank holding company shall not issue subordinated indebtedness unless the subordinated indebtedness is fully paid for in money or, with the approval of the Superintendent, in property.

• Marginal note:References to subordinated indebtedness

  (2) A person shall not in any prospectus, advertisement, correspondence or literature relating to any subordinated indebtedness issued or to be issued by a bank holding company refer to the subordinated indebtedness otherwise than as subordinated indebtedness.

• Marginal note:Other currencies

  (3) When issuing subordinated indebtedness, a bank holding company may provide that any aspect of the subordinated indebtedness relating to money or involving the payment of or the liability to pay money in relation thereto be in a currency other than that of Canada including, without restricting the generality of the foregoing, the payment of any interest thereon.

Security Certificates and Transfers

Marginal note:Sections 81 to 135 apply

724 Sections 81 to 135 apply in respect of bank holding companies, subject to the following:

• (a) references to “bank” in those sections are to be read as references to “bank holding company”;

• (b) references to “this Act” in those sections are to be read as references to “this Part”;

• (c) references to “Part VII” in those sections are to be read as references to “Division 7 of Part XV”;

• (d) references to “this Part” in those sections are to be read as references to “this Division”;

• (e) the reference to “subsections 137(5) to (7) and sections 138 to 141 and 145” in subsection 93(1) is to be read as a reference to “subsections 726(5) to (7) and sections 727 to 730 and 734”; and

• (f) the reference to “section 71 or 77” in subsection 97(3) is to be read as a reference to “section 715 or 720”.