AR 249/89 CREDIT UNION (PRINCIPAL) REGULATION (Consolidated up to 31/2012)
ALBERTA REGULATION 249/89
Credit Union Act
CREDIT UNION (PRINCIPAL) REGULATION
Table of Contents
Part 1 Interpretation and Application
1 Interpretation of Regulation
2 Interpretation provisions applicable to the Act
3 Application of Securities Act
Part 2 Administration
4 Minimum periods for retention of documents
5 Provision of confidential information
6 Fees
Part 3 Commencement of Business
7 Minimum share subscription for commencing business
8 Minimum deposit requirement therefor
9 Conditions for holding of deposits and share subscriptions
Part 4 Organization and Structure
10 Interpretation
11 Change from no bond to bond
12 Additional businesses permitted to credit unions
13 Credit union acting as financial leasing corporation
14 Subsidiary or affiliate as service corporation
15 Subsidiary or affiliate as financial leasing corporation
15.1 Additional businesses permitted to subsidiaries and affiliates
16 Joint ventures and partnerships
17 Disposal of assets in initial fiscal year
18 Trustee under self‑directed RRSP, RRIF or RESP
19 Additional permitted related party transactions
20 Exemption from procedures requirement
Part 5 Directors, Officers, Employees and Committees
21 Qualifications of directors
22 Functions, etc. to be performed by board
23 Prescribed authorization to delegate
24 Non‑delegable committee functions
Part 6 Financial Disclosure and Audit
25 Members’ equity and financial reporting
25.1 Form of remuneration disclosure resolution
25.2 Disclosure of remuneration in annual financial statements
26 Joint ventures and partnerships
27 Reporting by auditor on adverse financial changes
28 Meeting between Minister and auditor
29 Auditor’s right to information from Minister
30 Minister’s access to audit papers
Part 7 Investments
31 Land acquisition in new credit union’s initial fiscal year
32 Interest in partnership land
33 Prohibited investments
37 Investments in subsidiaries, affiliates, etc.
38 Liquidity investments
Part 8 Equity and Deposits
Division 1 Equity Generally
39 Statements on application for shares
40 Statement on share certificates
41 Intervals for common share statements
41.1 Disclosure of information before issue of common shares
41.2 Quarterly financial statements
41.3 Capital adequacy
42 Transfer of common shares
42.1 Transfer of common shares in new credit union
43 Redemption of shares
43.05 Protection of investment share dividends
Division 1.1 Investment Shares
43.1 Interpretation and application
43.2 Authorization to create and issue investment shares
43.3 General investment share provisions
43.31 Minister’s receipt authorizing issue
43.4 Amendments affecting investment shares
43.41 Issue of investment shares
43.5 Financial restrictions on issue of shares
43.51 Investment share register
43.6 Transfer of investment shares
43.61 Acquisition of credit union’s own investment shares for redemption, etc.
43.7 Dividends, patronage rebates and priorities
43.71 Marketing of investment shares
43.8 Material changes
43.81 Disclosure, examination and production of documents
43.9 Rights of withdrawal
Division 2 Deposits
44 Deposits from related party financial institutions
45 Repayment of deposit and share redemption on death
Part 9 Borrowings
47 Meaning of net borrowings
Part 10 Loans and Guarantees
50 Financial leasing corporation transactions - treatment as loans
51 Required quality as to mortgages
52 Determination of quality mortgage loan where multiple security
53 Limits on loans and guarantees without credit committee review
54 Loan maximums
54.1 Inter-credit union loans, etc.
54.2 Loans to individual non-members
55 Loans and guarantees to related party financial institutions
56 Loans to employees
57 Loans, etc. to related party auditors
Part 11 Credit Union Deposit Guarantee Corporation
58 Authorization to delegate
59 Composition of special loans committees
60 Non-acquirable securities
61 Maximum periodic assessment
62 Corporation’s common shares
63 Stated capital accounts
64 Shares as capital of the Corporation
65 Directors’ remuneration
Part 12 Credit Union Central Alberta Limited
65.01 Definitions
65.1 Credit unions that are not Central members
66 Additional composition of Central
67 Central’s purposes re other corporations
68 Delegation by board
69 Permitted businesses
70 Central’s joint ventures and partnerships
70.1 Disclosure of remuneration and benefits
71 Financial disclosure
73 Investment powers
74 Acquisition of lender rights under existing loan agreements
75 Loans and guarantees to members of credit unions by Central
76 Loans and guarantees to members of Central by Central Part 12.1 Amalgamation
77.1 Effect of having issued investment shares
Part 13 Dissolution and Liquidation and Dissolution
78 Ranking of special shares
79 Issue of certificate without discharge of bankruptcy
Part 14 Reviews
79.1 Reviewable action
80 Review board proceedings
Part 15 Enforcement
81 Auditor’s working papers
82 Orders affecting subsidiaries subject to Securities Act
83 Civil penalties and interest
Part 16 Miscellaneous
84 Valuation of property
85 Transitional - financial lease and conditional sales agreements
86 Transitional - loan limit exemptions
90 Amendment of O.C. 446/79
91 Repeals
92 Coming into force
Schedules
Part 1 Interpretation and Application
Interpretation of Regulation
1(1) In this Regulation,
(a) “Act” means the Credit Union Act;
(b) “buyer”, in relation to a conditional sales agreement, includes a bailee;
(c) “conditional sales agreement” means an agreement for a sale of personal property where the right of property or the right of possession in whole or in part remains in the seller notwithstanding that the actual possession of the personal property passes to the buyer, and where credit is extended by the seller to the buyer;
(d) “co‑operative” means an association within the meaning of section 1(b) of the Co‑operative Associations Act or a co‑operative association incorporated or registered under an Act of Canada or of a province similar to that Act or to any of the Acts referred to in that clause;
(e) “farming operation” means an agricultural activity conducted for gain or reward on land whose use for agriculture is a permitted or discretionary use under the land use by‑law of the municipality in which the land is situated or is permitted under section 74 of the Planning Act, including
(i) the cultivation of land,
(ii) the raising of livestock or poultry,
(iii) the raising of fur‑bearing animals, pheasants or fish,
(iv) the production of agricultural field crops or the growing of mushrooms,
(v) the production of fruit, vegetables, sod, trees, shrubs and other specialty horticultural crops,
(vi) the production of eggs and milk, and
(vii) the production of honey;
(f) “financial lease agreement” means an agreement for a lease of personal property whereby credit is extended by the lessor to the lessee for the purpose of enabling the lessee to meet his financial obligations under the lease;
(g) “financial leasing corporation” means a corporation whose business activities are limited to or, if the corporation is a credit union or Central, include entering into or acquiring and operating conditional sales agreements or financial lease agreements or both, including, if the corporation is a subsidiary or an affiliate of a credit union or Central, raising money for the purpose of financing those activities and holding and investing in short term securities any money so raised pending the employment of the money in those activities;
(h) “initial fiscal year” means, in respect of a new credit union, its initial fiscal year of operation following the date when approval to commence business was granted to it under section 24 of the Act;
(i) “insurer” means an insurer within the meaning of the Insurance Act who is authorized to carry on the business of insurance in Canada under a statute of Canada or of a province;
(i.01) “investment grade securities” means debt securities or preferred shares
(i) with ratings at least as high as those listed in the following table,
(ii) with ratings by other rating organizations, both the rating and the organization being approved by the Minister, or
(iii) that meet the requirements of subsection (4): Rating Organization Commercial Paper Bonds/ Debentures Preferred Shares Standard and Poor’s Corporation A-1 A
A Moody’s Investor Service P-1 A A Dominion Bond Rating Service Ltd. R-1 A Pfd-2 Canadian Bond Rating Service Ltd. A-1 A P-2
(i.1) “investment shares” means the class of shares referred to in section 43.2(1);
(j) “land” includes physical land;
(k) “Ministerial Regulation” means the Credit Union (Ministerial) Regulation (Alta. Reg. 250/89);
(l) “mortgage loan” means a loan that is or is to be secured by a mortgage of land;
(m) “quality mortgage loan”, subject to section 52, means a mortgage loan where
(i) the amount of the indebtedness, together with the amount of the indebtedness under other mortgages on the land mortgaged that rank equally with or in priority to the mortgage loan,
(A) does not exceed 80% of the fair market rate of the land at the time the mortgage is granted, or
(B) repealed AR 66/99 s2,
(ii) a government guarantee or insurance exists such that the amount of any loan loss for which the credit union is potentially liable cannot exceed 20% of the fair market rate of the land;
(m.1) “residential mortgage loans” means mortgage loans by the credit union to individuals to finance one to 4 unit residential dwellings where at least one of the units is to be owner‑occupied and the parcel of land on which it is situated does not exceed 40 acres;
(n) “section 24 approval date” means, in respect of a new credit union in its initial fiscal year, the date when approval to commence business was granted to it under section 24 of the Act;
(o) “seller”, in relation to a conditional sales agreement, includes a bailor;
(p) repealed AR 111/2004 s2.
(2) The definitions in section 2(1) and (2) apply to this Regulation.
(2.1) The definition of “assets” in section 2(9) applies in sections 2(4), 15(1)(b), 17, 26(3), 31, 32, 33, 38(1), 43(1), 44(2), 54, 54.1, 65.01(c) and 73(1)(a) and sections 2(1)(a)(i) and (ii) and (c)(iv) and 3(a) and (b) and 4 of Schedule 2.
(3) For the purposes of this Regulation, a corporation is able to continue as a going concern if, in the opinion of the person making the determination, it will be able to realize its assets and discharge its liabilities in the normal course of its business for the foreseeable future.
(4) Where a debt security or preferred share issued by a corporation does not have a rating, it is an investment grade security if the lower of
(a) the corporation’s corporate rating, and
(b) the rating of that other security issued by that corporation that has terms that are most closely similar to the terms of the debt security or preferred share in question,
or either of those ratings if both do not exist, is used as the rating for that security to determine whether or not the security meets the requirements of the table set out in subsection (1)(i.01).
AR 249/89 s1;21/95;66/99;111/2004;112/2007
Interpretation provisions applicable to the Act
2(1) For the purposes of the Act,
(a) “beneficially owned” includes owned through a trustee, legal representative, agent or other intermediary;
(a.1) “executive managers” means, in relation to a credit union,
(i) its chief executive officer or general manager,
(ii) its chief financial officer, and
(iii) vice‑presidents not included in subclause (i) or (ii) who perform executive and policy functions,
or the persons who occupy positions similar to those positions or fulfil functions normally performed by persons occupying those positions.
(b) “guarantee” includes the issue of a letter of credit;
(b.1) “internal operations report” means,
(i) where a credit union has an auditor, the management letter accompanying the audited financial statements, and
(ii) where it does not have an auditor, a report on the credit union’s internal controls;
(c) repealed AR 21/95 s3;
(d) “total capital” means total capital within the meaning of section 2 of Schedule 2.
(2) In section 2(4)(f), (6) and (7) of the Act, “held” means held as the legal owner or as the owner according to the share or voting records of the corporation or trust in question.
(3) For the purposes of section 2(6)(c) of the Act, a body corporate holds a voting interest if it is in possession of a proxy entitling it to vote that interest whichever way it chooses.
(4) With reference to section 1(1)(dd)(iii) of the Act and for the purposes of the Act except for section 111(3)(a) thereof, “insolvent” includes a case where the realizable value of the credit union’s assets is or would be less than the aggregate of its liabilities and the stated capital of its common and investment shares.
(5) The amount prescribed for the purposes of section 1(1)(gg) and (aaa) of the Act is $2 000 000.
(6) Notwithstanding section 1(1)(gg) and (aaa) of the Act, for the purposes of the Act, a new credit union in its initial fiscal year is a large or a small credit union depending on whether the aggregate of the money that has been paid to the credit union as share subscriptions under section 24(2)(c)(ii) of the Act and deposits under section 24(2)(c)(iii) of the Act as at the section 24 approval date is equal to or in excess of $2 000 000 or is less than $2 000 000.
(7) For the purposes of section 1(1)(jj) of the Act, the book value of the shares issued by a financial institution that is a subsidiary or affiliate of Central and that are held by Central shall be deducted in determining Central’s members’ equity.
(8) The other equity accounts referred to in section 1(1)(jj)(iii) of the Act are reserves and contributed surplus as accounted for in accordance with section 5 of the Act.
(9) For the purposes of sections 1(1)(gg), 1(1)(aaa), 89(1), 99(1)(b), 126(1), 183(7) and 199(2), and the 2nd reference in section 47(2), of the Act and the provisions of Part 13 of the Act that apply any of those enactments in relation to Central, “assets”, in relation to a credit union or Central, as the case may be, means the total book value of its assets, calculated in accordance with the methods referred to in or pursuant to section 5(1)(a) and, where applicable, 5(2) or (3) of the Act.
(10) The class of employees referred to in section 2(4)(e) of the Act consists of employees who are chief financial officers, branch managers or chief credit officers of the body corporate, or who perform functions for the body corporate normally performed by any such person.
AR 249/89 s2;21/95;66/99;111/2004
Application of Securities Act
3 With reference to section 3(2) of the Act, the Securities Act does not apply to common shares issued by Central.
AR 249/89 s3
Part 2 Administration
Minimum periods for retention of documents
4(1) The period of time for which a body corporate is required by section 15(1) of the Act to retain a document is
(a) as long as the body corporate exists, in the case of
(i) minutes of board and of general meetings,
(ii) the general ledger or other book of final entry containing summaries of year‑to‑year transactions, and
(iii) special agreements necessary to an understanding of the entries in the general ledger or other book of final entry referred to in subclause (ii),
and
(b) in the case of
(i) all other records and books of account and of accounts and vouchers necessary to verify the information contained in those records and books, and
(ii) minutes of committee and executive committee meetings,
the period ending 6 years after the end of the last fiscal year to which the records and books of account or minutes relate.
(2) The period following the dissolution of a credit union or Central for which the Corporation is required by section 15(4) of the Act to retain a document is
(a) in the case of a document referred to in subsection (1)(a), the period ending 5 years after the date of the dissolution, and
(b) in the case of a document referred to in subsection (1)(b), the period ending 6 years after the end of the last fiscal year to which the records and books of account relate.
AR 249/89 s4
Provision of confidential information
5 Pursuant to section 16(3) or (4) of the Act, the Minister or the Corporation, as the case may be, may provide
(a) information referred to in section 16(1) of the Act that is required by an insurer to enable it to negotiate insurance coverage on behalf of a body corporate, to that insurer,
(b) with the specific consent of a body corporate and for any purpose that the Minister or the Corporation considers expedient, any information about that body corporate to any other body corporate,
(c) aggregated financial data about credit unions based on data provided by them individually, whether in the form of registered information or not, to any person,
(d) until June 30, 1997, any information or documents referred to in section 16(1) of the Act to the Ombudsman for the purpose of an investigation under the Ombudsman Act, or
(e) to the person who prepares an internal operations report, for the purpose of enabling that person to fulfil the duties and functions imposed on such a person by the Act, such information as is necessary to enable the achievement of that purpose.
AR 249/89 s5;31/97;48/97;66/99
Fees
6 The fees payable to the Minister for services rendered by him under the Act or, except where specifically prescribed in this Regulation, under this Regulation are fees in the same amount as are payable to the Registrar of Corporations for corresponding services under the Business Corporations Act.
AR 249/89 s6;21/95
Part 3 Commencement of Business
Minimum share subscription for commencing business
7 The number of common shares prescribed for the purposes of section 24(2)(c)(ii) of the Act is
(a) in the case of a credit union with no bond of association, 250 000, and
(b) in the case of a credit union with a bond of association, 10 000.
AR 249/89 s7
Minimum deposit requirement therefor
8 The amount prescribed as required deposits for the purposes of section 24(2)(c)(iii) of the Act is
(a) in the case of a credit union with no bond of association, $750 000, and
(b) in the case of a credit union with a bond of association, $30 000.
AR 249/89 s8
Conditions for holding of deposits and share subscriptions
9(1) The conditions on which Central is required to hold deposits and share subscriptions and is permitted to allow withdrawals from those deposits and subscriptions under section 24(4) of the Act are as set out in this section.
(2) Central must pay interest on the money at a rate at least equal to and on conditions that are not less favourable than the rate and conditions generally applicable to 30‑day term deposits by credit unions with Central.
(3) Central may allow withdrawals only for the purpose of enabling the payment of incorporation and initial organization expenses included in a credit union’s business plan that have been approved by the Corporation.
(4) Central must report total withdrawals to the Corporation on a weekly basis.
(5) Where the total withdrawals have exceeded or are about to exceed the level of incorporation and initial organization expenses approved, Central must, if the Corporation so directs, suspend further withdrawals until a review of the credit union’s business plan has been conducted.
(6) In this section, “withdrawals” does not include the reimbursement of money paid by subscribers or depositors for the shares or deposits.
AR 249/89 s9
Part 4 Organization and Structure
Interpretation
10 In this Part,
(a) “borrower” means a person to whom credit is extended pursuant to a financial lease agreement or a conditional sales agreement;
(b) “estimated residual value” means, in respect of personal property leased or to be leased under a financial lease agreement by a financial leasing corporation, the value of the property immediately after the expiry of the lease as estimated by the financial leasing corporation at the time of its acquisition of the property.
AR 249/89 s10
Change from no bond to bond
11 The conditions prescribed in relation to section 28(2) of the Act are that the credit union satisfy the Minister that
(a) section 24(2)(c)(i), (ii), (iii) and (iv) of the Act, as those subclauses apply in respect of a credit union with a bond of association, have been complied with, with references in those subclauses to the approval to commence business being replaced by references to the coming into effect of the amendment of the articles effecting the change, and
(b) the change is not contrary to the public interest.
AR 249/89 s11
Additional businesses permitted to credit unions
12(1) The businesses that a credit union may carry on pursuant to section 46(3) of the Act are
(a) acting as a custodian of property,
(b) subject to section 13, acting as a financial leasing corporation,
(c) providing tax preparation services, so long as the individuals who actually perform those services on the credit union’s behalf have demonstrated competence and have participated in a course in that field,
(c.1) providing registry services pursuant to Schedule 12 to the Government Organization Act, and
(d) any other business that is incidental or conducive to the attainment of a credit union’s purposes or any of them.
(2) A credit union may not act as the underwriter within the meaning of the Securities Act of securities issued or to be issued by another entity.
AR 249/89 s12;66/99;111/2004
Credit union acting as financial leasing corporation
13(1) In this section,
(a) “agreement” means a financial lease agreement or a conditional sales agreement held or to be held by a credit union;
(b) “property” means the personal property leased or conditionally sold or to be leased or conditionally sold under an agreement.
(2) A credit union may, with the approval of the Corporation, act as a financial leasing corporation if the following terms and conditions are met:
(a) the credit union must not direct its customers or potential customers to particular dealers in the property;
(b) at no time may the aggregate of the estimated residual values of all the property of the credit union, excluding motor vehicles and subject to subsection (2.1), leased under financial lease agreements exceed 10% of the aggregate of the cost of acquisition of that leased property to the credit union;
(c) the estimated residual value of property leased under a financial lease agreement must not exceed
(i) in the case of motor vehicles, 50% of their cost of acquisition, and
(ii) in the case of any other property and subject to subsection (2.1), 20% of its cost of acquisition
to the credit union;
(d) the specific property must be selected by the lessee or buyer and
(i) must be acquired by the lessor or seller at the request of the lessee or buyer, or
(ii) must have been acquired by the lessor or seller specifically in respect of an earlier agreement;
(e) a financial lease agreement held by the credit union must yield a return that will compensate the credit union for not less than its full investment in the leased property and, without limiting the generality of the foregoing, the agreement must yield a rate of return that is reasonable, taking into consideration the term of the lease and the other terms and conditions of it and the rate of return sought by other lessors in respect of the financial leasing of similar property subject to similar terms and conditions, and that is based on the aggregate of
(i) rental charges paid or to be paid by the lessee,
(ii) estimated tax benefits of the lease to the credit union, including tax credits and capital cost allowance claims, and
(iii) the amount of,
(A) where the lessee or a third party who is dealing at arm’s length with the credit union has, on or before the commencement of the lease, contracted to purchase the leased property or unconditionally guaranteed the resale value of the leased property at the expiry of the lease, the purchase price or the resale value so guaranteed, or
(B) in any other case, the estimated residual value of the property, to the maximum specified in clause (c);
(f) an agreement must include a provision
(i) assigning and conveying to the lessee or buyer the benefit of all warranties, guarantees or other undertakings made by a manufacturer or supplier relating to the property, or
(ii) setting out the responsibilities of the credit union with regard to the warranties, guarantees or other undertakings referred to in subclause (i);
(g) an agreement must substantially transfer to the lessee or buyer the benefits and risks incidental to the operation of the property and must not entail responsibility on the part of the credit union to install, promote, service, clean, maintain or repair the property;
(h) where a lessee or buyer defaults in the manner set out in an agreement and the default is not waived or the agreement, including any renewals or extensions of it, expires, the credit union must
(i) liquidate its interest in the property, or
(ii) enter into a new financial lease agreement or conditional sales agreement, as the case may be, in respect of that property
within 2 years of that default or expiry or, where proceedings in respect of that property have prevented the credit union from complying with that requirement within that period, within 2 years of the completion of those proceedings.
(2.1) There shall be deducted from the estimated residual values of property for the purposes of the calculations under subsection (2)(b) and (c)(ii) those portions of the estimated residual values that are either insured or in respect of which the lessee or a third party who is dealing at arm’s length with the credit union has, on or before the commencement of the lease agreement, contracted to purchase the leased property or has unconditionally guaranteed the resale value of the leased property at the end of the lease agreement.
(3) Subsection (2)(d) does not apply in respect of an agreement acquired by the credit union from another person.
(4) An agreement may be renewed on its expiry and may be extended during its term.
AR 249/89 s13;21/95;111/2004
Subsidiary or affiliate as service corporation
14(1) Pursuant to section 46(4) of the Act, a subsidiary or an affiliate of a credit union may act as a service corporation, so long as the subsidiary or affiliate does not hold any shares issued by any other corporation.
(2) In subsection (1), “service corporation” means a corporation that limits its activities to the provision of services to entities that do not extend beyond the credit union and its subsidiaries and affiliates, other credit unions within the meaning of section 1(1)(p) of the Act and equivalent corporations registered under legislation elsewhere in Canada that is equivalent to the Act, and financial institutions.
AR 249/89 s14;66/99;170/2006
Subsidiary or affiliate as financial leasing corporation
15(1) A subsidiary or an affiliate of a credit union may act as a financial leasing corporation only if
(a) it does not hold any shares issued by any other corporation,
(b) not less than 80% of its assets consists of receivables under its financial lease agreements or conditional sales agreements or both, and the value of the property to which those agreements relate, and
(c) the terms and conditions specified in section 13 are met, with references in that section to a credit union being deemed to be references to the subsidiary or affiliate.
(2) The restriction in subsection (1)(b) does not apply until the expiration of the period of 12 months after the corporation first becomes a subsidiary or affiliate of the credit union if it was a financial leasing corporation when it became such a subsidiary or affiliate.
(3) With respect to section 46(5)(b) of the Act, a subsidiary or an affiliate may lend money in the course of its acting as a financial leasing corporation.
AR 249/89 s15
Additional businesses permitted to subsidiaries and affiliates
15.1(1) Pursuant to section 46(4) of the Act, a subsidiary or an affiliate of a credit union may, with the prior approval of the Corporation and subject to any other law, carry on any of the following financial services businesses:
(a) as a corporation that is an insurer within the meaning of the Insurance Act;
(b) as a real property brokerage corporation, that is a corporation whose activities are limited to acting as an agent for vendors or purchasers of real estate where the real estate is owned or administered by the credit union;
(c) as a real property corporation, that is a corporation whose primary business activity consists of holding, managing or otherwise dealing with
(i) real property, or
(ii) shares issued by a corporation (including another real property corporation) or ownership interests in an unincorporated entity that is primarily engaged in holding, managing or otherwise dealing with real property;
(c.1) as a mortgage broker within the meaning of the Real Estate Act;
(c.2) subject to subsection (2), as a bank;
(c.3) subject to subsection (2), as a retail association within the meaning of section 1 of the Retail Association Regulations under the Cooperative Credit Associations Act (Canada) (SOR/2002‑216);
(c.4) as a loan servicing corporation, being a corporation that performs administrative functions to carry out the obligations of a loan holder under a loan agreement;
(d) as a factoring corporation, that is a corporation whose activities are limited to acting as a factor in relation to accounts receivable, including the lending of money and the raising of money for the purpose of financing those activities;
(e) as a mutual fund distribution corporation, that is a corporation that is registered as a mutual fund dealer under the Securities Act;
(f) as an asset management corporation, that is a corporation that administers and disposes of property acquired through realization of a security interest held by or for the benefit of the credit union;
(g) as an investment counselling corporation, that is a corporation that is registered as an investment counsel under the Securities Act;
(h) as a portfolio management corporation, that is a corporation that is registered as a portfolio manager under the Securities Act;
(i) as an information management corporation, that is a corporation whose activities are limited to
(i) the collection, manipulation and transmission of information that is primarily financial or economic in nature, or
(ii) the sale of related software.
(2) Subsection (1)(c.2) or (c.3) only applies if the credit union has entered into a written agreement with the Minister with respect to that subject‑matter.
AR 66/99 s7;111/2004;170/2006
Joint ventures and partnerships
16 Pursuant to section 230(k) of the Act, section 46 of the Act and sections 14, 15 and 15.1 of this Regulation apply in relation to a joint venture or partnership in which a credit union has an interest as if that entity were a subsidiary of the credit union.
AR 249/89 s16;111/2004;170/2006
Disposal of assets in initial fiscal year
17 Pursuant to section 230(n) of the Act, the reference in section 47(2) of the Act to 10% of the credit union’s assets as at the end of the previous fiscal year shall be deemed, in respect of a new credit union in its initial fiscal year, to be substituted by a reference to 10% of its members’ equity as at the section 24 approval date.
AR 249/89 s17;111/2004
Trustee under self‑directed RRSP, RRIF or RESP
18 The classes of transaction prescribed for the purposes of section 46(7) of the Act are acting under self‑directed registered retirement savings plans, self‑directed registered retirement income funds, self‑directed registered tax‑free savings accounts and self‑directed registered education savings plans under the Income Tax Act (Canada).
AR 249/89 s18;216/2008
Additional permitted related party transactions
19(1) The related party transactions that a credit union or its subsidiary may enter into without prior board authorization, unless the by‑laws require that authorization, pursuant to section 51(2)(c)(ii) of the Act are as set out in this section.
(2) Repealed AR 111/2004 s9.
(3) A large credit union or its subsidiary may maintain with a related party that is a securities dealer cash balances, in an amount not exceeding $50 000, in connection with the disposition of securities authorized as investments under Part 8 of the Act.
(4) A subsidiary may acquire or dispose of its own shares from or to a party related to its holding credit union if the consideration is at fair market rate.
(5) A credit union or its subsidiary may enter into a contract with its auditor for the provision of auditing services and the payment of remuneration for those services.
AR 249/89 s19;111/2004
Exemption from procedures requirement
20 Small credit unions are exempt from section 54 of the Act.
AR 249/89 s20
Part 5 Directors, Officers, Employees and Committees
Qualifications of directors
21 The period prescribed for the purposes of section 65(2)(h) of the Act is 60 days.
AR 249/89 s21
Functions, etc. to be performed by board
22 To the extent that the following powers, duties and functions are exercised or performed, a credit union shall ensure that they are exercised or performed by resolution of the board:
(a) the submission to a general meeting of any matter requiring its approval;
(b) the filling of a vacancy on the board or on the audit or finance committee, or in the office of auditor;
(c) the removal of a director;
(d) the appointment or removal of the chief executive officer, the chairman or the president of the credit union;
(e) the issue of securities;
(f) the declaration of dividends or patronage rebates;
(g) repealed AR 21/95 s6;
(g.1) authorization of the certification of the completeness and accuracy of a disclosure statement issued under Part 8;
(h) approval of the annual financial statements or of the annual budget;
(i) approval of any item requiring the prior authorization of the board with respect to a related party transaction;
(j) the establishment of written procedures pursuant to section 101(2) of the Act;
(k) the making of loans to, or the guaranteeing of obligations of, its employees.
AR 249/89 s22;21/95;111/2004
Prescribed authorization to delegate
23(1) The board of a credit union may, pursuant to section 67(3) of the Act, delegate to the credit union’s executive committee, if any, or to any committee, director or officer, any of its powers, duties or functions except those described in section 22.
(2) Section 22 does not prohibit or restrict the delegation under subsection (1) of the power to issue securities in the manner and on terms that have been authorized by resolution of the board.
AR 249/89 s23
Non-delegable committee functions
24 The by‑laws of a credit union may not provide for the delegation under section 82(3) of the Act of any of the functions referred to in section 81 or 87(a), (b), (c), (d), (f) or (g) of the Act.
AR 249/89 s24;111/2004
Part 6 Financial Disclosure and Audit
Members’ equity and financial reporting
25 Deductions from capital, within the meaning of section 2(1) of Schedule 2 shall not be made in determining members’ equity for any purpose related to the preparation or auditing of a credit union’s financial statements or any reporting done pursuant to Part 7 of the Act or any other financial reports made to the Minister or to the Corporation.
AR 249/89 s25;21/95
Form of remuneration disclosure resolution
25.1 The form of the resolution required by section 83(4) of the Act is as follows:
BE IT RESOLVED THAT (name of credit union) disclose the total annual remuneration and benefits received directly or indirectly from the credit union and its subsidiaries and affiliates by each of the following of its executive managers as a notation to its annual financial statements in the form set out in Schedule 3 to the Credit Union (Principal) Regulation:
(Names or positions of executive managers whose remuneration and benefits are to be disclosed).
AR 21/95 s8;66/99;111/2004
Disclosure of remuneration in annual financial statements
25.2 If a resolution referred to in section 25.1 has been passed by the members, the information prescribed for the purposes of section 83(3)(e) of the Act includes the information required by that resolution and Schedule 1.
AR 127/95 s2;66/99;111/2004
Joint ventures and partnerships
26(1) Where a credit union has an interest in a joint venture or a partnership, the credit union shall ensure that the financial statements of the joint venture or partnership are audited and shall provide to the Minister the financial statements of that entity for each fiscal year of the entity, with the auditor’s report on them, within 3 months after the end of each such fiscal year.
(2) Subsection (1) does not apply to the extent that the Minister exempts the credit union from the duty imposed by that subsection.
(3) The credit union shall state each joint venturer’s or partner’s share of the assets, liabilities, income and expenses of the joint venture or partnership in a note to the credit union’s annual financial statements.
AR 249/89 s26
Reporting by auditor on adverse financial changes
27(1) Where the auditor of a credit union considers that there has been a change in the circumstances of the credit union or of any of its subsidiaries that might reasonably be expected to affect the financial position of the credit union materially and adversely, then, subject to this section, the auditor shall forthwith report in writing to the credit union’s audit committee and to the Minister what he considers to be the circumstances that constitute that change and why he considers that those circumstances constitute such a change.
(2) Without limiting subsection (1), a change referred to in that subsection shall be considered to have taken place where
(a) there is evidence that the corporation has suffered a material financial loss or there is a significant risk of its suffering a material financial loss,
(b) there has been a significant failure of or weakness in an internal control system affecting the accounting records of the corporation,
(c) reporting by the credit union to the Minister or to the Corporation, as required by the Act or the regulations, is misleading or misrepresents a particular issue,
(d) the credit union has failed to report or does not intend to report a matter and that failure to report is or would be materially misleading,
(e) conditions exist which cast doubt on the ability of the corporation to continue as a going concern, including, without limiting the generality of the foregoing, any situation where there is or are, with respect to the corporation,
(i) recurring financial operating losses,
(ii) serious deficiencies in working capital,
(iii) inability to obtain financing sufficient for continued operations,
(iv) inability to comply with the terms of existing loan agreements or other types of financial contracts,
(v) insufficient funds to meet liabilities, or
(vi) a plan to curtail significantly or to liquidate operations,
(f) there are circumstances which suggest that the directors or officers are acting imprudently, negligently, fraudulently or incompetently and that their actions may represent a significant risk to the corporation, or
(g) circumstances exist where the interests of customers having deposits with the credit union require that, or will be best protected if, those circumstances are brought to the attention of the Minister and of the audit committee.
(3) Notwithstanding anything in subsections (1) and (2), the auditor shall report circumstances which fall within subsection (2)(f) only to the Minister.
(4) Notwithstanding subsection (1), the auditor is not required to report to the Minister a matter under this section, other than under subsection (2)(f) or (g), if he satisfies himself that the credit union has already reported or is required within the next 30 days to report that matter to the Minister.
(5) Nothing in this section is to be construed as expanding the scope of an audit.
AR 249/89 s27
Meeting between Minister and auditor
28 At the request of and on being given reasonable written notice by the auditor of a credit union, the Minister shall meet with the auditor to discuss the financial business and affairs of the credit union relating to the audit of its business and affairs.
AR 249/89 s28
Auditor’s right to information from Minister
29 The Minister shall, on the written request of the auditor of a credit union, permit the auditor, during normal business hours, to inspect the following documents so far as they relate to the credit union and are in his possession:
(a) any completed reports that have been sent to the credit union relating to examinations conducted under section 95 or 96 of the Act;
(b) copies of orders or directions made by the Minister or by the Corporation under the Act;
(c) any appraisals or information relating to appraisals made under section 229 of the Act.
AR 249/89 s29;111/2004
Minister’s access to audit papers
30 The auditor of a credit union shall, on the written request of a person authorized under section 98(1) of the Act, permit that person, during normal business hours, to inspect working papers maintained by the auditor in respect of any audit of the credit union’s business.
AR 249/89 s30;111/2004
Part 7 Investments
Land acquisition in new credit union’s initial fiscal year
31 Pursuant to section 230(n) of the Act, the reference in section 99(1)(b) of the Act to 5% of the credit union’s assets as at the end of the fiscal year preceding the acquisition shall be deemed, in respect of a new credit union in its initial fiscal year, to be a reference to 10% of the credit union’s members’ equity as at the section 24 approval date.
AR 249/89 s31;111/2004
Interest in partnership land
32 Where a credit union has an interest in a partnership that owns land, there shall be taken into account, in determining the percentage of the credit union’s assets referred to in section 99(1)(b) of the Act or section 31 of this Regulation, as the case may be, the value of that portion of the partnership land that is equal to the proportion of the credit union’s beneficial interest in that land in relation to the totality of the beneficial interests of all the partners.
AR 249/89 s32;111/2004
Prohibited investments
33 The amount prescribed for the purpose of section 102(1) of the Act is 2% of the credit union’s total assets, determined as at the time of acquisition of the securities.
AR 249/89 s33;66/99;111/2004
34 to 36 Repealed AR 66/99 s9.
Investments in subsidiaries, affiliates, etc.
37(1) Pursuant to section 230(n) of the Act, where references are made in sections 104 and 105 of the Act to a credit union’s total capital as at the end of the fiscal year preceding the acquisition of shares, then, in relation to acquisitions of shares by a new credit union in its initial fiscal year, that total capital shall be treated as being equal to nothing.
(1.1) The percentage of total capital prescribed for the purposes of sections 104(3)(a) and 105(1)(a) of the Act is 10%.
(1.2) The percentage of total capital prescribed for the purposes of sections 104(3)(b) and 105(1)(b) of the Act is 20%.
(2) The corporation prescribed for the purposes of section 105(2)(c) of the Act is one that is an affiliate of the credit union and that carries on a business referred to in section 46(4) of the Act.
AR 249/89 s37;21/95;111/2004
Liquidity investments
38(1) The amount prescribed for the purpose of section 106(1)(b) of the Act is the credit union’s total assets as at the end of the calendar month occurring 2 months previous to the calendar month referred to in that section.
(2) The liquid assets prescribed for the purpose of section 106(1)(b) of the Act are
(a) in the case of a credit union that is a member of Central, deposits with Central designated by Central as liquidity deposits, and
(b) in the case of a credit union that is not a member of Central,
(i) cash,
(ii) deposits and bearer deposit notes, bankers’ acceptances and other similar instruments issued by an eligible financial institution that mature or can be redeemed within one year, at their face or redemption value as the case may be, plus any accrued interest,
(iii) commercial paper that mature within one year from the date of issue and are investment grade securities, at face value, and
(iv) securities issued or guaranteed by the Government of Canada, the government of a province or a municipality, at their market value.
(3) In the case of a credit union that is not a member of Central, not less than 2% of the amount prescribed in subsection (1) must mature or be capable of being redeemed within 90 days.
AR 249/89 s38;172/90;66/99;111/2004
Part 8 Equity and Deposits
Division 1 Equity Generally
Statements on application for shares
39(1) A credit union shall ensure that each application made for shares to be issued by it is in writing and clearly indicates that
(a) the shares applied for are not guaranteed or insured by the Corporation, and
(b) in the case of common shares, the redemption of the shares is at the discretion of the credit union subject to the restrictions contained in the Act and this Regulation.
(2) If the application is for investment shares, it must be in the form referred to in section 43.41(4)(b).
AR 249/89 s39;21/95
Statement on share certificates
40 Where share certificates are issued by a credit union, each share certificate must state that the shares covered by the certificate are not guaranteed or insured by the Corporation.
AR 249/89 s40
Intervals for common share statements
41(1) The intervals prescribed for the purposes of section 107(10) of the Act are once every year.
(2) Notwithstanding subsection (1), if
(a) a statement is returned because the shareholder cannot be found,
(b) the credit union has made reasonable efforts to locate the shareholder, and
(c) thereafter the shareholder still cannot be found,
the intervals prescribed by subsection (1) become interrupted and do not resume until the shareholder has informed the credit union in writing of the shareholder’s new address.
AR 249/89 s41;66/99;111/2004
Disclosure of information before issue of common shares
41.1(1) The circumstances prescribed for the purposes of section 107(11) of the Act are
(a) where an individual already holds, or following the issue of the shares to an individual the individual will hold, 3000 or more common shares, exclusive of shares received as patronage rebates or dividends, or
(b) where the Minister has given written notice to the credit union that, in his opinion, the credit union is directly soliciting the purchase of common shares issued by it.
(2) For the purposes of subsection (1)(b), the credit union is not directly soliciting the purchase of common shares to the extent that, following the purchase, the person’s holding would not exceed the minimum holding of common shares required by the credit union as a prerequisite for membership or for the provision by it of a service or benefit.
(3) The information prescribed for the purposes of section 107(11) of the Act is
(a) that contained, and in the form set out, in Form 1 of Schedule 3,
(b) the most recent audited financial statements and quarterly financial statements of the credit union, and
(c) the statement of material change, if any, required by subsection (4).
(4) A statement of material change is required for the purposes of section 107(11) of the Act and this section, if Division 1.1 and Form 2 of Schedule 3 would require a statement of material change were the shares investment rather than common shares.
AR 21/95 s11;111/2004
Quarterly financial statements
41.2(1) A credit union shall prepare quarterly financial statements where such statements are necessary to enable the credit union to comply with section 107(11) of the Act, this Part or a disclosure statement set out in Schedule 3.
(2) A large credit union shall have the quarterly financial statements reviewed by its auditor where the initial issue of a disclosure statement in the form set out in Form 2 of Schedule 3 is about to take place more than 3 months after the end of the most recently completed fiscal year of the credit union.
AR 21/95 s11;111/2004
Capital adequacy
41.3 The rules for determining whether a credit union is maintaining adequate capital for the purposes of section 109 of the Act are those prescribed in Schedule 2.
AR 21/95 s11;111/2004
Transfer of common shares
42 The circumstances prescribed for the purposes of section 110(1)(a) of the Act are that the transferor and the transferee both be members of the same family, whether related by blood, marriage or adoption or by virtue of an adult interdependent relationship.
AR 249/89 s42;109/2003;111/2004
Transfer of common shares in new credit union
42.1 A transaction that is approved in writing by the Minister and that results only from
(a) the incorporation of a new credit union that is assuming part or all of the retained earnings of an institution referred to in section 228 of the Act in return for common shares issued by the new credit union,
(b) an agreement to transfer those shares to members or prospective members of the new credit union, being members or shareholders or former members or shareholders of that institution, and
(c) the dissolution or proposed dissolution of that institution,
is a transaction prescribed for the purposes of section 110(1)(b)(iii) of the Act.
AR 260/90 s2;111/2004
Redemption of shares
43(1) Pursuant to section 1(1)(dd)(iii) of the Act and in construing section 111(3)(a) of the Act, “insolvent” includes a case where the realizable value of the credit union’s assets after the redemption or cancellation would be less than the aggregate of
(a) its liabilities, and
(b) the amounts that would be required for the redemption if all common and investment shares issued by it were being redeemed at that time.
(2) Pursuant to section 230(n) of the Act, the reference in section 111(3)(b) of the Act to the end of the fiscal year previous to the acquisition of shares shall be deemed, in respect of a new credit union in its initial fiscal year, to be a reference to the section 24 approval date.
(3) The circumstances prescribed for the purposes of section 111(4)(b) of the Act are
(a) where a member is transferring the balance in his common share account with the credit union acquiring the shares to a common share account with another credit union, and the credit union acquiring the shares verifies the member’s membership at the other credit union and forwards the money payable from its acquisition of the shares directly to the other credit union on account of the member’s purchase of common shares from that other credit union,
(b) where a member is expelled,
(c) where a member has attained the age of 65 years, or
(d) where, according to the records of the credit union, a member no longer resides in the area specified in its by‑laws as the area over which it conducts its business
provided that the total of all shares acquired by the credit union in the circumstances described in clauses (a), (b) and (d) cumulatively do not exceed 10% of its capital as at the end of the fiscal year preceding the acquisition.
AR 249/89 s43;172/90;21/95;66/99;111/2004
Protection of investment share dividends
43.05 A large credit union shall not pay any dividend on its common shares if any dividend on investment shares issued by it has been declared and remains unpaid.
AR 21/95 s13
Division 1.1 Investment Shares
Interpretation and application
43.1(1) In this Division and in Form 2 of Schedule 3,
(a) “authorizing by‑law” means the by‑law referred to in section 43.2(3);
(b) “authorizing instrument” means the authorizing by‑law or the authorizing resolution, or both, as the case may be;
(c) “authorizing resolution” means the board resolution referred to in section 43.2(4) for the relevant series, and includes the authorizing by‑law to the extent that that by‑law includes a matter that could have been included in that resolution;
(d) “class” means, with reference to a credit union’s overall share capital, the class known as investment shares;
(e) “disclosure statement” means a statement for the relevant series in the form set out in Form 2 of Schedule 3;
(f) “material change” means a change that has taken place in the 5 years preceding the time in question in the business, operations or capital of a credit union, other than a change that results from a change in interest rates, and that would reasonably be expected to have a significant effect on the market value of investment shares issued by it;
(g) “receipt for the series” means the receipt issued by the Minister under section 43.31(1) for the series in question;
(h) “series” means the series or, if more than one, each series of investment shares referred to in section 43.2(2);
(i) “shares” means investment shares.
(2) This Division and Form 2 of Schedule 3 apply only to large credit unions, and references in them to a credit union are to be taken as referring only to a large credit union.
AR 21/95 s13;111/2004
Authorization to create and issue investment shares
43.2(1) A large credit union may, subject to and in accordance with Part 9 of the Act and this Part, create, issue and maintain one (and only one) class of special shares, to be known as investment shares.
(2) Investment shares may be issued only in one or more series.
(3) A credit union that has not yet issued any investment shares but that wishes to do so must by special resolution make a by‑law for the class, which must at least create the class and which may contain any limitations, restrictions and conditions on an issue or on the board’s powers with respect to making authorizing resolutions and any further matters, including those which may or must be included in authorizing resolutions, that are allowed by this Regulation or the Act to be included in it.
(4) Before a credit union issues investment shares in a particular series, its board must pass a resolution specifically for that series, and the resolution must, with respect to that series or those shares,
(a) create the series and authorize the issue of the investment shares in the series,
(b) designate the series by a sequential letter of the alphabet,
(c) specify the issue price of the shares,
(d) contain any restrictions, other than those imposed by this Part, on the issue or transferability of the shares,
(e) specify
(i) the dividend rights attaching to the shares, including the rate of, or the formula used to calculate, dividends and whether the right to dividends is cumulative or non‑cumulative,
(ii) the redemption rights attaching to the shares, including any right of the credit union to redeem the shares at its option, any rights of their holders to require the credit union to redeem the shares, and the repurchase date, if any, of the shares, and
(iii) any rights of the holders of the shares to require the credit union to convert them into investment shares of another series,
(f) comply with any limitations, restrictions or conditions contained in the authorizing by‑law, notwithstanding anything in this subsection, and
(g) contain any other matters required by this Division to be included in it,
and the resolution may contain any further matters that are considered appropriate or that are allowed by this Regulation or the Act to be included in it.
(5) Notwithstanding subsection (4), the authorizing resolution does not need to deal with a matter to the extent that it is adequately dealt with in the authorizing by‑law.
(6) An authorizing instrument may not entitle a credit union
(a) to exchange shares in a series for common shares, or for shares in any other series, that have been issued by the credit union,
(b) except at the instance of the holder, to convert investment shares in the series into investment shares of another series, or
(c) to convert shares into common shares issued by the credit union.
AR 21/95 s13;111/2004
General investment share provisions
43.3(1) Investment shares have no par value.
(2) Investment shares are non‑assessable, and their holders are not liable to the credit union or to its creditors in respect of them.
(3) Investment shares carry no voting rights.
(4) Investment shares may not be held by any person other than one to whom the credit union has lawfully issued them or a person to whom they have been transferred in compliance with section 43.6.
(5) Notwithstanding section 108(5) of the Act, a credit union shall maintain a stated capital account for each series in which investment shares are issued and shall add to the stated capital account the full amount of money it receives for investment shares in that series and, if investment shares in the series are issued in payment of a dividend, it shall add the declared amount of the dividend, stated as an amount of money, to the stated capital account for the series.
(6) The rights, terms and conditions attaching to all investment shares of any one series are equal.
AR 21/95 s13;111/2004
Minister’s receipt authorizing issue
43.31(1) On application by a credit union that wishes to issue investment shares, the Minister shall issue a receipt to the credit union if
(a) it has provided to the Minister
(i) a copy of the authorizing by‑law, with a certification properly executed on behalf of the credit union that it is a true copy and that the authorizing by‑law complies with the Act and this Part,
(ii) a copy of the authorizing resolution, with a certification properly executed on behalf of the credit union that it is a true copy and that the authorizing resolution complies with the authorizing by‑law, the Act and this Part,
(iii) a disclosure statement,
(iv) repealed AR 21/95 s26,
(v) any written evidence that the Minister requires to establish that the credit union is in compliance with section 43.5(1)(a), (b) and (c),
(vi) a letter from the credit union’s auditor to the Minister stating that the auditor has read the disclosure statement and knows of no misrepresentations in the information in the disclosure statement that is derived from the audited financial statements or that is within his knowledge as a result of his audit or, if applicable, his review of any financial statements,
(vii) letters from all professional advisers whose opinions have been relied on and referred to or included in the disclosure statement, consenting to the reference or inclusion in the disclosure statement, and
(viii) a specimen share certificate, if share certificates are to be issued for the series,
(b) the Minister is satisfied that the documents provided under clause (a) comply with this Part, and
(c) the credit union has paid the fee specified in subsection (2).
(2) The fee referred to in subsection (1)(c) is
(a) $1000, if it is the first application for a receipt, or
(b) $500, if it is the second or a subsequent application for a receipt,
to be issued to the credit union under subsection (1).
(3) A credit union shall ensure that, as of the date of the disclosure statement, all information included in the disclosure statement is in all material respects complete and accurate and that the disclosure statement does not omit to state a material fact that is necessary to make the information, in the light of the circumstances under which it is presented, not misleading.
(4) The Minister shall enter into the register all documents provided under subsection (1)(a) and a copy of each receipt for the series.
(5) If the application for a receipt under subsection (1) covers more than one series of investment shares, the receipt may cover both or all the series in respect of which the application is made.
AR 21/95 ss13,26;111/2004
Amendments affecting investment shares
43.4(1) A credit union may, with the prior approval of the Minister, at any time after the Minister has issued a receipt for the series but before issuing any investment shares in the series, amend an authorizing instrument or the disclosure statement.
(2) The credit union may not make any amendment to the rights, privileges, obligations or other features of any series after any investment shares in that series have been issued.
(3) The board shall certify as complete and accurate any amendments made to the disclosure statement.
AR 21/95 s13;111/2004
Issue of investment shares
43.41(1) A credit union may issue investment shares only
(a) in accordance with the authorizing instruments,
(b) if it has received a receipt for the series, and
(c) if the issue is in compliance with Part 9 of the Act and this Part.
(2) A credit union shall not issue investment shares, other than as a dividend on investment shares to any person other than
(a) a member,
(b) another person where the shares are to be held under a registered retirement savings plan or a registered retirement income fund of which a member is the beneficiary,
(c) a trustee, executor, administrator or guardian of a member, or
(d) the Corporation or its subsidiary, if the issue is part of a financial restructuring of the credit union.
(3) A credit union shall not issue investment shares until they have been fully paid for.
(4) A credit union shall not issue investment shares, other than as a dividend, unless the subscriber
(a) has been provided with a copy of the disclosure statement and the other documents required by section 43.81(1), and
(b) has completed and signed an application in the form set out in Form 3 of Schedule 3.
(5) Subject to subsection (6), a credit union shall not issue investment shares, other than as a dividend, more than 6 months after the date of the receipt for the series.
(6) If within 6 months after the date of the receipt for the series, a person enters into an agreement to subscribe and pay for investment shares in the series by instalments, the credit union may continue to issue investment shares in the series to that person, in accordance with the instalment agreement, for up to 6 months after the instalment agreement was entered into.
(7) A credit union is not required to issue share certificates for investment shares unless an authorizing instrument so requires.
AR 21/95 s13;111/2004
Financial restrictions on issue of shares
43.5(1) A credit union shall not issue investment shares unless
(a) its audited financial statements reflect that it has had net income, before patronage rebates but after tax, in each of the last 2 fiscal years for which audited financial statements are available or in 4 of the last 5 such fiscal years,
(b) its audited financial statements over the last 3 such fiscal years reflect that it has had average annual net income, before patronage rebates but after tax, of at least twice the projected average annual dividends, and
(c) its most recent audited financial statements reflect that it had retained earnings of at least 3 times the projected average annual dividends.
(1.1) For the purposes of subsection (1)(b) and (c), “projected average annual dividends” means the sum of
(a) the total dividends from the shares to be issued (assuming all the shares authorized for sale are sold) that are expected by the credit union to be incurred over the 3 years following the date of their issue pursuant to any rights or policies stated in the disclosure statement for the share issue, divided by 3, and
(b) the total dividends expected to be incurred over the next 12 months on all investment shares that are currently outstanding.
(1.2) Where the dividend right or policy is variable, the calculation of the rate is to be based on the conditions existing at the time that the receipt for the current disclosure statement is granted.
(2) A credit union shall not lend, or otherwise finance or guarantee the financing of, the whole or any part of the subscription price of shares to be issued by it.
AR 21/95 s13;66/99;111/2004
Investment share register
43.51(1) A credit union shall establish a register for its investment shares and maintain that register in regard to all investment shares that remain outstanding, listing the name and address of, and the number and series of investment shares held by, each holder, the date of issue or transfer of the investment shares to the holder and, if applicable, the name of the person who transferred the investment shares to the holder.
(2) Subject to this section, any person who holds investment shares in a particular series or an agent with a written authorization from any such person may, during the normal business hours of the credit union, on giving reasonable notice to the credit union and on paying such reasonable fee as the credit union requires, examine the part of the investment share register that pertains to that series.
(3) The credit union may require persons referred to in subsection (2), as a condition of the access to the investment share register, to undertake in writing not to use the information contained in the register for any purpose not related to protecting or exercising rights of holders of investment shares in the series.
(4) The credit union may deny a person access to its investment share register if it reasonably concludes that it is not for a purpose related to protecting or exercising rights of holders of investment shares in the series.
(5) In the absence of evidence to the contrary, the investment share register constitutes proof of the legal ownership of investment shares.
AR 21/95 s13;111/2004
Transfer of investment shares
43.6(1) An investment share may not be transferred, and a credit union shall not accept the transfer of an investment share issued by it, unless the transfer
(a) is made to a person referred to in section 43.41(2), or
(b) results only from the death of the holder of the share or the realization of security that consists of or includes the share,
and the transfer complies with any transfer restrictions and procedures contained in this Division and in the authorizing instruments.
(2) A credit union shall enter a transfer of investment shares in the investment share register, but only if
(a) it has provided to the proposed transferee a copy of the disclosure statement and the other documents required by section 43.81(1), and
(b) either
(i) it has received a transfer in the form set out in Form 4 of Schedule 3 duly completed and signed by the proposed transferor and transferee, or
(ii) the board is satisfied, having regard to the particular circumstances, that the transfer form cannot be fully completed and signed and passes a resolution accepting the transfer.
(3) The restriction in subsection (2)(a) does not apply
(a) to the extent that, by reason of the particular circumstances, the proposed transferee or the proposed beneficial owner of the investment shares where the proposed transferee is a person referred to in section 43.41(2)(b) or (c) will, in effect, have received the documents previously, or
(b) where the transfer results only from the death of the holder of the investment shares or the realization of security that consists of or includes the investment shares.
(4) A valid designation of a beneficiary under section 71 of the Wills and Succession Act, to the extent that it has the effect of transferring investment shares on a person’s death, is deemed to be a properly executed transfer for the purposes of subsection (2).
AR 21/95 s13;111/2004;31/2012
Acquisition of credit union’s own investment shares for redemption, etc.
43.61(1) Subject to this section and to the extent provided by the authorizing instruments, a credit union may at any time acquire investment shares issued by it for redemption either at its own instance or at the instance of their holder.
(2) A credit union shall not acquire any investment shares issued by it, or redeem or cancel investment shares,
(a) under any circumstances whatsoever, if there are reasonable grounds for believing that the credit union is or would thereby become insolvent, or
(b) subject to subsections (3) and (4), if any redemption or cancellation would result in its ceasing to meet the requirements of, or if it is already in contravention of, section 109 of the Act,
but this subsection does not apply to acquisitions of investment shares pursuant to a lien or the taking or realization of security.
(3) Subject to subsection (2)(a), the authorizing resolution may entitle a holder to require the credit union to acquire investment shares and redeem them if
(a) the redemption results only from the death of their holder, or
(b) the investment shares are held in a qualifying registered retirement income fund and their value represents the minimum amount of the fund that the tax rules under the Income Tax Act (Canada) require to be taken into the holder’s income for the year.
(4) The Corporation may exempt a credit union in whole or in part from the requirement of subsection (2)(b) to meet the requirements of section 109 of the Act.
(5) A credit union shall not acquire investment shares issued by it except for redemption and, on the acquisition of any shares, it shall forthwith redeem and cancel them.
(6) A credit union acquiring investment shares for redemption shall pay for the acquisition an amount equal to the price at which the shares were issued and all unpaid dividends on them.
(7) A credit union may acquire investment shares under this section from related parties.
(8) A credit union shall give investment shareholders advance notice that their investment shares will be acquired and redeemed and shall deposit the proceeds in their account.
(9) Before redeeming or cancelling all or a portion exceeding 25% of the initial issue of a series of investment shares issued by it, a credit union shall notify the Corporation of its intention to do so.
AR 21/95 ss13,26;111/2004
Dividends, patronage rebates and priorities
43.7(1) Investment shares entitle their holders to the dividends specified in the authorizing instruments and declared, and to receive those dividends in preference to dividends or any return of capital payable to the holders of common shares.
(2) All series have, as among themselves, equal priority in respect of dividends and return of capital, and if any cumulative dividends or amounts payable on return of capital in respect of a series are not paid in full, the shares of all series shall participate rateably in respect of accumulated dividends and return of capital.
(3) In construing section 112(2) of the Act as it applies to investment shares,
(a) the by‑laws may not allow the credit union to issue investment shares as patronage rebates, and
(b) the authorization to issue shares generally as dividends extends only to the issue of investment shares of the same series as the shares on which the dividend is to be paid.
(4) Where investment shares are issued as a dividend under section 112(2) of the Act, the credit union may issue fractional shares.
(5) A credit union shall not pay any dividend on investment shares in cash if
(a) repealed AR 21/95 s26,
(b) its total capital is less than, or payment of the dividend would result in its total capital being less than, the amount of capital that the credit union is required by section 109 of the Act to maintain.
(c) repealed AR 111/2004 s37.
AR 21/95 ss13,26;111/2004
Marketing of investment shares
43.71(1) Where a credit union proposes to issue investment shares other than by way of a dividend, its board shall take all reasonable measures, including establishing, implementing and monitoring appropriate policies, to ensure that
(a) the shares are promoted and sold only by persons who understand and are fully familiar with the requirements of Part 9 of the Act and this Part as to investment shares and the details of the authorizing instruments, the disclosure statement and the other documents referred to in section 43.81(1),
(b) the persons promoting or selling the shares do not advise others, with respect to investing in shares except in compliance with those provisions of the Securities Act that would apply to them as advisers within the meaning of that Act, if that Act applied to them,
(c) those persons receive no bonus, commission or other incentive for selling or promoting the shares and are not subject to any disincentive for failing to sell or promote the shares,
(d) the shares are not sold or promoted in circumstances where the credit union has reasonable grounds to believe that it would be contrary to the best interests of any person to subscribe for the shares, unless that person has received independent professional advice with respect to the subscription, and
(e) the shares are issued only in accordance with Part 9 of the Act and this Part.
(2) A credit union shall not sell or promote investment shares in any area at any of its places of business that is primarily used by it for serving deposit and withdrawal transactions.
AR 21/95 s13;111/2004
Material changes
43.8 A credit union, on becoming aware of any material change, shall forthwith
(a) prepare a written material change statement describing the change, and
(b) send a copy of that statement to the Minister and to each of its branches.
AR 21/95 s13
Disclosure, examination and production of documents
43.81(1) Whenever a credit union provides a disclosure statement to any person, it shall append to that statement copies of
(a) any material change statements that it was required by section 43.8 to send to the Minister in the preceding 5 years, if the events that constituted the material changes reflected in them may still have a significant effect on the market value of the shares,
(b) its most recent audited financial statements, and
(c) if applicable, its financial statements for the most recently completed quarter of its fiscal year.
(2) A credit union that has issued or that intends to issue investment shares shall keep available for examination by current and prospective holders of shares at all its branches copies of
(a) the authorizing instruments,
(b) any disclosure statements the credit union has provided to the Minister, and
(c) the documents referred to in subsection (1)(a), (b) and (c), as amended or as most recently issued as the case may be.
(3) The credit union shall provide copies of the documents referred to in subsection (2)(c) at no charge to any current or prospective holder of investment shares who requests them.
(4) The credit union shall prominently display the documents referred to in subsection (2)(c) at all its branches and at all times while it remains an issuer of investment shares and while the documents remain material to holders of investment shares.
AR 21/95 s13;111/2004
Rights of withdrawal
43.9(1) A person who has agreed to subscribe for investment shares to be issued by a credit union may cancel the agreement by ensuring that notice in writing cancelling the agreement is actually received
(a) by or on behalf of the credit union through a method of serving documents described in section 35 of the Act, or
(b) at any branch of the credit union,
by the close of business on the fifth business day of the credit union after the date when the form applying to subscribe for the shares was signed by that person.
(2) On cancelling the agreement under subsection (1), the person is relieved from any obligation to subscribe or pay for the shares or is entitled to be refunded their full subscription price, as the case may be.
(3) The subscription agreement is not cancellable by a person who has entered into the agreement except pursuant to subsection (1).
AR 21/95 s13
Division 2 Deposits
Deposits from related party financial institutions
44(1) The purposes prescribed for the purposes of section 115(1)(a) of the Act are
(a) to support the short‑term liquidity needs of the credit union, and
(b) to enable the clearance of cheques drawn on it.
(2) The amount prescribed for the purpose of section 115(1)(a) of the Act is that amount that causes the aggregate of all deposits received from all related party financial institutions to be equal to 2% of the credit union’s assets as at the end of the fiscal year preceding the deposit or, in the case of a new credit union in its initial year, the section 24 approval date.
AR 249/89 s44;111/2004
Repayment of deposit and share redemption on death
45 The amount prescribed for the purpose of section 116(1) of the Act is $20 000.
AR 249/89 s45;66/99;111/2004
46 Repealed AR 66/99 s14.
Part 9 Borrowings
Meaning of net borrowings
47 For the purposes of section 125(1) of the Act, “net borrowings”, in so far as it relates to borrowings from a particular lender with whom deposits are held for the purpose of maintaining the greater amount required by section 106(1) of the Act shall be deemed to mean net borrowings from that lender less the total amount of deposits held by the credit union with that lender other than those deposits so held only for that purpose.
AR 249/89 s47;111/2004
48 Repealed AR 66/99 s14.
Part 10 Loans and Guarantees
49 Repealed AR 66/99 s14.
Financial leasing corporation transactions - treatment as loans
50(1) Where a credit union or its subsidiary or affiliate enters into a financial lease agreement or a conditional sales agreement, a sum equal to the value of the property leased or conditionally sold less the amount of any down payment or deposit made, shall be treated for the purposes of the Act and this Regulation as having been loaned by it to the lessee or buyer.
(2) Where a credit union or its subsidiary or affiliate acquires a financial lease agreement or a conditional sales agreement from another person, a sum equal to the value at which the property leased or conditionally sold is acquired shall be treated for the purposes of the Act and this Regulation as having been loaned by it to the lessee or buyer.
AR 249/89 s50
Required quality as to mortgages
51(1) A credit union shall not make a mortgage loan, or acquire the rights of a lender under a mortgage loan, unless the loan is a quality mortgage loan.
(2) Notwithstanding subsection (1), a credit union may make a mortgage loan that is not a quality mortgage loan
(a) if the loan is not a residential mortgage loan and has previously been approved by the Corporation, or
(b) as part of the sale of foreclosed land to a purchaser if the prior approval of a special loans committee has been received for the making of the loan.
AR 249/89 s51;21/95;111/2004
Determination of quality mortgage loan where multiple security
52 Where
(a) a loan is or is to be secured by a mortgage of land and also by at least one other form of security, and
(b) the loan would not, but for this section, be a quality mortgage loan,
then, for the purpose of determining whether the loan is a quality mortgage loan, with respect to the mortgage of land as distinct from the other form or forms of security, that loan may be considered as separate loans and the aggregate amount of the loan divided up into separate amounts and the determination made on the basis of the separate loan and amount allocated in respect of that mortgage.
AR 249/89 s52
Limits on loans and guarantees without credit committee review
53(1) The Corporation may establish financial limits on a credit union’s ability to grant loans or give guarantees without a review of the transaction by its credit committee.
(2) A credit union shall not grant a loan or give a guarantee in an amount exceeding a limit established under subsection (1) unless the transaction has been reviewed by its credit committee.
AR 249/89 s53
Loan maximums
54(1) Subject to this section, the amount prescribed for the purpose of section 130(2)(a) of the Act is
(a) in the case of a credit union with assets of less than $10 000 000 as at the end of the fiscal year preceding that in which the loan would be made or, where applicable, as at the section 24 approval date, 100% of its total capital as at whichever of those dates is applicable or $300 000, whichever is the greater,
(b) in the case of a credit union with assets of $10 000 000 or more but not more than $500 000 000 as at the applicable date referred to in clause (a), 40%, or with the prior approval of the Corporation such higher percentage up to 100%, of its total capital as at that date or $500 000, whichever is the greater, and
(c) in the case of a credit union with assets of more than $500 000 000 as at the applicable date referred to in clause (a),
(i) if it meets the requirements of section 109 of the Act, 40% of its total capital as at that date, or
(ii) if it does not, 20% of its total capital as at that date or $4 000 000, whichever is the greater.
(2) Repealed AR 111/2004 s44.
(3) Where the loan is secured by the assignment of
(a) securities issued or guaranteed by the government of Canada or of a province or by an agency of such a government, or
(b) deposits with the credit union,
the limit prescribed by subsection (1) is increased by an amount equal to the value of those securities or deposits.
(4) Where the whole or any part of the loan is guaranteed or insured by the government of Canada or of a province or by an agency of such a government or is insured under an insurance policy issued by an insurer, then the limit prescribed by subsection (1) is increased by an amount equal to the amount so guaranteed or insured.
(5) The amount prescribed for the purpose of section 132(2)(a) of the Act is unlimited where the loan is made to
(a) a government or agency referred to in subsection (3)(a),
(b) a municipality or a school district or regional health authority, or
(c) a university or technical institute established or continued by or under the Post‑secondary Learning Act.
AR 249/89 s54;21/95;111/2004;170/2006
Inter-credit union loans, etc.
54.1 The amount prescribed for the purpose of section 130(3) of the Act is
(a) where a small credit union is making a loan to or placing a deposit with a large credit union, 100% of the small credit union’s total assets, or
(b) in any other case, 2% of the lender credit union’s total assets, such assets being determined as at the time of its making the loan or placing the deposit.
AR 66/99 s15;111/2004
Loans to individual non-members
54.2 A loan that is part of a program approved by the Corporation as a promotional loan program is a prescribed class of transactions for the purpose of section 132(d) of the Act.
AR 66/99 s15;111/2004
Loans and guarantees to related party financial institutions
55(1) Repealed AR 111/2004 s47.
(2) The amount prescribed for the purpose of section 133(9) of the Act is 10% of the credit union’s members’ equity as at the end of the fiscal year preceding that in which the transaction would take place or, in the case of a new credit union in its initial fiscal year, as at the section 24 approval date, subject however to a maximum of the amount prescribed by section 54.
AR 249/89 s55;111/2004
56 Repealed AR 21/95 s16.
Loans, etc. to related party auditors
57 Where a credit union or its subsidiary makes a loan to, or guarantees the obligations of,
(a) a party related to the credit union who is also the credit union’s auditor,
(b) a corporation controlled by that auditor or more than 10% of whose voting shares are held or beneficially owned, directly or indirectly, by that auditor, or
(c) any other entity more than 10% beneficially owned, directly or indirectly, by that auditor,
the credit union shall forthwith provide to the Minister a written report containing the amount and the terms and conditions of the loan or guarantee.
AR 249/89 s57
Part 11 Credit Union Deposit Guarantee Corporation
Authorization to delegate
58 Pursuant to section 141(1) (incorporating section 67(3)) of the Act, the Corporation may delegate
(a) to a member of its staff who has been authorized pursuant to section 98 of the Act to exercise powers under that section, its powers under section 97 of the Act, and
(b) to a committee, its executive committee, an officer or a member of its staff, if its by‑laws permit that delegation, any of its other powers, duties or functions, except those under sections 22(b), 24(2)(b), 89(4), 128(3), 177(1), (2), (5) or (6), 180(1), (2) or (6), 183(5) or (6), 185(1), 191(3) and 214(1) of the Act.
AR 249/89 s58;111/2004
Composition of special loans committees
59 Each special loans committee is to consist of individuals appointed by the Corporation, one of whom is to be an individual nominated to the office by Central or, if no individual has been so nominated, one of the individuals appointed as directors under section 8(1)(a) of the Act, ex officio.
AR 249/89 s59;66/99;111/2004
Non-acquirable securities
60 The securities prescribed for the purposes of section 146(3) of the Act are
(a) securities that are neither investment grade securities nor deposits in the Consolidated Cash Investment Trust Fund, and
(b) investment shares, stabilization shares or debentures issued by a credit union, except those issued as part of a financial restructuring of the credit union.
AR 249/89 s60;21/95;66/99;111/2004
Maximum periodic assessment
61 The rate prescribed for the purpose of section 148 of the Act in any quarter commencing on November 1, February 1, May 1 or August 1, is 1/16 of 1% of the average over the preceding quarter of the aggregates of the balances of deposits held at the end of each month by the credit union and its subsidiaries and affiliates and the borrowings by the credit union as at each month‑end from Central, the Corporation and eligible financial institutions.
AR 249/89 s61;111/2004;170/2006
Corporation’s common shares
62(1) Subject to subsection (2), the Corporation may create and issue an unlimited number and amount of common shares.
(2) The following rights, privileges, restrictions and conditions are attached to common shares issued by the Corporation:
(a) the shares may be issued in one or more series;
(b) the shares may be issued only to the Government and are not thereafter transferable to any person;
(c) the shares shall be issued for a consideration and issue price per share of $10 in money or in other property, other than a promissory note or a promise to pay given by the Government, and a share shall not be issued until the consideration for the share is fully paid or provided;
(d) the shares are non‑assessable and, on payment of the issue price, are fully paid, and the Government is not liable in respect of them to the Corporation or to its creditors or for any obligation, act or default of the Corporation;
(e) the shares carry no right to vote at any meeting of the Corporation;
(f) the shares are redeemable for the issue price but only on the written demand of the Government, which demand may be exercised at any time on 90 days’ written notice given to the Corporation;
(g) instruments evidencing the shares must specify that the Government is entitled to the shares or to the rights that they evidence and that they may not be transferred;
(h) the rights carried by all the shares are equal in all respects.
AR 249/89 s62
Stated capital accounts
63(1) The Corporation shall maintain a separate stated capital account for each series of shares it issues to the Government.
(2) The Corporation shall add to the appropriate stated capital account the full amount of consideration it receives for shares it issues.
(3) On the issue of a share the Corporation shall not add to a stated capital account in respect of the share it issues an amount greater than the amount of the consideration it receives for the share.
(4) The Corporation shall not reduce its stated capital or any stated capital account except for the purposes of a redemption under section 62(2)(f).
(5) On a redemption by the Corporation under section 62(2)(f), the Corporation shall deduct from the stated capital account maintained for the series of shares redeemed an amount equal to the result obtained by multiplying the stated capital of the shares of that series by the number of shares of that series redeemed, divided by the number of issued shares of that series immediately before the redemption.
(6) Shares issued by the Corporation and redeemed shall be cancelled.
AR 249/89 s63
Shares as capital of the Corporation
64 Where there are any shares issued by the Corporation and outstanding, all the capital of the Corporation is appropriated to the Government.
AR 249/89 s64
Directors’ remuneration
65 The chairman and directors of the Corporation shall be paid remuneration, fees and expenses in accordance with an order made by the Minister.
AR 249/89 s65
Part 12 Credit Union Central Alberta Limited
Definitions
65.01 In this Part,
(a) “exempted entity” means a credit union, Credit Union Central of Canada, the Corporation or any subsidiary of the Corporation;
(a.1) “maximum loan exposure level” means that amount of Central’s interests in all pooling funds and other loans held, and guarantees given, by Central, excluding
(i) qualifying transitional loans, and
(ii) loans and guarantees to exempted entities,
that does not exceed 150% of Central’s members’ equity as at the end of the previous fiscal year or such higher amount as has previously been approved by the Minister;
(b) “maximum single entity exposure level” means that amount of
(i) loans held by Central, where the borrower is not an exempted entity,
(ii) guarantees given by Central, where the person whose obligations are guaranteed is an exempted entity, and
(iii) investments held by Central, where the person who issued the securities underlying the investment is an exempted entity,
that does not exceed 15% of Central’s members’ equity as at the end of the previous fiscal year or such higher amount, if any, as is approved by the Minister;
(c) “pooling fund” means a number of loans that are being held in a fund for the purpose of enabling credit unions and Central to invest by purchasing interests in that fund and to receive amounts of principal and interest computed by reference to the value of their proportionate interests in the assets of the fund;
(d) “qualifying transitional loans” means those loans, owned by Central for a period of less than 180 days from acquisition or such longer period as is approved by the Minister, that are to be included in a pooling fund.
AR 66/99 s18;111/2004
Credit unions that are not Central members
65.1 For the purpose of section 157(a) of the Act, a small credit union that is exempted from the requirement of membership of Central by the Minister in writing is prescribed not to be a member of Central.
AR 172/90 s4;111/2004
Additional composition of Central
66 Corporations prescribed for the purposes of section 157(b) of the Act are as follows:
(a) co‑operatives;
(b) corporations incorporated by or under any Act of Canada or a province acting as a central credit union or, in relation to credit unions of that jurisdiction, in a role similar to that of Central in relation to Alberta’s credit unions;
(c) repealed AR 111/2004 s54;
(d) Co‑operative Trust Company of Canada Ltd.;
(e) The Co‑operators Group Limited;
(f) The CUMIS Group Ltd.;
(g) repealed AR 111/2004 s54;
(h) the Corporation;
(i) Credit Union Central Canada Limited;
(j) Federated Co‑operatives Limited;
(k) CU Electronic Transaction Services;
(k.1) corporations that are financial institutions;
(k.2) provincial corporations within the meaning of section 1(1)(r) of the Financial Administration Act or, generally, equivalent corporations of other provinces or territories or of Canada;
(k.3) Credential Financial Services Inc.;
(k.4) Ethical Funds Inc.;
(k.5) Everlink Payment Services Inc;
(l) subsidiaries of credit unions or of Central or of any corporation named or referred to in this section.
AR 249/89 s66;66/99;111/2004
Central’s purposes re other corporations
67 Pursuant to section 158(3) of the Act, Central’s purposes, as they relate to corporations referred to in section 66 of this Regulation, are
(a) to provide the services to those corporations of
(i) accepting deposits from them,
(ii) lending money to them,
(iii) guaranteeing their loans, and
(iv) providing and managing their clearing house arrangements,
(b) to manage those of their investments that are held with Central, and
(c) to provide them with any other services that support any purposes referred to in clauses (a) and (b).
AR 249/89 s67;111/2004
Delegation by board
68 Pursuant to section 163(9) of the Act, Central’s by‑laws may not provide for the delegation by the board of any powers, duties or functions referred to in section 22 of this Regulation or the power to make, amend, repeal or replace by‑laws.
AR 249/89 s68;111/2004
Permitted businesses
69(1) The businesses that Central may carry on pursuant to section 165(1.1)(b) of the Act are
(a) providing corporations referred to in section 66 of this Regulation with educational, technical and advisory services,
(b) acting as a data processing corporation,
(c) subject to the terms and conditions specified in section 13, acting as a financial leasing corporation,
(d) any other business that is incidental or conducive to the attainment of Central’s purposes or any of them, and
(e) providing corporations that operate automated teller machines or point‑of‑sale terminals in Canada on the Everlink Payment Services Inc.’s network with settlement facilities, including related deposit and credit facilities, under that network.
(2) The businesses that a subsidiary or an affiliate of Central may carry on pursuant to section 165(1.2)(c) of the Act are
(a) the businesses referred to in subsection (1)(a) and (b),
(b) acting as a service corporation, so long as the subsidiary or affiliate does not hold any shares issued by any other corporation,
(c) subject to the terms and conditions specified or referred to in section 15, acting as a financial leasing corporation, for which purpose section 15(3) applies,
(d) providing credit card services to any person, and
(e) any business, where the subsidiary or affiliate is a corporation referred to in section 66(b).
(2.1) For the purposes of section 165(1) (as it incorporates section 46(5)) of the Act, a subsidiary or affiliate of Central is entitled to engage in the business of lending money in the course of a business referred to in subsection (2)(d).
(3) In this section,
(a) “data processing corporation” means a corporation primarily engaged in the collection and manipulation of information of a financial or economic nature and the transmission of information of a financial nature;
(b) “service corporation” means a corporation that limits its activities to the provision of services to Central or to members of Central or to both.
AR 249/89 s69;13/96;111/2004;178/2005
Central’s joint ventures and partnerships
70 Pursuant to section 230(k) of the Act, section 165(1) of the Act, in so far as it incorporates section 46 of the Act, section 165(2) of the Act and section 69(2) of this Regulation apply in relation to a joint venture or partnership in which Central has an interest as if that entity were a subsidiary of Central.
AR 249/89 s70;111/2004
Disclosure of remuneration and benefits
70.1 Pursuant to section 166(1), as it incorporates section 83(3)(e), of the Act, section 25.1 of this Regulation and Schedule 1 apply in relation to Central.
AR 21/95 s18;111/2004
Financial disclosure
71 Sections 26 to 30 of this Regulation apply in relation to Central.
AR 249/89 s71
72 Repealed AR 66/99 s20.
Investment powers
73(1) Pursuant to section 168(5) of the Act but subject to subsection (2), Central shall hold and maintain securities averaging in aggregate value over the course of each calendar month an amount that is not less than the higher of
(a) 6% of the aggregate value of the assets, as at the end of the previous month, of all credit unions that keep deposits with Central, and
(b) that level of liquidity that it considers prudent,
in the form of any or all of the liquid assets described in section 38(2)(b) and (3).
(2) Liquid assets owned by Central for which a third party claim exists are not to be counted as liquid assets for the purposes of subsection (1) unless they exist under a national liquidity agreement for credit unions.
AR 249/89 s73;21/95;66/99;111/2004
Acquisition of lender rights under existing loan agreements
74 Pursuant to section 168(4) of the Act, Central may acquire the rights of a lender under an existing loan agreement only if it has obtained the prior approval of the Minister to do so or if
(a) the acquisition is for a pooling fund,
(b) repayment of neither the principal nor interest on the loan is in arrears,
(c) the acquisition does not cause Central to exceed
(i) the maximum single entity exposure level, or
(ii) the maximum loan exposure level,
(d) in making the acquisition, Central is not acting directly or indirectly in competition with any credit union, and
(e) where the loan agreement is secured by a mortgage,
(i) the mortgage is on land in Canada,
(A) on which a building exists or is being or is about to be constructed,
(B) where a farming operation is carried on by a farmer, or
(C) that is vacant land in a municipality whose use is restricted by law to commercial, industrial or residential purposes,
(ii) the mortgage secures a quality mortgage loan, and
(iii) where the mortgage secures land situated outside Alberta, the mortgage is guaranteed or fully insured by the government of Canada or of a province or by an agency of such a government or is insured under an insurance policy issued by an insurer.
AR 249/89 s74;172/90;21/95;66/99;111/2004
Loans and guarantees to members of credit unions by Central
75 The conditions prescribed in relation to section 172(6) of the Act are
(a) that, in making the loan or giving the guarantee, Central is not acting to any extent in competition with the credit union,
(b) that the loan or guarantee is to be made or given by Central together with one or more credit unions,
(c) if the loan or guarantee is for an aggregate amount in excess of $1 000 000, that the transaction has received the prior approval of a special loans committee, and
(d) that the loan or guarantee does not cause Central to exceed
(i) the maximum single entity exposure level, or
(ii) the maximum loan exposure level.
AR 249/89 s75;66/99;111/2004
Loans and guarantees to members of Central by Central
76 The amount prescribed for the purposes of section 172(7)(a) and (b) of the Act is that amount that would not cause Central to exceed
(a) the maximum single entity exposure level, or
(b) the maximum loan exposure level.
AR 249/89 s76;21/95;66/99;111/2004
77 Repealed AR 66/99 s21.
Part 12.1 Amalgamation
Effect of having issued investment shares
77.1 A credit union with issued and outstanding investment shares may not enter into an amalgamation agreement unless, under the terms of that agreement,
(a) those investment shares will be converted into investment shares issued by the amalgamated credit union having dividend, redemption and conversion rights equivalent to the rights attaching to the shares before the amalgamation, or
(b) the Corporation is permitted to, and does, approve another manner of disposing of the investment shares issued by the amalgamating credit union.
AR 21/95 s23
Part 13 Dissolution and Liquidation and Dissolution
Ranking of special shares
78(1) For the purposes of section 204(b)(ii) of the Act, proceeds shall be applied in priority of payment, as respects special shares amongst themselves,
(a) first to the holders of investment shares to the extent of return of capital,
(b) second to the holders of investment shares to the extent of unpaid dividends, and
(c) third to the holders of stabilization preferred shares to the extent of return of capital.
(2) Subject to subsection (1), the shares of all series of investment shares participate rateably in respect first of return of capital and then unpaid dividends.
AR 249/89 s78;21/95;111/2004
Issue of certificate without discharge of bankruptcy
79 The exceptions prescribed with reference to section 206(8) of the Act are where the Minister is satisfied that all proceedings under the bankruptcy have terminated and that it is reasonable to expect that no third party will be affected by the dissolution.
AR 249/89 s79;111/2004
Part 14 Reviews
Reviewable action
79.1 The refusal by the Corporation to give an approval referred to in section 15.1 is a prescribed action for the purposes of section 211(1)(n) of the Act.
AR 66/99 s22;111/2004
Review board proceedings
80 Proceedings before a review board held under section 212 of the Act shall be held in camera.
AR 249/89 s80;111/2004
Part 15 Enforcement
Auditor’s working papers
81 For the avoidance of doubt, the reference in section 217(1) of the Act to a document includes an auditor’s working papers referred to in section 30 of this Regulation.
AR 249/89 s81;111/2004
Orders affecting subsidiaries subject to Securities Act
82 Where an order under section 218 of the Act would relate to the performing of an activity by a subsidiary of a credit union or of Central whose business activities are regulated by or administered in accordance with the Securities Act, the Minister shall not make the order unless the making of the order has previously been consented to in writing by the Chief of Securities Administration, as defined in that Act.
AR 249/89 s82;111/2004
Civil penalties and interest
83(1) The amount prescribed for the purposes of section 225(2) of the Act is $25.
(2) The interest rate prescribed for the purposes of section 225(3) of the Act is the rate set out in section 10 of the Ministerial Regulation.
AR 249/89 s83;111/2004
Part 16 Miscellaneous
Valuation of property
84(1) In this section, “appraiser” means a person who
(a) is current in terms of being trained, experienced and certified in the appraisal of land, and
(b) where
(i) the land appraised is located in Canada, is a member in good standing of the Appraisal Institute of Canada or another appraisal institute recognized by the Minister and is designated as an “Accredited Appraiser Canadian Institute” or a “Canadian Residential Appraiser” or by an equivalent designation recognized by the Appraisal Institute of Canada, or
(ii) the land appraised is located outside Canada, has qualifications satisfactory to the Minister.
(2) An appraisal under section 229(1) of the Act must be conducted by an appraiser in accordance with the standards of the appraisal institute of which he is a member.
AR 249/89 s84;111/2004
Transitional - financial lease and conditional sales agreements
85 Notwithstanding anything in section 13 or 69, where a credit union or Central, as the case may be, entered into a financial lease agreement or a conditional sales agreement before November 1, 1989 and that agreement does not comply or causes that body corporate to be in non‑compliance with that section, the body corporate may renew the agreement, but only with the prior approval of the Corporation, in the case of a credit union, or the Minister, in the case of Central.
AR 249/89 s85
Transitional - loan limit exemptions
86(1) Where a loan that was originally made by a credit union before November 1, 1989 exceeds any maximum loan limit imposed by Part 11 of the Act, the Corporation may nevertheless approve the renewal or restructuring of the loan.
(2) Where a loan that was originally made by Central before November 1, 1989 exceeds any maximum loan limit imposed by section 172 of the Act, the Minister may nevertheless approve the renewal of the loan.
AR 249/89 s86;111/2004
87 Repealed AR 66/99 s23.
88 and 89 Repealed AR 111/2004 s73.
Amendment of O.C. 446/79
90 Order in Council numbered 446/79 is amended by striking out “sections 6 and 64 of The Credit Union Act (Alberta),” and “sections 6 et 64 de la Loi sur les Caisses Populaires (Alberta),”.
AR 249/89 s90
Repeals
91 The following are repealed:
(a) the Credit Union Regulation (Alta. Reg. 201/84);
(b) the Standard By‑laws under the Credit Union Act (Alta. Reg. 134/57);
(c) Order in Council numbered 944/65;
(d) Order in Council numbered 1037/69, as amended;
(e) Alberta Regulations 25/74, 333/74 and 241/75.
AR 249/89 s91
Coming into force
92 This Regulation comes into force on November 1, 1989, but, notwithstanding section 5(3) of the Interpretation Act, section 91 comes into force at the beginning of that day.
AR 249/89 s92 Schedule 1
Annual Financial Statement Note Disclosure of Executive Managers’ Remuneration and Benefits
(Section 25.1 or 25.2) (current year) 200__ (previous year) 200__ Total Annual Remuneration(1) $ Total Annual Value of Benefits(2) $ Total $ Total Annual Value of Remuneration and Benefits(1)(2) $ C.E.O/General Manager*+ – – – – Chief Financial Officer*+ – – – – 1st (other) v.p.*+ – – – – (Other) v.p.s*+ – – – – Total – – – –
* Describe the executive managers by their position titles. Do not include the names of the position holders.
+ Adapt as appropriate.
(1) Remuneration includes regular base pay, bonuses, overtime, fees, lump sum payments, honoraria and any other remuneration in whatever capacity. It is to include all remuneration received directly or indirectly from the credit union and its subsidiaries and affiliates.
(2) Benefits include employer’s share of all executive managers’ benefits and allowances and contributions or payments made on behalf of executive managers including pension, health care, dental coverage, vision coverage, out of country medical benefits, group life insurance, accidental disability and dismemberment insurance, long and short term disability plans, professional memberships and tuition and the costs of additional benefits including sabbaticals or other special leave with pay, financial planning services, retirement planning services, concessionary loans, travel allowances, car allowances, club memberships and automobiles provided (listing must be comprehensive).
AR 21/95 Sched.;66/99
Schedule 2 (Section 41.3)
Capital Adequacy Rules
Interpretation
1(1) In this Schedule,
(a) “agricultural loan or lease” means a loan or a lease under a financial lease agreement from a credit union
(i) to finance operations on a farm,
(ii) where the primary source of the servicing of the debt is derived from the sale of agricultural products or services, or
(iii) in the case of a secured loan, where the security for it consists of a mortgage or pledge of farm assets;
(b) “commercial loan or lease” means
(i) a loan from a credit union
(A) to finance commercial activity or a commercial investment,
(B) where the primary source of the servicing of the debt is derived from commerce, or
(C) in the case of a secured loan, where the security for it consists of a mortgage or pledge of assets owned by a commercial enterprise,
(ii) accounts receivable by a credit union acquired in the course of factoring,
(iii) a mortgage loan, other than a residential mortgage loan, from a credit union,
(iv) a conditional sales agreement where the purchaser under the agreement is a commercial enterprise, or
(v) a lease from a credit union under a financial lease agreement,
but does not include an agricultural loan or lease;
(c) “deposit‑taking institution” means
(i) a loan corporation,
(ii) a trust corporation,
(iii) a credit union,
(iv) a bank, or
(v) Alberta Treasury Branches;
(d) “residential mortgage loan” means a mortgage loan by a credit union to an individual to finance a one to four unit residential dwelling where at least one of the units is to be owner‑occupied and the parcel of land on which it is situated does not exceed 20 acres.
(2) With respect to the interpretation of expressions used in this Schedule and not specifically defined, section 5 of the Act applies.
(3) References in this Schedule to a Table are references to the appropriate Table set out at the end of this Schedule.
Determination of primary, secondary and total capital
2(1) In this section and for the purposes of section 3,
(a) “deductions from capital” means, in relation to a credit union, the aggregate of
(i) its goodwill and other intangible assets,
(ii) the following investments of the credit union in its subsidiaries and affiliates, if any, as determined using the equity method of accounting:
(A) where a subsidiary or affiliate is a loan corporation or a trust corporation that may accept deposits, the credit union’s proportionate share of the capital that the loan or trust corporation is required to maintain under the Loan and Trust Corporations Act,
(A.1) where a subsidiary or affiliate is a trust corporation that may not accept deposits and the credit union has capital of
(I) at least $5 000 000, an amount equal to the capital that the trust corporation is required to maintain under the Loan and Trust Corporations Act less $2 000 000, multiplied by the credit union’s proportionate share of that required capital, or
(II) less than $5 000 000, the credit union’s proportionate share of that required capital,
(B) where a subsidiary or affiliate is any other financial institution, the book value of the credit union’s investment in that body corporate, and
(C) where a subsidiary or affiliate is not one described in paragraph (A) or (B), an amount equal to the amount by which the book value of the credit union’s investment in it exceeds 2% of the credit union’s total assets,
(iii) an amount equal to the difference between the book value and the value at fair market rate of securities, other than securities issued or guaranteed by the government of Canada or of a province, beneficially owned by the credit union,
(iv) an amount equal to the difference between the book value and the value at fair market rate of land, other than land or the proportion of any parcel of land that is occupied by it for its own purposes, that the credit union has acquired,
(v) the amount of its future income taxes recoverable, and
(vi) the lesser of
(A) the amount of any first loss protection facility provided by the credit union to support the value of the underlying assets in a securitised asset pool, and
(B) the capital that would be required to support a direct credit substitute in an amount equal to the total loans being supported by the first loss facility;
(b) “primary capital” means, in relation to a credit union, the aggregate of
(i) the total par value of common shares issued by it and outstanding,
(ii) the total issue value of investment shares issued by it and outstanding that
(A) carry no repurchase, redemption or cumulative dividend rights, and
(B) are either not convertible or are convertible only into other investment shares issued by it that carry no such rights,
(iii) subject to subsection (2), the total issue value of investment shares issued by it and outstanding that
(A) carry no cumulative dividend rights,
(B) are redeemable up to a maximum of 10% of issued and outstanding investment shares of the same series per year, excluding redemptions permitted under section 43.61(3),
(C) have a remaining term to repurchase that is more than 5 years, and
(D) are either not convertible or are convertible only into other investment shares issued by it that carry no such cumulative rights and are not redeemable beyond that 10% limit nor repurchasable in the period of 5 years or less,
(iv) repealed AR 111/2004 s74,
(v) its contributed surplus,
(vi) its reserves,
(vii) its retained earnings, and
(viii) if the credit union has access to Central’s retained earnings under circumstances that are acceptable to the Minister for the purposes of this clause, its proportionate share of Central’s excess retained earnings determined in accordance with subsection (3);
(c) “secondary capital” means, in relation to a credit union, the aggregate of
(i) the total issue value of investment shares issued by it and outstanding that do not qualify as primary capital and that had an initial term to repurchase of more than 5 years,
(ii) the amount owing by it in the form of subordinated notes, subordinated bonds, subordinated debentures and other subordinated debt instruments that had an initial term to maturity of more than 5 years,
(iii) its future income taxes recoverable, and
(iv) general allowances for its loan losses equal to the lesser of 0.875% of the total risk weighted assets of the credit union and an amount declared by the Minister;
(d) “total capital” means the sum of a credit union’s primary capital and, subject to subsection (5), its secondary capital less its deductions from capital.
(2) The maximum total issue value of those investment shares that qualify as primary capital by virtue of subsection (1)(b)(iii) is equal to the lesser of
(a) 100% of its primary capital excluding the investment shares referred to in subsection (1)(b)(iii), and
(b) the adjusted value of those investment shares determined in accordance with the formula D x (100% ‑ R), where D is the total dollar value of the shares issued and outstanding and R is the maximum percentage of shares in the series that may be redeemed in the year under the authorizing instrument under Division 1.1 of Part 8.
(3) For the purposes of subsection (1)(b)(viii), the amount of the credit union’s proportionate share of Central’s excess retained earnings is determined by the formula E x ( NT ) where E is Central’s excess retained earnings determined in accordance with subsection (4), N is the number of common shares issued by Central, outstanding and held by the credit union and T is the total number of common shares issued by Central and outstanding, calculated as of the date of Central’s most recent audited annual financial statements.
(4) For the purposes of subsection (3), Central’s excess retained earnings are determined by taking Central’s retained earnings as at the previous fiscal year end and deducting
(a) the portion of those retained earnings required by Central to meet the requirements of section 171(4) of the Act,
(b) any dividends declared by Central since the previous fiscal year end, and
(c) the value of any transactions designated by the Minister for the purposes of this subsection.
(5) The maximum amount of secondary capital that may be taken into account in determining the amount of total capital is equal to the lesser of
(a) 50% of the credit union’s primary capital, and
(b) the sum of
(i) its future income taxes recoverable,
(i.1) the general allowances for its loan losses referred to in subsection (1)(c)(iv),
(ii) the value of the investment shares that qualify as primary capital by virtue of subsection (1)(b)(iii) less the adjusted value of those shares specified in subsection (2)(b), and
(iii) the total issue value of any other investment shares and subordinated debt referred to in subsection (1)(c)(i) and (ii), adjusted however in accordance with the following Adjustment Table:
Adjustment Table Remaining term to date of repurchase, maturity or other acquisition* Adjustment (deduction) Proportion to be included in secondary capital 5 years or more, or no specified date of repurchase, maturity or other acquisition **R% **100‑R% 4 or more but less than 5 years 20% 80% 3 or more but less than 4 years 40% 60% 2 or more but less than 3 years 60% 40% 1 or more but less than 2 years 80% 20% less than 1 year 100% 0%
NOTES TO THE TABLE
* For the purposes of this Table, the “term to date” is the least of the number of years until the date of repurchase, maturity or other acquisition.
* Any investment shares or subordinated debt instruments with maximum redemption rates in excess of 20% per year are deemed to have a remaining term to repurchase or maturity equal to 100% divided by the redemption rate.
** “R” is the maximum percentage of subordinated debt or investment shares of the series that may be redeemed during the year under the authorizing instrument under Division 1.1 of Part 8 or under the terms of the debt instrument, as the case may be.
Adequacy of capital
3 A credit union does not maintain adequate capital unless its total capital equals or exceeds the greater of
(a) 4% of its total assets less any S C Financial Ltd. debentures owned by it, and
(b) 8% of its risk weighted assets determined in accordance with sections 4 to 7.
Risk weighting
4 Subject to sections 5, 6 and 7, the risk weighted assets of a credit union are the sum of the following:
(a) for on‑balance sheet items, the sum of the products of $A x R for each asset category set out in Table 1, where A is the book value of the asset held by the credit union in each such asset category and R is the risk weighting factor set out in Table 1 for that asset category,
(b) for off‑balance sheet items excluding interest rate contracts, the sum of the products of $F x V x R for each financial instrument set out in Table 2, where F is the face amount of the financial instrument, V is the credit conversion factor for that financial instrument set out in Table 2 and R is the risk weighting factor set out in Table 1 for the asset category underlying the financial instrument, and
(c) for interest rate contracts, the sum of the products of (M + (P x E)) x C for each interest rate contract where M is the total replacement cost, marked to market, of all interest rate contracts with a positive value, P is the notional principal amount of the interest rate contract, E is the future exposure multiple for the interest rate contract as set out in Table 3, and C is the counterparty weight as set out in Table 3.
Partial guarantees
5 Where the recovery of any losses from a loan, financial lease agreement or security is partially guaranteed, only that part of it that is fully guaranteed is to be weighted according to the risk weight of the guarantor or of the asset, whichever is lower.
Government program with uncertain recovery prospects
6 Where a loan, financial lease agreement or security is a part of a government loan program under which the amount of the recovery is uncertain, the loan, financial lease agreement or security is not considered to be guaranteed at all and the full amount of it is to be risk weighted according to the type of the loan, financial lease agreement or security.
Privately issued mortgage backed securities
7(1) The privately issued mortgage backed securities of a mortgage pooling fund are to be risk weighted according to the underlying assets, provided that
(a) there are in place mortgage pooling agreements that require or that relate to a special purpose vehicle and either a trustee or Central that provide that the following conditions are to be observed:
(i) the trustee or Central is to monitor the performance of the mortgage pooling fund administrator, unless they are the same person;
(ii) the investors are to receive information, at least annually, on the structure and performance of the fund;
(iii) the special purpose vehicle and the trustee or Central are to be legally separate from the person who initiated the mortgages included in the mortgage pooling fund;
(iv) the special purpose vehicle and the trustee or Central are to be responsible for any damage or loss to investors created by the negligent management of the assets in the fund,
(b) the mortgage pooling fund contains only mortgages that were fully performing when the mortgage backed securities were created,
(c) the mortgage backed securities are not required to absorb any more than their prorated share of any losses incurred on the underlying assets,
(d) the securitization and administration of the mortgages are effected in the special purpose vehicle,
(e) the underlying mortgages are assigned to a third party who is independent of the person who initiated the mortgages included in the mortgage pooling fund, for the benefit of the investors in the mortgage backed securities,
(f) the trustee or Central has a first charge over the underlying assets of the special purpose vehicle on behalf of the holders of the mortgage backed securities,
(g) the agreement provides for the trustee or Central to take clearly specified steps where the mortgagor defaults,
(h) either the holders of the mortgage backed securities have a prorated share in the underlying assets or the special purpose vehicle that issues the mortgage backed securities has no liabilities other than liabilities related to the issuing of the mortgage backed securities,
(i) the cash flows of the underlying assets meet the cash flow requirements of the mortgage backed securities without undue reliance on any reinvestment income, and
(j) the special purpose vehicle or the trustee or Central is allowed to invest cash flows, pending distribution to investors, only in short‑term money market instruments without any material investment risk, or in new mortgage loans.
(2) Where privately issued mortgage backed securities do not comply with subsection (1) they are to be risk weighted according to the “All other assets” category of Table 1.
(3) Where the pool of assets underlying the mortgage backed securities consists of assets that would attract different risk weights, the risk weight to be used for the mortgage backed securities is to be the highest risk weight associated with the underlying assets.
(4) In subsection (1), “special purpose vehicle” means a legal entity or a specifically designated mortgage pooling fund held at Central whose only assets are related to the underlying mortgages and to any cash or short‑term investments associated with the administration of those mortgages.
Investments in mutual fund units
8 Investments in mutual fund units are to be risk weighted at the highest risk weight associated with the underlying assets of the mutual fund.
Table 1
Risk Weighting Asset Category ($A) Factor(R)
1. Cash 0.0
2. Securities issued or guaranteed by the government of Canada or of a province or by its agent 0.0
3. Loans or financial lease agreements to, or guaranteed by, the government of Canada or a province 0.0
4. Mortgages issued under the National Housing Act or under an equivalent provincial statute 0.0
5. S C Financial Ltd. debentures 0.0
6. Deposits with Central 0.0
7. Loans fully secured by securities issued or guaranteed by the Government of Canada or a province 0.0
8. Loans fully secured by deposits in or shares issued by the credit union 0.0
9. Deductions from capital (as defined in section 2) 0.0
10. Deposits in, or securities issued by, a deposit‑taking institution, including bankers’ acceptances, bankers’ demand notes and comparable securities 0.2
11. Loans to a deposit‑taking institution 0.2
12. Loans fully secured by deposits in or guaranteed by a deposit‑taking institution 0.2
13. Securities issued or guaranteed by a municipality 0.2
14. Loans or financial lease agreements to or guaranteed by a municipality 0.2
15. Loans fully secured by securities issued or guaranteed by a municipality 0.2
16. Other residential mortgage loans that are quality mortgage loans 0.5
17. Residential mortgage loans that are not quality mortgage loans 1.0
18. Other debt securities that are investment grade securities 0.5
19. Loans or financial lease agreements to individuals 0.8
20. Commercial or agricultural loans or leases under financial lease agreements 1.0
21. Fixed assets, including buildings, land, leasehold improvements, equipment or comparable assets at book value 1.0
22. Land acquired in settlement of a debt and held for less than 7 years or such longer period as the Corporation approves 1.0
23. Land acquired for investment 1.5
24. Shares issued by Central 1.0
25. All other assets 1.0
Table 2
Off-balance Sheet Items
Credit Financial Instrument Conversion (Face Amount) ($F) Factor (V)
Direct credit substitutes (general guarantees of indebtedness and guarantee‑type instruments, including standby letters of credit serving as financial guarantees for, or supporting, loans and securities, securities lending). 100%
Acquisitions of risk participation in bankers’ acceptances and participation in direct credit substitutes (e.g., standby letters of credit). 100%
Sale and repurchase agreements. 100%
Forward agreements (contractual obligations) to purchase assets, including financing facilities with certain draw‑down. 100%
Transaction‑related contingencies (e.g., performance bonds, warranties, and standby letters of credit related to a particular transaction). 50%
Commitments with an original maturity exceeding one year, including underwriting commitments and commercial credit lines. 50%
Revolving underwriting facilities, note issuance facilities and other similar arrangements. 50%
Short‑term self‑liquidating trade‑related contingencies, including documentary letters of credit. 20%
Commitments with an original maturity of one year or less or that are unconditionally cancellable at any time. 0%
Table 3
Residual Maturity Future Exposure of Interest Rate Contract Multiple (E)
One year or less 0.0%
More than one year to 2 years 0.5%
For each additional year or part thereof 0.5%
Counterparty Counterparty Weight (C)
Government 0.0
Deposit‑taking Financial Institutions and Central 0.2
Other 0.5
AR 21/95 Sched.;66/99;111/2004
Schedule 3
Forms
Form 1 (Section 41.1(3))
Disclosure Statement for Common Shares
(Name of credit union) (the “Credit Union”)
[NOTE: The “Notes” in this Disclosure Statement are of an editorial nature and are addressed to the Credit Union to assist it in preparing the wording of the actual form to be used.]
Price: $1.00 per common share.
NOTICE TO PROSPECTIVE INVESTOR IN COMMON SHARES
[NOTE: This Statement does not have to be provided by the Credit Union for all purchasers of new common shares: only where certain circumstances prescribed by law (section 41.1 of the Credit Union (Principal) Regulation (“the Regulations”)) apply.] COMMON SHARES ARE RISK CAPITAL. THEY ARE NOT DEPOSITS, AND THEY ARE NOT INSURED OR GUARANTEED BY ANY GOVERNMENT OR GOVERNMENT AGENCY, BY THE CANADA DEPOSIT INSURANCE CORPORATION OR BY ALBERTA’S CREDIT UNION DEPOSIT GUARANTEE CORPORATION AND NO SUCH INSTITUTION HAS CONSIDERED THE MERITS OF THE SHARES AS AN INVESTMENT. THERE IS NO ASSURANCE THAT, IN THE EVENT OF THE LIQUIDATION OR DISSOLUTION OF THE CREDIT UNION, IT WILL HAVE ENOUGH ASSETS TO RETURN YOUR INVESTMENT TO YOU.
THERE ARE RESTRICTIONS ON THE REDEMPTION OF THESE SHARES AND NO CERTAINTY OF FUTURE DIVIDENDS. COMMON SHARES ARE AN IMPORTANT PART OF THE EQUITY OF THE CREDIT UNION
ANY RIGHTS YOU MAY HAVE TO DIVIDENDS OR TO HAVE THE SHARES REDEEMED BY THE CREDIT UNION OR TO TRANSFER THEM TO OTHERS ARE SUBJECT TO CERTAIN PRECONDITIONS, WHICH ARE REFERRED TO IN THIS DISCLOSURE STATEMENT.
THE SHARES ARE NOT TRADEABLE ON ANY STOCK EXCHANGE OR SIMILAR MARKET. YOU MAY BE ABLE TO TRANSFER YOUR SHARES IN LIMITED CIRCUMSTANCES.
THE SECURITIES ACT DOES NOT APPLY TO SHARES ISSUED BY CREDIT UNIONS.
1. FINANCIAL POSITION OF THE CREDIT UNION
The Credit Union’s most recent audited annual financial statements and its unaudited quarterly financial statements for the most recent quarter should be attached to this Disclosure Statement. Those financial statements provide information on the Credit Union’s assets, liabilities, equity (deficit) and income (loss).
[Note: In the 1st line, delete “audited” and substitute “unaudited” in the case of a small credit union with no auditor].
Although there will have been some changes in the ordinary course of the Credit Union’s business since the dates of those annual and quarterly financial statements, to the best of the knowledge of the Board of Directors they continue to present a reasonably accurate picture of the Credit Union’s financial position as of the date of this Disclosure Statement. If applicable, there are also attached statements of any “material changes” (as defined in investment share provisions of the Regulations) that have occurred in the last 5 years and that may still have a significant effect on the value of the common shares. Attached are financial highlights for the last 5 years.
If you have not received all of these documents, please ask the Credit Union for those you haven’t received. You will also be entitled to obtain from the Credit Union copies of annual and quarterly financial statements and any material change statements issued in the future. These will be available at any branch of the Credit Union, on request, and displayed prominently at each branch.
[Note: Included in this Disclosure Statement must be comparable figures for the last 5 fiscal years taken from the Credit Union’s audited income statement and balance sheets. If there were “material changes” between the date of the last audited financial statements and the date of the Disclosure Statement, they must be explained in a material change statement.
2. BUSINESS OF THE CREDIT UNION
The Credit Union is incorporated and regulated under Alberta’s Credit Union Act. It provides a full range of financial services in (state the geographic area it serves) .
[Note: If it does not, delete the preceding sentence and explain the business of the Credit Union instead. If the Credit Union has a bond of association, explain it. If the Credit Union’s loan business is heavily concentrated in or reliant on any particular industry (for example, agriculture), mention that. Also mention any major restructuring, acquisitions or amalgamation within the last 5 years. If the Credit Union is under supervision by the Credit Union Deposit Guarantee Corporation, explain how that affects its business operations.]
If you have any questions about the business of the Credit Union, its management, the geographic area it serves or the legal or regulatory status of Alberta credit unions generally, be sure you have those questions answered to your satisfaction, either by the Credit Union or by your professional advisers, before purchasing any common shares.
3. RISK FACTORS
In addition to general competitive and economic risks, the Credit Union is exposed to the following risk factors: [Note: Provide a description of the major risk factors to which the Credit Union is exposed, such as credit risk, investment risk, liquidity risk, interest rate risk and currency risk.]
4. CREDIT UNION SHARE CAPITAL
The Credit Union is permitted to issue and has issued and/or is about to issue the following kinds or “classes” of shares:
Common Shares ‑ The rights attaching to common shares are set out in the Credit Union Act and the Regulations and, to some extent, in the Credit Union’s by‑laws. They are an important part of the equity of the Credit Union. The attached financial statements show the number and the total value of the Credit Union’s common shares currently issued and outstanding.
Investment Shares ‑ The Credit Union may issue one or more series of investment shares, in accordance with the Regulations. Different series may carry different rights. Rights to dividends and to redeem the shares by selling them back to the Credit Union and other rights specified under the authorizing resolution are permanently set for each series before any shares in the series are issued. Investment shares are preferred shares in the sense that they give a preferential right to dividends and to return of capital from any remaining assets of the Credit Union if it winds up its business. The attached financial statements give details of the series of investment shares that the Credit Union has issued, including the number and total issue price of, and the conversion rights attached to, the investment shares in each series. Disclosure statements for each series are available from the Credit Union on request.
[Note: Delete the preceding paragraph if the Credit Union is a “small” credit union or if it has not issued any investment shares and has not passed the necessary by‑law and resolution authorizing the issue of such shares.]
The Credit Union issued the following class of shares before November 1, 1989:
Stabilization Preferred Shares ‑ These shares were issued under the Credit Union Stabilization Preferred Shares Regulation. They can be owned only by the Credit Union Deposit Guarantee Corporation or its subsidiary. No dividends are payable on these shares, but the Credit Union has certain contractual obligations to redeem them. The attached financial statements show the number and total value of stabilization preferred shares that the Credit Union has issued and outstanding. The Credit Union Deposit Guarantee Corporation or its subsidiary is currently entitled, in each fiscal year of the Credit Union, to have the Credit Union apply towards redeeming the shares an amount equal to % of the Credit Union’s net income less dividends on investment shares, net of income tax effect, plus the amount of any patronage rebates included as an expense in arriving at net income, net of the income tax effect, as reflected in the Credit Union’s audited financial statements for the year.
[Note: Delete the preceding paragraph referencing stabilization preferred shares if no such shares have been issued by the Credit Union or if there has been no such shares outstanding in the last 5 years. If the status of the stabilization preferred shares is further clarified by a note to the financial statements, cross‑reference that note here.]
None (Neither) of these classes of shares carries (This class of shares does not carry) voting rights, since credit unions operate on the principle of one vote per member. You must, however, hold the required minimum number of common shares in order to be a member of a credit union.
5. DESCRIPTION OF COMMON SHARES
A. Voting Rights:
Common shares carry no voting rights. Members are entitled to one vote each at annual and special meetings.
B. Dividends:
Dividends will not be paid if the Credit Union is or would become insolvent. Dividends are not permitted if dividends on investment shares (if any) have been declared and remain unpaid. Dividends become payable only when “declared” by the directors of the Credit Union. Directors have the discretion to pay patronage rebates ahead of common share dividends or to retain earnings for operational purposes. The rate of payment of dividends may be different on holdings of common shares above and below the minimum common shareholdings required for membership.
[Note: If there are other dividend restrictions, describe them.]
C. Redemptions:
Common shares are “redeemed” when the Credit Union buys them back from you and you sell them back to the Credit Union.
The Credit Union has the following rights to buy back common shares:
[Note: Specify the Credit Union’s redemption rights.]
You may have the following rights to sell your shares back to the Credit Union:
[Note: Specify the redemption rights (if any) of the common shareholder, including those stated in the Act and the regulations.]
However, redemption of common shares is subject to a number of preconditions. Common shares cannot be redeemed if the Credit Union is insolvent or, in certain cases, if its obligations as to certain capital requirements are not met or if the redemption would cause either of those circumstances.
[Note: If there are other redemption restrictions, describe them.]
D. Conversion:
Common shares may not be converted into any other class of shares.
E. Exchange of Shares:
Common shares may not be exchanged for investment shares.
6. APPLICATION AND PAYMENT FOR COMMON SHARES
Common shares may be sold by the Credit Union at any time during normal business hours at any branch or the head office of the Credit Union or at any other premises where its business is transacted. If you already hold, or will, after the purchase, hold 3000 or more common shares, exclusive of shares received as patronage rebates or dividends you are entitled to receive a copy of the disclosure statement and the latest audited annual financial statements and quarterly financial statements and material change statements (if any). Shares will not be issued unless fully paid for.
7. TRANSFER OF COMMON SHARES
Common shares issued by credit unions are not tradeable on any stock exchange or similar market. Under the Credit Union Act common shares may not be transferred unless the transfer is between members of the credit union in the same family or results only from the death of the holder or certain other limited circumstances. The by‑laws may contain further restrictions.
[Note: State any additional restrictions contained in the By‑laws.]
8. LIQUIDATION OR DISSOLUTION OF THE CREDIT UNION
If at some time in the future the Credit Union ceases to carry on business, the Credit Union may be dissolved and its assets sold to pay off its liabilities, including deposits. The proceeds received from the sale of assets will be used to repay deposits in the Credit Union, return of capital (repayment of initial investment) and unpaid dividends on investment shares and return of capital on stabilization preferred shares before payment is made on common shares. If, after those liabilities are paid, there are sufficient remaining proceeds from the sale, the holders of common shares will receive the return of their capital investment and unpaid dividends. If there are not sufficient remaining proceeds from the sale to pay out all the capital and unpaid dividends of common shareholders fully, common shareholders will share rateably (your common shareholdings in proportion to all common shares) in the remaining proceeds.
There may also be no remaining proceeds from the sale once all liabilities, including prior claims of depositors, investment shareholders and stabilization preferred shareholders, are paid, in which case there will be no money available to pay common shareholders their capital and unpaid dividends. In this event you will lose the entire value of your investment and unpaid dividends.
NO LOSS FROM A HOLDING OF COMMON SHARES IS INSURED OR GUARANTEED; PLEASE SEE “THE NOTICE TO PROSPECTIVE INVESTOR IN COMMON SHARES” ON PAGE 1 OF THIS DISCLOSURE STATEMENT. Since a loss of your investment is possible, a decision to purchase common shares should reflect your judgment that the Credit Union is and will remain financially sound.
9. TAX CONSEQUENCES
This summary is of a general nature only and is not intended to be, nor should it be understood as, legal or tax advice to any particular person. Therefore, prospective investors should inform themselves of, and if appropriate consult their own tax or other professional advisers on, the possible tax consequences of any share transaction they might enter into, based on their own particular circumstances.
[Note: State in general terms the taxation consequences of purchasing, owning and disposing of the common shares and the expected tax treatment of dividends issued on common shares. If dividends may be paid by issuing shares instead of cash, explain the tax consequences and any adverse consequences in terms of cash flow. Explain RRSP and RRIF eligibility.]
10. FOR FURTHER INFORMATION
This Disclosure Statement is only a summary. If you or your professional adviser are interested in further details, you should obtain a copy of the Credit Union Act and the regulations under it.
THIS DISCLOSURE STATEMENT APPLIES ONLY TO THE CREDIT UNION’S COMMON SHARES.
The form of this Disclosure Statement is prescribed by the Regulations. THE INFORMATION INCLUDED IN IT IS CERTIFIED TO BE COMPLETE AND ACCURATE BY THE BOARD OF DIRECTORS AND THE CHIEF EXECUTIVE OFFICER OF THE CREDIT UNION BASED ON DUE DILIGENCE AND REASONABLE INQUIRY.
[Note: If completeness or accuracy requires disclosure of additional details or circumstances, include them in an appropriate part of this Disclosure Statement. If it requires deletion of any of the prescribed text, then delete accordingly. Overriding everything else, the Disclosure Statement must in all material respects be complete and accurate and must not omit to state a material fact that is necessary to make the information, in the light of the circumstances under which it is presented, not misleading as of the date of the disclosure statement.]
BOARD OF DIRECTORS OF
(name of Credit Union)
Date: Per:
(signature of Chair, Board of Directors)
(name (print))
Date: Per:
(signature of director)
(name (print))
Date: Per:
(signature of chief executive officer)
(name (print))
(title)
Form 2 (Section 43.1(1)(e))
Disclosure Statement for Investment Shares
(Name of credit union) (the “Credit Union”)
[NOTE: The “Notes” in this Disclosure Statement are of an editorial nature and are addressed to the Credit Union to assist it in preparing the wording of the actual form to be used.]
Price: $ per investment share in the Series.
SERIES (alphabetical letter of series) INVESTMENT SHARES (the “Series”)
[Note: This Disclosure Statement may cover more than one series of investment shares.]
NOTICE TO PROSPECTIVE INVESTOR IN INVESTMENT SHARES: INVESTMENT SHARES ARE RISK CAPITAL. THEY ARE NOT DEPOSITS, AND THEY ARE NOT INSURED OR GUARANTEED BY ANY GOVERNMENT OR GOVERNMENT AGENCY, BY THE CANADA DEPOSIT INSURANCE CORPORATION OR BY ALBERTA’S CREDIT UNION DEPOSIT GUARANTEE CORPORATION AND NO SUCH INSTITUTION HAS CONSIDERED THE MERITS OF THE SHARES AS AN INVESTMENT. THERE IS NO ASSURANCE THAT, IN THE EVENT OF THE LIQUIDATION OR DISSOLUTION OF THE CREDIT UNION, IT WILL HAVE ENOUGH ASSETS TO RETURN YOUR INVESTMENT TO YOU.
INVESTMENT SHARES ARE A PREFERRED CLASS OF SHARES THAT MAY BE ISSUED BY CREDIT UNIONS IN ACCORDANCE WITH THE “INVESTMENT SHARES” DIVISION OF THE CREDIT UNION (PRINCIPAL) REGULATION. (That Division and any other relevant “Equity” provisions of Part 8 of that Regulation are referred to in this Disclosure Statement as “the Regulations”.)
ANY RIGHTS YOU MAY HAVE TO DIVIDENDS OR TO HAVE THE SHARES REDEEMED BY THE CREDIT UNION OR TO TRANSFER THEM TO OTHERS ARE SUBJECT TO CERTAIN PRECONDITIONS, WHICH ARE REFERRED TO IN THIS DISCLOSURE STATEMENT.
INVESTMENT SHARES ARE NOT TRADEABLE ON ANY STOCK EXCHANGE OR SIMILAR MARKET. YOU MAY BE ABLE TO TRANSFER YOUR INVESTMENT SHARES IN LIMITED CIRCUMSTANCES.
THE SECURITIES ACT DOES NOT APPLY TO INVESTMENT SHARES ISSUED BY CREDIT UNIONS.
1. FINANCIAL POSITION OF THE CREDIT UNION
The Credit Union’s most recent audited annual financial statements and its unaudited quarterly financial statements for the most recent quarter should be attached to this Disclosure Statement. In summary, as of (date of latest audited annual financial statements), the Credit Union had
assets (including loans) of $
liabilities (including deposits) of $
members’ equity (deficit) of $
net income (loss) for the fiscal year of $
non‑accrual loans:
consumer loans, of $
residential mortgage loans, of $
commercial and agricultural loans, of $
total non-accrual loans, of $
allowance for impaired loans of $
allowance for impaired loans as a % of total loans of %
total risk weighted assets of $
total primary capital of $
total secondary capital of $
total capital of $
total capital as a % of total
risk weighted assets of %
[Note: Give a brief explanation of what some of the more complex items used above mean or include.]
Although there will have been some changes in the ordinary course of the Credit Union’s business since the dates of those annual and quarterly financial statements, to the best of the knowledge of the Board of Directors they continue to present a reasonably accurate picture of the Credit Union’s financial position as of the date of this Disclosure Statement. If applicable, there are also attached statements of any “material changes” (as defined in the Regulations) that have occurred in the last 5 years and that may still have a significant effect on the market value of the investment shares. Attached are financial highlights for the last 5 years.
If you have not received all of these documents, please ask the Credit Union for those you haven’t received. You will also be entitled to obtain from the Credit Union copies of annual and quarterly financial statements and any material change statements issued in the future. These will be available at any branch of the Credit Union, on request, and displayed prominently at each branch. This will enable you to monitor the Credit Union’s financial position, which may affect the value of your shares and your dividend and redemption rights.
[Note: Included in this Disclosure Statement must be comparable figures for the last 5 fiscal years taken from the Credit Union’s audited income statement and balance sheets. If there were “material changes” between the date of the last audited financial statements and the date of the Disclosure Statement, they must be explained in a material change statement. If the Disclosure Statement is issued more than 3 months after the most recent fiscal year end, the latest quarterly financial statements, reviewed by the Credit Union’s auditor, must be attached.]
2. BUSINESS OF THE CREDIT UNION
The Credit Union is incorporated and regulated under Alberta’s Credit Union Act. It provides a full range of financial services in (state the geographic area it serves) .
[Note: If it does not, delete the preceding sentence and explain the business of the Credit Union instead. If the Credit Union has a bond of association, explain it. If the Credit Union’s loan business is heavily concentrated in or reliant on any particular industry (for example, agriculture), mention that. Also mention any major restructuring, acquisitions or amalgamations within the last 5 years. If the Credit Union is under supervision by the Credit Union Deposit Guarantee Corporation, explain how that affects its business operations.]
If you have any questions about the business of the Credit Union, its management, the geographic area it serves or the legal or regulatory status of Alberta credit unions generally, be sure you have those questions answered to your satisfaction, either by the Credit Union or by your professional advisers, before purchasing any investment shares.
3. RISK FACTORS
In addition to general competitive and economic risks, the Credit Union is exposed to the following risk factors: [Note: Provide a description of the major risk factors to which the Credit Union is exposed, such as credit risk, investment risk, liquidity risk, interest rate risk and currency risk.]
4. CREDIT UNION SHARE CAPITAL
The Credit Union is permitted to issue and has issued and/or is about to issue the following kinds or “classes” of shares:
Common Shares ‑ The rights attaching to common shares are set out in the Credit Union Act and its regulations and, to some extent, in the Credit Union’s by‑laws. They are an important part of the equity of the Credit Union. The Credit Union has common shares currently issued and outstanding, having a total value of $ .
Investment Shares ‑ The Credit Union may issue one or more series of investment shares, in accordance with the Regulations. Different series may carry different rights. Rights to dividends and to redeem the shares by selling them back to the Credit Union and other rights specified under the authorizing resolution are permanently set for each series before any shares in the series are issued. Investment shares are preferred shares in the sense that they give a preferential right to dividends (see details under “Dividend Rights” in Item 5B below) and to return of capital from any remaining assets of the Credit Union if it winds up its business (see details under “Liquidation or Dissolution of the Credit Union” below). Prior to this Series, the Credit Union issued investment shares in the following series, disclosure statements for which are available from the Credit Union on request:
Series # of Shares Total Issue Price Conversion Rights
_____ _____ _____ _____
[Note: If the share have conversion rights, describe them.]
The Credit Union issued the following class of shares before November 1, 1989:
Stabilization Preferred Shares ‑ These shares were issued under the Credit Union Stabilization Preferred Shares Regulation. They can be owned only by the Credit Union Deposit Guarantee Corporation or its subsidiary. No dividends are payable on these shares, but the Credit Union has certain contractual obligations to redeem them. The Credit Union has stabilization preferred shares issued and outstanding, having a total value of $ . The Credit Union Deposit Guarantee Corporation or its subsidiary is currently entitled, in each fiscal year of the Credit Union, to have the Credit Union apply towards redeeming the shares an amount equal to % of the Credit Union’s net income less dividends on investment shares, net of income tax effect, plus the amount of any patronage rebates included as an expense in arriving at net income, net of the income tax effect, as reflected in the Credit Union’s audited financial statements for the year.
[Note: Delete the preceding paragraph referencing stabilization preferred shares if no such shares have been issued by the Credit Union or if there has been no such shares outstanding in the last 5 years. If the status of the stabilization preferred shares is further clarified by a note to the financial statements, cross‑reference that note here.]
None (Neither) of these classes of shares carries voting rights, since credit unions operate on the principle of one vote per member. You must, however, hold the required minimum number of common shares in order to be a member of a credit union.
5. USE OF PROCEEDS
The proceeds raised from the issue of shares in this Series will be used for the Credit Union’s general purposes.
[Note: If there is a specially intended purpose, specify.]
6. DESCRIPTION OF SERIES (Series letter)
INVESTMENT SHARES
A. Voting Rights:
Investment shares carry no voting rights.
B. Dividend Rights:
Investment shares in the Series entitle you to dividends as follows:
[Note: Specify the dividend rights attaching to investment shares. Include an explanation of whether the dividend rate is fixed or floating, whether the dividend is cumulative or non‑cumulative and whether dividends will be paid in cash or by the issue of additional investment shares of the same series.]
However, payment of dividends on the investment shares is subject to a number of preconditions. Dividends will not be paid if the Credit Union is or would become insolvent and can only be paid in additional shares (i.e. not in cash) if certain obligations as to capital requirements are not met. Dividends become payable only when “declared” by the directors of the Credit Union. Declaration and payment of dividends will depend on many factors, including the financial performance of the Credit Union. Directors have the discretion to pay patronage rebates ahead of investment share dividends or to retain earnings for operational purposes. These factors are particularly significant if the dividend rights are “non‑cumulative” (do not carry forward from year to year) rather than “cumulative” (continue to accumulate until paid).
[Note: Modify this paragraph as appropriate if dividends have to be paid in cash or by issuing additional investment shares. If there are other dividend restrictions, describe them.]
C. Redemption Rights:
Investment shares are “redeemed” when the Credit Union buys them back from you and you sell them back to the Credit Union.
The Credit Union has the following rights to buy back investment shares in the Series:
[Note: Specify the Credit Union’s redemption rights.]
You may have the following rights to sell your investment shares back to the Credit Union:
[Note: Specify the redemption rights of the investment shareholder, including those in the event the holder dies or if the shares are held in a RRIF. There may also be mentioned here any policy or intention of the Credit Union to exercise its redemption rights at the request of shareholders, if it is made clear that the policy or intention can be changed in the future.]
However, redemption of investment shares is subject to a number of preconditions. Investment shares cannot be redeemed if the Credit Union is insolvent or if its obligations as to certain capital requirements are not met or if the redemption would cause either of those circumstances. The redemption rights must be provided by the authorizing instruments. If the Credit Union does not meet its capital requirements, the Credit Union Deposit Guarantee Corporation may permit it to redeem investment shares.
[Note: If there are other redemption restrictions in the authorizing resolution, describe them.]
D. Conversion:
Investment shares may not be converted into any other class of shares (common shares).
[Note: Describe any options contained in the authorizing resolution for the holder to convert the shares into investment shares of another series, or say that there is no such right.]
E. Exchange of Shares:
Investment shares may not be exchanged for investment shares of any other series or for common shares.
7. INSTALMENT PURCHASES
The Credit Union will provide the option to subscribe for the shares in instalments. That is, you may agree to subscribe and pay for an equal number of shares in the Series each month for up to 6 months. If you do:
(a) shares will be issued to you only when you have paid for them;
(b) you will own only the shares that have actually been issued to you;
(c) the shares will earn dividends only after they have been issued; and
(d) you will be obligated to pay all of the instalments and purchase all of the shares specified in the instalment agreement.
[Note: If instalment purchases are not allowed, instead of the paragraph above, say that there is no provision for instalment purchases. Provide details of the consequences of default.]
8. APPLICATION AND PAYMENT FOR SHARES
The investment shares may be sold by the Credit Union from (date of commencement of sales period) to (date of its conclusion) . Prospective investors must complete and sign an application form and return it to any branch or to the head office of the Credit Union and must receive a copy of the disclosure statement and the latest annual audited financial statements and quarterly financial statements and material change statements (if any). Shares will not be issued unless fully paid for.
[Note: Say when payment for the shares is to be made. If the shares are not issued at the time of payment, say when the shares will be issued and when rights to dividends will commence.]
9. TRANSFER OF INVESTMENT SHARES
Investment shares issued by credit unions are not tradeable on any stock exchange or similar market. Although you may be entitled to sell them at any time to another member of the Credit Union or to certain other persons, it will be up to you to find a purchaser and to agree on a satisfactory price. There is no assurance of your being able to find a purchaser or obtain the price at which you wish to sell. (The Credit Union may be able to help you find a purchaser and to determine a price, but it will have no obligation to do so. Also, the value of investment shares may be affected by changes in interest rates.)
[Note: Delete the preceding sentence if the Series does not contemplate a fixed rate of dividend.]
YOU MAY NOT BE ABLE TO SELL YOUR INVESTMENT SHARES ON SHORT NOTICE OR AT ALL.
Transfers of the shares are subject to a number of preconditions. A transfer is not effective unless it is registered in the Credit Union’s “Investment Share Register”. Before registering a transfer of shares, the Credit Union must normally ensure that the transferee receives a copy of this Disclosure Statement, updated financial statements and any material change statements issued in the last 5 years that may still have a significant effect on their value. The transferor and transferee have to complete and return a transfer form similar to the application form used for original subscriptions.
[Note: If there are other transfer restrictions in the authorizing resolution, describe them.]
10. LIQUIDATION OR DISSOLUTION OF THE CREDIT UNION
If at some time in the future the Credit Union ceases to carry on business, the Credit Union may be dissolved and its assets sold to pay off its liabilities, including deposits. The proceeds received from the sale of assets will be used to repay deposits in the Credit Union before payment is made on investment shares. If, after those liabilities are paid, there are sufficient remaining proceeds from the sale, the holders of investment shares will receive the return of their capital investment and unpaid dividends in priority to the holders of common shares or stabilization preferred shares. If there are not sufficient remaining proceeds from the sale to pay out all the capital and unpaid dividends of investment shareholders fully, investment shareholders will share rateably (your investment shareholdings in proportion to all investment shares) in the remaining proceeds.
There may also be no remaining proceeds from the sale once the liabilities (including deposits) are paid, in which case there will be no money available to pay investment shareholders their capital and unpaid dividends. In this event you will lose the entire value of your investment and unpaid dividends.
NO LOSS FROM A HOLDING OF INVESTMENT SHARES IS INSURED OR GUARANTEED; PLEASE SEE THE “NOTICE TO PROSPECTIVE INVESTOR IN INVESTMENT SHARES” ON PAGE 1 OF THIS DISCLOSURE STATEMENT. Since a loss of your investment is possible, a decision to purchase investment shares should reflect your judgment that the Credit Union is and will remain financially sound.
11. AMALGAMATION
The Credit Union may not voluntarily amalgamate with any other credit union unless the holders of investment shares end up with investment shares in the amalgamated credit union that carry equivalent rights to shares in the Series originally issued, or unless Credit Union Deposit Guarantee Corporation approves otherwise in accordance with the amalgamation agreement.
THE TERMS OF AN AMALGAMATION MAY AFFECT THE VALUE OF THE INVESTMENT SHARES.
12. TAX CONSEQUENCES
This summary is of a general nature only and is not intended to be, nor should it be understood as, accounting legal or tax advice to any particular person. Therefore, prospective investors should inform themselves of, and if appropriate consult their own tax or other professional advisers on, the possible tax consequences of any share transaction they might enter into, based on their own particular circumstances.
[Note: State in general terms the taxation consequences of purchasing, owning and disposing of the investment shares and the expected tax treatment of dividends issued on investment shares. If dividends may be paid by issuing shares instead of cash, explain the tax consequences and any adverse consequences in terms of cash flow. Explain RRSP and RRIF eligibility.]
13. RIGHT TO WITHDRAW
YOU HAVE THE RIGHT TO CANCEL ANY AGREEMENT TO SUBSCRIBE FOR INVESTMENT SHARES BY MAKING SURE THAT THE CREDIT UNION RECEIVES A SIGNED REQUEST TO CANCEL THE SUBSCRIPTION BEFORE THE CLOSE OF BUSINESS ON THE FIFTH BUSINESS DAY AFTER THE DATE WHEN YOU SIGNED THE SUBSCRIPTION FORM. This right to cancel only applies to the original issue of the shares and not to a transfer from one shareholder to another. If you enter into an instalment agreement, the right to cancel applies only for those 5 business days; you will not have the right to cancel instalments as they come due.
14. FOR FURTHER INFORMATION
This Disclosure Statement is only a summary. If you or your professional adviser are interested in further details, you should obtain a copy of the Credit Union Act and the regulations under it, the Credit Union’s authorizing by‑law and the directors’ resolution authorizing the issue of the investment shares and determining the dividend, redemption, exchange, conversion and other characteristics of the Series. Copies of the by‑law and resolution are available on request from the Credit Union. Note that any reference above to the authorizing resolution may, in any specific instance, in fact refer to the Credit Union’s authorizing by‑law.
THIS DISCLOSURE STATEMENT APPLIES ONLY TO SERIES (series letter) INVESTMENT SHARES OF THE CREDIT UNION.
The form of this Disclosure Statement is prescribed by the Regulations. THE INFORMATION INCLUDED IN IT IS CERTIFIED TO BE COMPLETE AND ACCURATE BY THE BOARD OF DIRECTORS AND THE CHIEF EXECUTIVE OFFICER OF THE CREDIT UNION BASED ON DUE DILIGENCE AND REASONABLE INQUIRY.
[Note: If completeness or accuracy requires disclosure of additional details or circumstances, include them in an appropriate part of this Disclosure Statement. If it requires deletion of any of the prescribed text, then delete accordingly. Overriding everything else, the Disclosure Statement must in all material respects be complete and accurate and must not omit to state a material fact that is necessary to make the information, in the light of the circumstances under which it is presented, not misleading as of the date of the disclosure statement.]
BOARD OF DIRECTORS OF
(name of Credit Union)
Date: Per:
(signature of Chair, Board of Directors)
(name (print))
Date: Per:
(signature of director)
(name (print))
Date: Per:
(signature of chief executive officer)
(name (print))
(title)
Form 3 (Section 43.41(4))
Application to Subscribe for Investment Shares
Investment Shares, Series (Series Letter of Alphabet) NAME OF CREDIT UNION BRANCH NOTICE TO SUBSCRIBER 1. These investment shares are not insured or guaranteed by the Canada Deposit Insurance Corporation, Alberta’s Credit Union Deposit Guarantee Corporation or by any government or government agency.
2. These institutions have not considered the merits of these shares as an investment.
3. The Securities Act does not apply to investment shares issued by credit unions. A. NAME IN WHICH SHARES TO BE REGISTERED Date MEMBER NUMBER First Name and Initial □ Check if for RRSP
Last Name □ Check if for RRIF Street Address, Apt. No., R.R. or P.O. Box City, Town, or Post Office Province Postal Code Social Insurance Number If the shares are to be held in trust and if, in accordance with the instrument creating the trust, anyone other than the person described above is entitled to redeem the shares, state the same details respecting that other person. (Your attention is drawn to section 122 of the Act.)
B. SELF‑ASSESSMENT QUESTIONNAIRE If you have any questions about the merits of an investment in credit union investment shares in meeting your financial needs and plans, you should seek independent professional advice. The following considerations are designed to help you decide if you should seek independent professional advice. 1. Have you purchased common shares within the past five years? Yes □ No □ 2. Do you consider yourself sufficiently knowledgeable about equity investments to assess the potential risks of this investment? Yes □ No □ 3. Will these shares represent only a portion of your savings and investments (including deposit accounts, RRSPs, GICs, CSBs, bonds)? Yes □ No □ 4. If you are unable to redeem or sell the shares or the shares decline in value or do not pay cash dividends, will you have sufficient income from other sources to meet anticipated needs? Yes □ No □ If the answer to any of the questions is “NO”, you should seek independent professional advice before investing, or consider not investing. You should seek such advice even if you answered “Yes” to all the questions if you are still in any doubt at all as to whether the investment is suitable.
C. NUMBER OF SHARES AND METHOD OF PAYMENT I agree to subscribe for the shares shown in this box in the amount and in accordance with the payment method so shown.
Shares of Series X $ = $ Total Payable □ Payment in Full Payment to be dated for the Settlement Date (if any) in the Disclosure Statement ‑ Initial A or B below A Payment in full is attached
B Debit my credit union account My Account Number
│ │ │ │ │ │ │ │ │ │ │ □ Payment by instalments (if applicable) ‑ Initial A or B below
A Payment for first instalment and post‑dated cheques for each subsequent instalment are attached
B Debit my account for each instalment X
Signature of Subscriber
Date D. DECLARATION AND ACKNOWLEDGEMENT I have received the Disclosure Statement and the annual and (if applicable) quarterly financial statements and the material change statements (if any) described in the Disclosure Statement.
I have read and I understand those documents and in particular I understand the disclaimers in the “Notice to Prospective Investor in Investment Shares” segment at the beginning of the Disclosure Statement.
I understand that unless I am acquiring the shares as the trustee, executor, administrator or guardian of a member and with other limited exceptions provided in the legislation, I must be a member of the Credit Union to acquire these investment shares.
X
Signature of Subscriber
Date
E. CANCELLATION Please cancel my application in full □ Date Signature of Subscriber
X Signature of Credit Union Representative
X A person has until the close of business on the 5th business day after the date when the application was signed to ensure cancellation is received by the credit union. As to cancellation rights, refer to the “Rights to Withdraw” segment of the Disclosure Statement.
Form 4 (Section 43.6(2))
Transfer of Investment Shares
Investment Shares, Series (Series Letter of Alphabet) NAME OF CREDIT UNION BRANCH NOTICE TO TRANSFEREE 1. These investment shares are not insured or guaranteed by the Canada Deposit Insurance Corporation, Alberta’s Credit Union Deposit Guarantee Corporation or by any government or government agency.
2. These institutions have not considered the merits of these shares as an investment.
3. The Securities Act does not apply to investment shares issued by credit unions. A. NAME IN WHICH SHARES TO BE REGISTERED Date TRANSFEREE’S MEMBER NUMBER First Name and Initial □ Check if for RRSP
Last Name □ Check if for RRIF Street Address, Apt. No., R.R. or P.O. Box City, Town, or Post Office Province Postal Code Social Insurance Number If the shares are to be held in trust and if, in accordance with the instrument creating the trust, anyone other than the person described above is entitled to redeem the shares, state the same details respecting that other person. (Your attention is drawn to section 122 of the Act.)
B. SELF‑ASSESSMENT QUESTIONNAIRE If you have any questions about the merits of an investment in credit union investment shares in meeting your financial needs and plans, you should seek independent professional advice. The following considerations are designed to help you decide if you should seek independent professional advice. 1. Have you purchased common shares within the past five years? Yes □ No □ 2. Do you consider yourself sufficiently knowledgeable about equity investments to assess the potential risks of this investment? Yes □ No □ 3. Will these shares represent only a portion of your savings and investments (including deposit accounts, RRSPs, GICs, CSBs, bonds)? Yes □ No □ 4. If you are unable to redeem or sell the shares or the shares decline in value or do not pay cash dividends, will you have sufficient income from other sources to meet anticipated needs? Yes □ No □ If the answer to any of the questions is “NO”, you should seek independent professional advice before investing, or consider not investing. You should seek such advice even if you answered “Yes” to all the questions if you are still in any doubt at all as to whether the investment is suitable.
C. NUMBER OF SHARES AND METHOD OF PAYMENT I agree to subscribe for the shares shown in this box in the amount and in accordance with the payment method so shown. Shares of Series X $ = $ Total Payable
Initial A or B below
A Debit my (transferee’s) credit union account and credit transferor’s account (as detailed below)
Transferee’s Account Number
│ │ │ │ │ │ │ │ │ │ │
B Payment by me (transferee) otherwise arranged
__ X
Signature of Transferee
__ Date
D. DECLARATION AND ACKNOWLEDGEMENT I have received the Disclosure Statement and the annual and (if applicable) quarterly financial statements and the material change statements (if any) described in the Disclosure Statement.
I have read and I understand those documents and in particular I understand the disclaimers in the “Notice to Prospective Investor in Investment Shares” segment at the beginning of the Disclosure Statement.
I understand that unless I am acquiring the shares as the trustee, executor, administrator or guardian of a member and with other limited exceptions provided in the legislation, I must be a member of the Credit Union to acquire these investment shares.
__ X
Signature of Transferee
__ Date
E. TRANSFEROR’S NAME AND ADDRESS TRANSFEROR’S MEMBER NUMBER First Name and Initial Last Name Street Address, Apt. No., R.R. or P.O. Box City, Town, or Post Office Province Postal Code
F. TRANSFEROR’S AUTHORIZATION I authorize and direct the Credit Union to register the transfer of investment shares of Series to the person named in Box A.
__ X
Signature of Transferor __ Date Initial A or B
A Credit my (transferor’s) credit union account
Credit Union Account Number
│ │ │ │ │ │ │ │ │ │ │
B Payment by me (transferor) otherwise arranged
AR 21/95 Sched.;111/2004
