Bank Act

1991, c. 46

An Act respecting banks and banking

[Assented to 13th December, 1991]

Her Majesty, by and with the advice and consent of the Senate and House of Commons of Canada, enacts as follows:

SHORT TITLE

1. This Act may be cited as the Bank Act.

PART I
INTERPRETATION AND APPLICATION

Definitions

2. In this Act,

"affairs", with respect to a bank, an authorized foreign bank or a bank holding company, means the relationships among the bank, authorized foreign bank or bank holding company and its affiliates and the shareholders, directors and officers of the bank, authorized foreign bank or bank holding company and its affiliates, but does not include the business of the bank, authorized foreign bank or bank holding company or any of its affiliates;

"affiliate" means an entity that is affiliated with another entity within the meaning of section 6;

"Agency" means the Financial Consumer Agency of Canada established under section 3 of the Financial Consumer Agency of Canada Act;

"annual return" means a return prepared in accordance with section 601;

"annual statement", in relation to a bank, means the annual financial statement of the bank within the meaning of paragraph 308(1)(a) and, in relation to a bank holding company, means the annual financial statement of the bank holding company within the meaning of paragraph 840(1)(a);

"authorized foreign bank" means a foreign bank in respect of which an order under subsection 524(1) has been made;

"bank" means a bank listed in Schedule I or II;

"bank holding company" means a body corporate that is incorporated or formed under Part XV;

"bearer", in relation to a security, means the person in possession of a security payable to bearer or endorsed in blank;

"bearer form", in respect of a security, means a security in bearer form as determined in accordance with subsection 83(2);

"beneficial ownership" includes ownership through one or more trustees, legal representatives, agents or other intermediaries;

"body corporate" means an incorporated body wherever or however incorporated;

"branch"

(a) in respect of a bank, means an agency, the head office or any other office of the bank, and

(b) in respect of an authorized foreign bank, means an agency, the principal office or any other office of the authorized foreign bank in Canada at which is carried on the business in Canada of the authorized foreign bank;

"Canadian entity" means an entity that is incorporated or formed by or under an Act of Parliament or of the legislature of a province and that carries on business, directly or indirectly, in Canada;

"Canadian financial institution" means a financial institution that is incorporated or formed by or under an Act of Parliament or of the legislature of a province;

"central cooperative credit society" means a body corporate organized on cooperative principles by or under an Act of the legislature of a province, one of whose principal purposes is to receive deposits from and provide liquidity support to local cooperative credit societies, and

(a) whose membership consists solely or primarily of local cooperative credit societies, or

(b) whose directors are wholly or primarily persons elected or appointed by local cooperative credit societies;

"central securities register" or "securities register", in relation to a bank, means the register referred to in section 248 and, in relation to a bank holding company, means the register referred to in section 825;

"Commissioner" means the Commissioner of the Financial Consumer Agency of Canada appointed under section 4 of the Financial Consumer Agency of Canada Act;

"common-law partner", in relation to an individual, means a person who is cohabiting with the individual in a conjugal relationship, having so cohabited for a period of at least one year;

"complainant", in relation to a bank or any matter concerning a bank, means

(a) a registered holder or beneficial owner, and a former registered holder or beneficial owner, of a security of a bank or any of its affiliates,

(b) a director or an officer, or a former director or officer, of a bank or any of its affiliates, or

(c) any other person who, in the discretion of a court, is a proper person to make an application under section 334, 338 or 989;

"consumer provision" means a provision referred to in paragraph (a) of the definition "consumer provision" in section 2 of the Financial Consumer Agency of Canada Act;

"court" means

(a) in the Province of Ontario, the Superior Court of Justice,

(b) in the Province of Quebec, the Superior Court of the Province,

(c) in the Provinces of Nova Scotia and British Columbia, the Supreme Court of the Province,

(d) in the Provinces of New Brunswick, Manitoba, Saskatchewan and Alberta, the Court of Queen's Bench for the Province,

(e) in the Provinces of Prince Edward Island and Newfoundland, the trial division of the Supreme Court of the Province, and

(f) the Supreme Court of Yukon, the Supreme Court of the Northwest Territories and the Nunavut Court of Justice;

"court of appeal" means the court to which an appeal lies from a decision or order of a court;

"debt obligation" means a bond, debenture, note or other evidence of indebtedness of an entity, whether secured or unsecured;

"director" means a natural person occupying the position of director, by whatever name called, of a body corporate, and "board of directors" or "directors" refers to the directors of a body corporate as a body;

"entity" means a body corporate, trust, partnership, fund, an unincorporated association or organization, Her Majesty in right of Canada or of a province, an agency of Her Majesty in either of such rights and the government of a foreign country or any political subdivision thereof and any agency thereof;

"equity", in respect of a bank or a bank holding company, means its equity as determined in accordance with the regulations;

"federal financial institution" means

(a) a bank,

(b) a body corporate to which the Trust and Loan Companies Act applies,

(c) an association to which the Cooperative Credit Associations Act applies or a central cooperative credit society for which an order has been made under subsection 473(1) of that Act, or

(d) an insurance company or a fraternal benefit society incorporated or formed under the Insurance Companies Act;

"federation of cooperative credit societies" means an association under the Cooperative Credit Associations Act or a federation, league or corporation incorporated or organized by or under an Act of the legislature of a province, the membership or the shareholders of which include two or more central cooperative credit societies;

"fiduciary" means any person acting in a fiduciary capacity and includes a personal representative of a deceased person;

"financial institution" means

(a) a bank or an authorized foreign bank,

(b) a body corporate to which the Trust and Loan Companies Act applies,

(c) an association to which the Cooperative Credit Associations Act applies or a central cooperative credit society for which an order has been made under subsection 473(1) of that Act,

(d) an insurance company or a fraternal benefit society incorporated or formed under the Insurance Companies Act,

(e) a trust, loan or insurance corporation incorporated by or under an Act of the legislature of a province,

(f) a cooperative credit society incorporated and regulated by or under an Act of the legislature of a province,

(g) an entity that is incorporated or formed by or under an Act of Parliament or of the legislature of a province and that is primarily engaged in dealing in securities, including portfolio management and investment counselling, and

(h) a foreign institution;

"foreign bank", subject to section 12, means an entity incorporated or formed by or under the laws of a country other than Canada that

(a) is a bank according to the laws of any foreign country where it carries on business,

(b) carries on a business in any foreign country that, if carried on in Canada, would be, wholly or to a significant extent, the business of banking,

(c) engages, directly or indirectly, in the business of providing financial services and employs, to identify or describe its business, a name that includes the word "bank", "banque", "banking" or "bancaire", either alone or in combination with other words, or any word or words in any language other than English or French corresponding generally thereto,

(d) engages in the business of lending money and accepting deposit liabilities transferable by cheque or other instrument,

(e) engages, directly or indirectly, in the business of providing financial services and is affiliated with another foreign bank,

(f) controls another foreign bank, or

(g) is a foreign institution, other than a foreign bank within the meaning of any of paragraphs (a) to (f), that controls a bank incorporated or formed under this Act,

but does not include a subsidiary of a bank named in Schedule I as that Schedule read immediately before the day section 184 of the Financial Consumer Agency of Canada Act comes into force, unless the Minister has specified that subsection 378(1) no longer applies to the bank;

"foreign bank subsidiary" [Repealed, 2001, c. 9, s. 35]

"foreign institution" means an entity that is

(a) engaged in the business of banking, the trust, loan or insurance business, the business of a cooperative credit society or the business of dealing in securities or is otherwise engaged primarily in the business of providing financial services, and

(b) incorporated or formed otherwise than by or under an Act of Parliament or of the legislature of a province;

"form of proxy" means a written or printed form that, when completed and executed by or on behalf of a shareholder, constitutes a proxy;

"guarantee" includes a letter of credit;

"head office", in relation to a bank, means the office required to be maintained under section 237 and, in relation to a bank holding company, means the office required to be maintained under section 814;

"holder" means

(a) in respect of a security certificate, the person in possession of the certificate issued or endorsed to that person or to bearer or in blank, and

(b) in respect of the ownership of a share, the shareholder of the share within the meaning of section 7;

"holding body corporate" means a holding body corporate within the meaning of section 4;

"incorporated", when used with reference to a body corporate that is incorporated by or under an Act of Parliament or of the legislature of a province, also refers to a body corporate that is continued by or under any such Act;

"incorporating instrument" means the special Act, letters patent, instrument of continuance or other constating instrument by which a body corporate was incorporated or continued and includes any amendment to or restatement of the constating instrument;

"incorporator", in relation to a bank or a bank holding company, means a person who applied for letters patent to incorporate the bank or bank holding company, as the case may be;

"insurance holding company" means a body corporate that is incorporated or formed under Part XVII of the Insurance Companies Act;

"issuer", in respect of a security, means the entity that issues or issued the security;

"letters patent", in respect of an instrument authorized to be issued under this Act, means letters patent in a form approved by the Superintendent;

"local cooperative credit society" means a body corporate organized on cooperative principles incorporated by or under an Act of the legislature of a province

(a) whose members or shareholders consist substantially of natural persons, and

(b) whose principal purpose is to receive deposits from and make loans to its members and shareholders;

"Minister" means the Minister of Finance;

"NAFTA country resident" [Repealed, 1999, c. 28, s. 1]

"non-WTO Member foreign bank" means a foreign bank that is not controlled by a WTO Member resident;

"officer" means

(a) in relation to a body corporate, a chief executive officer, president, vice-president, secretary, controller, treasurer and any other natural person designated as an officer of the body corporate by by-law or by resolution of the directors of the body corporate, and

(b) in relation to any other entity, any natural person designated as an officer of the entity by by-law, by resolution of the members thereof or otherwise;

"order form", in respect of a security, means a security in order form as determined in accordance with subsection 83(3);

"ordinary resolution" means a resolution passed by a majority of the votes cast by or on behalf of the shareholders who voted in respect of that resolution;

"person" means a natural person, an entity or a personal representative;

"personal representative" means a person who stands in place of and represents another person and, without limiting the generality of the foregoing, includes, as the circumstances require, a trustee, an executor, an administrator, a committee, a guardian, a tutor, a curator, an assignee, a receiver, an agent or an attorney of any person;

"prescribed" means prescribed by regulation;

"principal office" means, in relation to an authorized foreign bank, the office required to be maintained under section 535;

"principal officer" in relation to an authorized foreign bank means the person appointed under section 536;

"proxy" means a completed and executed form of proxy by means of which a shareholder appoints a proxyholder to attend and act on the shareholder's behalf at a meeting of shareholders;

"proxyholder" means the person appointed by proxy to attend and act on behalf of a shareholder at a meeting of shareholders;

"real property" includes a leasehold interest in real property;

"recorded address" means

(a) in relation to a person who is a shareholder of a bank or a bank holding company, the latest postal address of the person according to its central securities register, and

(b) in relation to a person in any other respect in relation to a bank, the latest postal address of the person according to the records of the branch concerned;

"registered form", in respect of a security, means a security in registered form as determined in accordance with subsection 83(4);

"regulatory capital", in respect of a bank or a bank holding company, has the meaning given that expression by the regulations;

"resident Canadian" means a natural person who is

(a) a Canadian citizen ordinarily resident in Canada,

(b) a Canadian citizen not ordinarily resident in Canada who is a member of a prescribed class of persons, or

(c) a permanent resident within the meaning of subsection 2(1) of the Immigration and Refugee Protection Act and ordinarily resident in Canada, except a permanent resident who has been ordinarily resident in Canada for more than one year after the time at which the individual first became eligible to apply for Canadian citizenship;

"residential property" means real property consisting of buildings that are used, or are to be used, to the extent of at least one half of the floor space thereof, as one or more private dwellings;

"securities underwriter" means a person who, as principal, agrees to purchase securities with a view to the distribution of the securities or who, as agent for a body corporate or other person, offers for sale or sells securities in connection with a distribution of the securities, and includes a person who participates, directly or indirectly, in a distribution of securities, other than a person whose interest in the distribution of securities is limited to receiving a distributor's or seller's commission payable by a securities underwriter;

"security" means

(a) in relation to a body corporate, a share of any class of shares of the body corporate or a debt obligation of the body corporate, and includes a warrant of the body corporate, but does not include a deposit with a financial institution or any instrument evidencing such a deposit, and

(b) in relation to any other entity, any ownership interest in or debt obligation of the entity;

"security interest" means an interest in or charge on property by way of mortgage, lien, pledge or otherwise taken by a creditor or guarantor to secure the payment or performance of an obligation;

"send" includes deliver;

"series", in respect of shares, means a division of a class of shares;

"significant interest" means a significant interest determined in accordance with section 8;

"special resolution" means a resolution passed by a majority of not less than two thirds of the votes cast by or on behalf of the shareholders who voted in respect of that resolution or signed by all the shareholders entitled to vote on that resolution;

"subordinated indebtedness" means an instrument evidencing an indebtedness of a bank that by its terms provides that the indebtedness will, in the event of the insolvency or winding-up of the bank, be subordinate in right of payment to all deposit liabilities of the bank and all other liabilities of the bank except those that, by their terms, rank equally with or are subordinate to such indebtedness;

"subsidiary" means an entity that is a subsidiary of another entity as defined in section 5;

"substantial investment" means a substantial investment determined in accordance with section 10;

"Superintendent" means the Superintendent of Financial Institutions appointed pursuant to the Office of the Superintendent of Financial Institutions Act;

"trade", in respect of securities, means any sale or disposition of securities for valuable consideration;

"transfer", in respect of securities, includes a transmission by operation of law;

"voting share" means a share of any class of shares of a body corporate carrying voting rights under all circumstances or by reason of an event that has occurred and is continuing or by reason of a condition that has been fulfilled;

"WTO Member resident" means a WTO Member resident within the meaning of section 11.1.

1991, c. 46, ss. 2, 572, c. 47, s. 756, c. 48, s. 494; 1992, c. 51, s. 29; 1993, c. 34, s. 5(F), c. 44, s. 22; 1998, c. 30, ss. 13(F), 15(E); 1999, c. 3, s. 14, c. 28, s. 1; 2000, c. 12, s. 3; 2001, c. 9, s. 35, c. 27, s. 206; 2002, c. 7, s. 81(E).

Interpretation

2.1 References in this Act to the carrying on of business in Canada by an authorized foreign bank and to the business in Canada of an authorized foreign bank are deemed, respectively, to be references to the carrying on of business in Canada, or to business in Canada, under Part XII.1.

1999, c. 28, s. 2.

2.2 For the purposes of this Act, a person is a major shareholder of a body corporate if

(a) the aggregate of the shares of any class of voting shares of the body corporate that are beneficially owned by the person and that are beneficially owned by any entities controlled by the person is more than 20 per cent of the outstanding shares of that class of voting shares of the body corporate; or

(b) the aggregate of the shares of any class of non-voting shares of the body corporate that are beneficially owned by the person and that are beneficially owned by any entities controlled by the person is more than 30 per cent of the outstanding shares of that class of non-voting shares of the body corporate.

2001, c. 9, s. 36.

2.3 For the purposes of this Act, an entity is widely held if it is

(a) a body corporate that has no major shareholder;

(b) an insurance company incorporated or formed under a mutual plan;

(c) an association to which the Cooperative Credit Associations Act applies; or

(d) a cooperative credit society incorporated or formed, and regulated, by or under an Act of the legislature of a province.

2001, c. 9, s. 36.

3. (1) For the purposes of this Act,

(a) a person controls a body corporate if securities of the body corporate to which are attached more than 50 per cent of the votes that may be cast to elect directors of the body corporate are beneficially owned by the person and the votes attached to those securities are sufficient, if exercised, to elect a majority of the directors of the body corporate;

(b) a person controls an unincorporated entity, other than a limited partnership, if more than 50 per cent of the ownership interests, however designated, into which the entity is divided are beneficially owned by that person and the person is able to direct the business and affairs of the entity;

(c) the general partner of a limited partnership controls the limited partnership; and

(d) a person controls an entity if the person has any direct or indirect influence that, if exercised, would result in control in fact of the entity.

(2) A person who controls an entity is deemed to control any entity that is controlled, or deemed to be controlled, by the entity.

(3) A person is deemed to control, within the meaning of paragraph (1)(a) or (b), an entity if the aggregate of

(a) any securities of the entity that are beneficially owned by that person, and

(b) any securities of the entity that are beneficially owned by any entity controlled by that person

is such that, if that person and all of the entities referred to in paragraph (b) that beneficially own securities of the entity were one person, that person would control the entity.

(4) The Minister may, for any purpose of any provision of this Act that refers to control within the meaning of paragraph (1)(d), make guidelines respecting what constitutes such control, including guidelines describing the policy objectives that the guidelines and the relevant provisions of the Act are intended to achieve and, if any such guidelines are made, the reference to paragraph (1)(d) in that provision shall be interpreted in accordance with the guidelines.

1991, c. 46, s. 3; 2001, c. 9, s. 37.

4. A body corporate is the holding body corporate of any entity that is its subsidiary.

1991, c. 46, s. 4; 2001, c. 9, s. 38.

5. An entity is a subsidiary of another entity if it is controlled by the other entity.

1991, c. 46, s. 5; 2001, c. 9, s. 38.

6. (1) One entity is affiliated with another entity if one of them is controlled by the other or both are controlled by the same person.

(2) Despite subsection (1), for the purposes of subsections 265(1) and 283(1), one entity is affiliated with another entity if one of them is controlled, determined without regard to paragraph 3(1)(d), by the other or both are controlled, determined without regard to paragraph 3(1)(d), by the same person.

1991, c. 46, s. 6; 2001, c. 9, s. 39.

7. (1) For the purposes of this Act, a person is a shareholder of a body corporate when, according to the securities register of the body corporate, the person is the owner of one or more shares of the body corporate or is entitled to be entered in the securities register or like record of the body corporate as the owner of the share or shares.

(2) A reference in this Act to the holding of a share by or in the name of any person is a reference to the fact that the person is registered or is entitled to be registered in the securities register or like record of the body corporate as the holder of that share.

8. (1) A person has a significant interest in a class of shares of a bank or a bank holding company if the aggregate of

(a) any shares of that class beneficially owned by the person, and

(b) any shares of that class beneficially owned by entities controlled by the person

exceeds 10 per cent of all of the outstanding shares of that class of shares of the bank or bank holding company.

(2) A person who has a significant interest in a class of shares of a bank or bank holding company increases that significant interest in the class of shares if the person or any entity controlled by the person

(a) acquires beneficial ownership of additional shares of that class, or

(b) acquires control of any entity that beneficially owns shares of that class,

in such number as to increase the percentage of shares of that class that are beneficially owned by the person and by any entities controlled by the person.

1991, c. 46, s. 8; 2001, c. 9, s. 40.

9. (1) For the purposes of Part VII and Division 7 of Part XV, if two or more persons have agreed, under any agreement, commitment or understanding, whether formal or informal, verbal or written, to act jointly or in concert in respect of

(a) shares of a bank or of a bank holding company that they beneficially own,

(b) shares or ownership interests that they beneficially own of any entity that beneficially owns shares of a bank or of a bank holding company, or

(c) shares or ownership interests that they beneficially own of any entity that controls any entity that beneficially owns shares of a bank or bank holding company,

those persons are deemed to be a single person who is acquiring beneficial ownership of the aggregate number of shares of the bank or bank holding company or shares or ownership interests of the entity that are beneficially owned by them.

(2) Without limiting the generality of subsection (1), any agreement, commitment or understanding by or between two or more persons who beneficially own shares of a bank or bank holding company or shares or ownership interests of any entity referred to in paragraph (1)(b) or (c),

(a) whereby any of them or their nominees may veto any proposal put before the board of directors of the bank or bank holding company, or

(b) under which no proposal put before the board of directors of the bank or bank holding company may be approved except with the consent of any of them or their nominees,

is deemed to be an agreement, commitment or understanding referred to in subsection (1).

(3) For the purposes of this section, persons shall be presumed not to have agreed to act jointly or in concert solely by reason of the fact that

(a) one is the proxyholder of one or more of the others in respect of shares or ownership interests referred to in subsection (1); or

(b) they vote the voting rights attached to shares or ownership interests referred to in subsection (1) in the same manner.

(4) Where in the opinion of the Superintendent it is reasonable to conclude that an agreement, commitment or understanding referred to in subsections (1) and (2) exists by or among two or more persons, the Superintendent may designate those persons as persons who have agreed to act jointly or in concert.

1991, c. 46, s. 9; 2001, c. 9, s. 41.

10. (1) A person has a substantial investment in a body corporate where

(a) the voting rights attached to the aggregate of any voting shares of the body corporate beneficially owned by the person and by any entities controlled by the person exceed 10 per cent of the voting rights attached to all of the outstanding voting shares of the body corporate; or

(b) the aggregate of any shares of the body corporate beneficially owned by the person and by any entities controlled by the person represents ownership of greater than 25 per cent of the shareholders' equity of the body corporate.

(2) A person who has a substantial investment in a body corporate pursuant to paragraph (1)(a) increases that substantial investment when the person or any entity controlled by the person

(a) acquires beneficial ownership of additional voting shares of the body corporate in such number as to increase the percentage of voting rights attached to the aggregate of the voting shares of the body corporate beneficially owned by the person and by any entities controlled by the person; or

(b) acquires control of any entity that beneficially owns any voting shares of the body corporate in such number as to increase the percentage of voting rights attached to the aggregate of the voting shares of the body corporate beneficially owned by the person and by any entities controlled by the person.

(3) A person who has a substantial investment in a body corporate pursuant to paragraph (1)(b) increases that substantial investment when the person or any entity controlled by the person

(a) acquires beneficial ownership of additional shares of the body corporate in such number as to increase the percentage of the shareholders' equity of the body corporate represented by the aggregate of the shares of the body corporate beneficially owned by the person and by any entities controlled by the person; or

(b) acquires control of any entity that beneficially owns any shares of the body corporate in such number as to increase the percentage of the shareholders' equity of the body corporate represented by the aggregate of the shares of the body corporate beneficially owned by the person and by any entities controlled by the person.

(4) For greater certainty,

(a) where a person has a substantial investment in a body corporate pursuant to paragraph (1)(a) and the person, or any entity controlled by the person,

(i) purchases or otherwise acquires beneficial ownership of shares of the body corporate, or

(ii) acquires control of any entity that beneficially owns shares of the body corporate,

in such number as to cause the shareholders' equity of the body corporate represented by the aggregate of the shares of the body corporate beneficially owned by the person and by any entities controlled by the person to exceed 25 per cent of the shareholders' equity of the body corporate, or

(b) where a person has a substantial investment in a body corporate pursuant to paragraph (1)(b) and the person or any entity controlled by the person

(i) purchases or otherwise acquires beneficial ownership of voting shares of the body corporate, or

(ii) acquires control of any entity that beneficially owns voting shares of the body corporate,

in such number as to cause the voting rights attached to the aggregate of the voting shares beneficially owned by the person and by any entities controlled by the person to exceed 10 per cent of the voting rights attached to all of the outstanding voting shares of the body corporate,

the acquisition is deemed to cause the person to increase a substantial investment in the body corporate.

(5) A person has a substantial investment in an unincorporated entity where the aggregate of any ownership interests, however designated, into which the entity is divided, beneficially owned by the person and by any entities controlled by the person exceeds 25 per cent of all of the ownership interests into which the entity is divided.

(6) A person who has a substantial investment in an unincorporated entity increases that substantial investment when the person or any entity controlled by the person

(a) acquires beneficial ownership of additional ownership interests in the unincorporated entity in such number as to increase the percentage of ownership interests in the unincorporated entity beneficially owned by the person and by any entities controlled by the person; or

(b) acquires control of any entity that beneficially owns ownership interests in the unincorporated entity in such number as to increase the percentage of ownership interests beneficially owned by the person and by any entities controlled by the person.

11. (1) Subject to subsection (2), for the purposes of this Act, a security of a body corporate or an unincorporated entity

(a) is part of a distribution to the public where, in respect of the security, there has been a filing of a prospectus, statement of material facts, registration statement, securities exchange take-over bid circular or similar document under the laws of Canada, a province or a jurisdiction outside Canada; or

(b) is deemed to be part of a distribution to the public where the security has been issued and a filing referred to in paragraph (a) would be required if the security were being issued currently.

(2) On application by a bank or bank holding company, the Superintendent may determine that a security of the bank or bank holding company is not or was not part of a distribution to the public if the Superintendent is satisfied that the determination would not prejudice any security holder of the bank or bank holding company.

(3) For the purposes of this Act, securities of a bank or bank holding company issued on the conversion of other securities or issued in exchange for other securities are deemed to be securities that are part of a distribution to the public if those other securities were part of a distribution to the public.

1991, c. 46, s. 11; 1997, c. 15, s. 1; 2001, c. 9, s. 42.

11.1 (1) For the purposes of this Act, a WTO Member resident is

(a) a natural person who is ordinarily resident in a country or territory that is a WTO Member, as defined in subsection 2(1) of the World Trade Organization Agreement Implementation Act, other than Canada;

(b) a body corporate, association, partnership or other organization that is incorporated, formed or otherwise organized in a country or territory that is a WTO Member, as defined in subsection 2(1) of the World Trade Organization Agreement Implementation Act, other than Canada, and that is controlled

(i) directly or indirectly, by one or more persons referred to in paragraph (a), or

(ii) by a government of a WTO Member, whether federal, state or local, or an agency of one of those governments;

(c) a trust established by one or more persons referred to in paragraph (a) or (b) or a trust in which one or more of those persons have more than 50 per cent of the beneficial interest; or

(d) a body corporate, association, partnership or other organization that is controlled, directly or indirectly, by a trust referred to in paragraph (c).

(2) For the purposes of subsection (1),

(a) a body corporate is controlled by one or more persons if

(i) securities of the body corporate to which are attached more than 50 per cent of the votes that may be cast to elect directors of the body corporate are beneficially owned by the person or persons, and

(ii) the votes attached to those securities are sufficient to elect a majority of the directors of the body corporate;

(b) an association, partnership or other organization is controlled by one or more persons if

(i) more than 50 per cent of the ownership interests, however designated, into which the association, partnership or other organization is divided are beneficially owned by the person or persons, and

(ii) the person or persons are able to direct the business and affairs of the association, partnership or other organization;

(c) a body corporate, association, partnership or other organization is controlled by one or more persons if the person or persons have, directly or indirectly, control in fact of the body corporate, association, partnership or other organization; and

(d) a body corporate, association, partnership or other organization that controls another body corporate, association, partnership or other organization is deemed to control any body corporate, association, partnership or other organization that is controlled or deemed to be controlled by the other body corporate, association, partnership or other organization.

1993, c. 44, s. 23; 1999, c. 28, s. 3.

12. (1) The Minister may, by order, and subject to such terms and conditions as the Minister considers appropriate, exempt for the purposes of any provision of this Act any entity from being a foreign bank that, but for that order, would be a foreign bank.

(2) The Minister may, by further order, revoke or vary any order made under subsection (1), and any such revocation or variation shall come into force three months after the date the further order is made, unless the Minister and the entity to which the order relates agree that the revocation or variation should come into force at some other time agreed by them.

(3) Before filing an application for an order referred to in subsection (1), an applicant shall publish a notice of intention to make the application in the Canada Gazette.

1991, c. 46, s. 12; 2001, c. 9, s. 42.1.

Application

13. This Act is the charter of and applies to each bank.

1991, c. 46, s. 13; 1999, c. 28, s. 4; 2001, c. 9, s. 43.

14. (1) Subject to this Act,

(a) there shall be set out in Schedule I

(i) the name of every bank named in Schedules I and II as those Schedules read immediately before the day section 184 of the Financial Consumer Agency of Canada Act comes into force that was not a subsidiary of a foreign bank,

(ii) the name of every bank incorporated or formed under this Act that is not a subsidiary of a foreign bank, and

(iii) the place in Canada where the head office of the bank is situated; and

(b) there shall be set out in Schedule II

(i) the name of every bank named in Schedule II as that Schedule read immediately before the day section 184 of the Financial Consumer Agency of Canada Act comes into force that was a subsidiary of a foreign bank,

(ii) the name of every bank incorporated or formed under this Act that is a subsidiary of a foreign bank, and

(iii) the place in Canada where the head office of the bank is situated.

(2) Where

(a) a bank is incorporated,

(b) a body corporate is continued as a bank,

(c) one or more bodies corporate are amalgamated as a bank,

(d) the name of a bank is changed,

(e) the head office of a bank is changed,

(f) a bank becomes, or ceases to be, a subsidiary of a foreign bank, or

(g) a bank is dissolved,

Schedules I and II shall be amended accordingly.

(3) If in any year either Schedule I or II is amended, the Superintendent shall, within sixty days after the end of the year, cause a notice to be published in the Canada Gazette showing Schedule I or II in its complete amended form as at the end of the year.

1991, c. 46, s. 14; 2001, c. 9, s. 43.

14.1 (1) There shall be set out in Schedule III

(a) the name of every authorized foreign bank and, where applicable, any other name under which it is permitted to carry on business in Canada;

(b) the place in Canada where the principal office of the authorized foreign bank is situated; and

(c) whether the authorized foreign bank is subject to the restrictions and requirements referred to in subsection 524(2).

(2) Schedule III shall be amended accordingly where

(a) an order made under subsection 524(1) is revoked;

(b) any of the information referred to in paragraph (1)(a) or (b) changes; or

(c) the restrictions and requirements referred to in subsection 524(2) to which an authorized foreign bank is subject are added or removed.

(3) Where in any year Schedule III is amended, the Superintendent shall, within sixty days after the end of the year, cause a notice to be published in the Canada Gazette showing Schedule III in its complete amended form as at the end of the year.

1999, c. 28, s. 5.

14.2 The Governor in Council may make regulations exempting any class of foreign banks from the application of any provision of this Act.

2001, c. 9, s. 43.1.

PART II
STATUS AND POWERS

15. (1) A bank has the capacity of a natural person and, subject to this Act, the rights, powers and privileges of a natural person.

(2) A bank shall not carry on any business or exercise any power that it is restricted by this Act from carrying on or exercising, or exercise any of its powers in a manner contrary to this Act.

(3) A bank may carry on business throughout Canada.

(4) Subject to this Act, a bank has the capacity to carry on its business, conduct its affairs and exercise its powers in any jurisdiction outside Canada to the extent and in the manner that the laws of that jurisdiction permit.

16. No act of a bank or authorized foreign bank, including any transfer of property to or by a bank or authorized foreign bank, is invalid by reason only that the act or transfer is contrary to

(a) in the case of a bank, the bank's incorporating instrument or this Act; or

(b) in the case of an authorized foreign bank, this Act.

1991, c. 46, s. 16; 1999, c. 28, s. 6.

17. It is not necessary for a bank to pass a by-law in order to confer any particular power on the bank or its directors.

18. The shareholders of a bank are not, as shareholders, liable for any liability, act or default of the bank except as otherwise provided by this Act.

19. No person is affected by or is deemed to have notice or knowledge of the contents of a document concerning a bank or authorized foreign bank by reason only that the document has been filed with the Superintendent or the Minister or is available for inspection at a branch of the bank or authorized foreign bank.

1991, c. 46, s. 19; 1993, c. 34, s. 6(F); 1999, c. 28, s. 7.

20. A bank or a guarantor of an obligation of a bank may not assert against a person dealing with the bank or with any person who has acquired rights from the bank that

(a) the bank's incorporating instrument or any by-laws of the bank have not been complied with,

(b) the persons named as directors of the bank in the most recent return sent to the Superintendent under section 632 are not the directors of the bank,

(c) the place named in the incorporating instrument or the by-laws of the bank is not the head office of the bank,

(d) a person held out by the bank as a director, an officer or a representative of the bank has not been duly appointed or has no authority to exercise the powers and perform the duties that are customary in the business of the bank or usual for such director, officer or representative, or

(e) a document issued by any director, officer or representative of the bank with actual or usual authority to issue the document is not valid or not genuine,

except where the person has or ought to have by virtue of the person's position with or relationship to the bank knowledge to that effect.

1991, c. 46, s. 20; 1999, c. 28, s. 8.

21. (1) Subject to subsection (2), banks shall not carry on business and authorized foreign banks shall not carry on business in Canada after the day that is five years after this section comes into force, except that, if Parliament dissolves on that day or at any time within the three-month period before that day, banks may continue to carry on business, and authorized foreign banks may continue to carry on business in Canada, respectively, until the day that is one hundred and eighty days after the first day of the first session of the next Parliament.

(2) The Governor in Council may, by order, extend by up to six months the time during which banks may continue to carry on business and authorized foreign banks may continue to carry on business in Canada. No more than one order may be made under this subsection.

1991, c. 46, s. 21; 1997, c. 15, s. 2; 1999, c. 28, s. 9; 2001, c. 9, s. 44.

PART III
INCORPORATION AND CONTINUANCE

Formalities of Incorporation

22. On the application of one or more persons made in accordance with this Act, the Minister may, subject to this Part, issue letters patent incorporating a bank.

23. Letters patent incorporating a bank may not be issued if the application therefor is made by or on behalf of

(a) Her Majesty in right of Canada or in right of a province, an agency of Her Majesty in either of those rights, or an entity controlled by Her Majesty in either of those rights;

(b) the government of a foreign country or any political subdivision thereof;

(c) an agency of the government of a foreign country or any political subdivision thereof; or

(d) an entity that is controlled by the government of a foreign country or any political subdivision thereof, other than an entity that is a foreign bank, a foreign institution or a subsidiary of a foreign bank or foreign institution.

1991, c. 46, s. 23; 2001, c. 9, s. 45.

24. If a proposed bank would be a subsidiary of a foreign bank, within the meaning of paragraphs (a) to (f) of the definition "foreign bank" in section 2, and the application for letters patent to incorporate the bank is made by a non-WTO Member foreign bank, letters patent to incorporate the bank may not be issued unless the Minister is satisfied that treatment as favourable for banks to which this Act applies exists or will be provided in the jurisdiction in which the foreign bank principally carries on business, either directly or through a subsidiary.

1991, c. 46, s. 24; 1999, c. 28, s. 10; 2001, c. 9, s. 46.

25. (1) An application for letters patent to incorporate a bank setting out the names of the first directors of the bank shall be filed with the Superintendent, together with such other information, material and evidence as the Superintendent may require.

(2) Before filing an application referred to in subsection (1), the applicant or one of the applicants, as the case may be, shall, at least once a week for a period of four consecutive weeks, publish, in a form satisfactory to the Superintendent, a notice of intention to make the application in the Canada Gazette and in a newspaper in general circulation at or near the place where the head office of the bank is to be situated.

26. (1) Any person who objects to the proposed incorporation of a bank may, within thirty days after the date of the last publication under subsection 25(2) in respect of the proposed bank, submit the objection in writing to the Superintendent.

(2) On receipt of an objection under subsection (1), the Superintendent shall inform the Minister of the objection.

(3) On receipt of an objection under subsection (1), and if the application for the issuance of the letters patent to which the objection relates has been received, the Superintendent shall, if satisfied that it is necessary and in the public interest to do so, hold or cause to be held a public inquiry into the objection as it relates to the application and, on completion of the inquiry, the Superintendent shall report the findings of the inquiry to the Minister.

(4) Within thirty days after receiving a report under subsection (3), the Minister shall make the report available to the public.

(5) Subject to the approval of the Governor in Council, the Superintendent may make rules governing the proceedings at public inquiries held under this section.

27. Before issuing letters patent to incorporate a bank, the Minister shall take into account all matters that the Minister considers relevant to the application, including

(a) the nature and sufficiency of the financial resources of the applicant or applicants as a source of continuing financial support for the bank;

(b) the soundness and feasibility of the plans of the applicant or applicants for the future conduct and development of the business of the bank;

(c) the business record and experience of the applicant or applicants;

(d) the character and integrity of the applicant or applicants or, if the applicant or any of the applicants is a body corporate, its reputation for being operated in a manner that is consistent with the standards of good character and integrity;

(e) whether the bank will be operated responsibly by persons with the competence and experience suitable for involvement in the operation of a financial institution;

(f) the impact of any integration of the businesses and operations of the applicant or applicants with those of the bank on the conduct of those businesses and operations;

(g) the opinion of the Superintendent regarding the extent to which the proposed corporate structure of the applicant or applicants and their affiliates may affect the supervision and regulation of the bank, having regard to

(i) the nature and extent of the proposed financial services activities to be carried out by the bank and its affiliates, and

(ii) the nature and degree of supervision and regulation applying to the proposed financial services activities to be carried out by the affiliates of the bank; and

(h) the best interests of the financial system in Canada.

1991, c. 46, s. 27; 2001, c. 9, s. 47.

28. (1) There shall be set out in the letters patent incorporating a bank

(a) the name of the bank;

(b) the place in Canada where the head office of the bank is to be situated; and

(c) the date that the bank came, or is to come, into existence.

(2) The Minister may set out in the letters patent incorporating a bank any provision not contrary to this Act that the Minister considers advisable in order to take into account the particular circumstances of the proposed bank.

(3) The Minister may impose such terms and conditions in respect of the issuance of letters patent incorporating a bank as the Minister considers necessary or appropriate.

29. (1) If the Minister issues letters patent, under section 22, incorporating a bank on the application of a company to which the Trust and Loan Companies Act or the Insurance Companies Act applies and the paid-in capital of the bank immediately following its incorporation will be not less than five million dollars or any greater amount that the Minister may specify under subsection 46(1), there may, on the request of the company and with the approval of the Minister, be included in the letters patent a provision deeming shares of the bank to be issued, on a share for share basis, to all shareholders of the company in exchange for all the issued and outstanding shares of the company.

(2) Shares of a bank deemed to be issued pursuant to subsection (1) are subject to the same designation, rights, privileges and restrictions or conditions and, subject to any agreement to the contrary, to the same charges, encumbrances and other restrictions as the shares of the company for which they are exchanged and the shares of the company, on the issuance of the letters patent, become the property of the bank free and clear of any charge, encumbrance or other restriction.

(3) An exchange of shares of a company referred to in subsection (1) pursuant to a provision included in the letters patent incorporating a bank does not deprive a person who was a holder of shares of the company immediately prior to the exchange of any right or privilege with respect to the shares or relieve the person of any liability in respect thereof, but any such right or privilege shall be exercised in accordance with this Act.

(4) Notwithstanding subsection (3), no share of a bank that is deemed to be issued pursuant to a provision included in the letters patent incorporating a bank may subsequently be transferred or voted contrary to this Act, but any shareholder of a bank who acquired shares of the bank by means of an exchange of shares of a company referred to in subsection (1) pursuant to that provision may, for a period of ten years from the date of issuance of the letters patent, exercise the voting rights attached to the shares without regard to any provisions of this Act, other than subsection (7), that would otherwise prohibit the shareholder from voting the shares.

(5) No provision described in subsection (1) may be included in letters patent issued pursuant to section 22 unless the application therefor is accompanied by evidence that the request for such a provision was approved by a vote of at least two thirds of those shareholders of the applicant company entitled to vote thereon, present or represented by proxy and voting at a shareholders' meeting called to consider the application.

(6) Where, pursuant to a provision included in the letters patent incorporating a bank, a share exchange is deemed to have taken place, the bank shall, within ninety days after the issuance of the letters patent, make provision for the issue of share certificates representing shares of the bank and for the exchange of those certificates for share certificates representing the shares of the company that were outstanding on the day the letters patent were issued.

(7) Notwithstanding any other provision of this Act, where letters patent incorporating a bank include a provision described in subsection (1) and, on the date of issuance of the letters patent, another bank and any entities controlled by that other bank held, in the aggregate, more than ten per cent of any class of shares of the applicant company, that other bank may have a significant interest in any class of shares of the bank deemed to be issued pursuant to subsection (1) in exchange for the shares of the company for a period of two years from the date of issuance of the letters patent.

(8) On application of a bank authorized by subsection (7) to hold, directly or through a subsidiary, shares of another bank, the Minister may, by order, extend the period referred to in subsection (7), but the aggregate of such extensions from time to time granted to a bank and of the period referred to in subsection (7) may not, in any case, exceed ten years.

(9) [Repealed, 2001, c. 9, s. 48]

1991, c. 46, ss. 29, 573, c. 47, s. 756; 2001, c. 9, s. 48.

30. The Superintendent shall cause to be published in the Canada Gazette a notice of the issuance of letters patent incorporating a bank.

31. The first directors of a bank are the directors named in the application for letters patent to incorporate the bank.

32. A bank comes into existence on the date provided therefor in its letters patent.

Continuance

33. (1) A body corporate incorporated under the Canada Business Corporations Act or any other Act of Parliament, including a bank holding company, may apply to the Minister for letters patent continuing the body corporate as a bank under this Act.

(2) A body corporate incorporated otherwise than by or under an Act of Parliament may, if so authorized by the laws of the jurisdiction where it is incorporated, apply to the Minister for letters patent continuing the body corporate as a bank under this Act.

1991, c. 46, s. 33; 1994, c. 24, s. 34(F); 2001, c. 9, s. 49.

34. (1) Where a body corporate applies for letters patent under subsection 33(1) or (2), sections 23 to 27 apply in respect of the application, with such modifications as the circumstances require.

(2) Where a body corporate applies for letters patent under subsection 33(1) or (2), the application must be duly authorized by a special resolution.

(3) A copy of the special resolution referred to in subsection (2) shall be filed with the application.

35. (1) On the application of a body corporate under subsection 33(1) or (2), the Minister may, subject to this Part, issue letters patent continuing the body corporate as a bank under this Act.

(2) Where letters patent are issued to a body corporate under subsection (1), section 28 applies in respect of the issue of letters patent, with such modifications as the circumstances require.

36. On the day set out in the letters patent continuing a body corporate as a bank under subsection 35(1),

(a) the body corporate becomes a bank as if it had been incorporated under this Act; and

(b) the letters patent are deemed to be the incorporating instrument of the continued bank.

37. (1) Where a body corporate is continued as a bank under this Part, the Superintendent shall forthwith send a copy of the letters patent to the appropriate official or public body in the jurisdiction in which the body corporate was authorized to apply to be continued under this Act.

(2) The Superintendent shall cause to be published in the Canada Gazette a notice of the issuance of letters patent continuing a body corporate as a bank under this Act.

38. Where a body corporate is continued as a bank under this Part,

(a) the property of the body corporate continues to be the property of the bank;

(b) the bank continues to be liable for the obligations of the body corporate;

(c) an existing cause of action or claim by or against the body corporate or any liability of the body corporate to prosecution is unaffected;

(d) a civil, criminal or administrative action or proceeding pending by or against the body corporate may continue to be prosecuted by or against the bank;

(e) a conviction against, or any ruling, order or judgment in favour of or against the body corporate may be enforced by or against the bank;

(f) a person who, on the day the body corporate becomes a bank, was the holder of a security issued by the body corporate is not deprived of any right or privilege available to the person at that time in respect of the security or relieved of any liability in respect thereof, but any such right or privilege may be exercised only in accordance with this Act; and

(g) the by-laws of the body corporate, except those that are in conflict with this Act, continue as the by-laws of the bank.

39. (1) Notwithstanding any other provision of this Act or the regulations, the Minister may, on the recommendation of the Superintendent, by order, grant to a bank in respect of which letters patent were issued under subsection 35(1) permission to

(a) engage in a business activity specified in the order that a bank is not otherwise permitted by this Act to engage in and that the body corporate continued as the bank was engaging in at the time the application for the letters patent was made;

(b) continue to have issued and outstanding debt obligations the issue of which is not authorized by this Act if the debt obligations were outstanding at the time the application for the letters patent was made;

(c) [Repealed, 1994, c. 47, s. 14]

(d) hold assets that a bank is not otherwise permitted by this Act to hold if the assets were held by the body corporate continued as the bank at the time the application for the letters patent was made;

(e) acquire and hold assets that a bank is not otherwise permitted by this Act to acquire or hold if the body corporate continued as the bank was obliged, at the time the application for the letters patent was made, to acquire those assets; and

(f) maintain outside Canada any records or registers required by this Act to be maintained in Canada and maintain and process outside Canada information and data relating to the preparation and maintenance of such records or registers.

(2) The permission granted under subsection (1) shall be expressed to be granted for a period specified in the order not exceeding

(a) with respect to any activity described in paragraph (1)(a), thirty days after the date of issue of the letters patent or, where the activity is conducted pursuant to an agreement existing on the date of issue of the letters patent, the expiration of the agreement;

(b) with respect to any matter described in paragraph (1)(b), ten years; and

(c) with respect to any matter described in any of paragraphs (1)(d) to (f), two years.

(3) Subject to subsection (4), the Minister may, on the recommendation of the Superintendent, by order, renew a permission granted by order under subsection (1) with respect to any matter described in paragraphs (1)(b) to (e) for such further period or periods as the Minister considers necessary.

(4) The Minister shall not grant to a bank any permission

(a) with respect to matters described in paragraph (1)(b), that purports to be effective more than ten years after the date of the approval for the bank to commence and carry on business, unless the Minister is satisfied on the basis of evidence on oath provided by an officer of the bank that the bank will not be able at law to redeem at the end of the ten years the outstanding debt obligations to which the permission relates; and

(b) with respect to matters described in paragraphs (1)(d) and (e), that purports to be effective more than ten years after the date of the approval for the bank to commence and carry on business.

1991, c. 46, s. 39; 1994, c. 47, s. 14; 1997, c. 15, s. 3.

Discontinuance

39.1 If section 39.2 or 402.1 applies in respect of a bank, on the day specified in the letters patent continuing the bank as a company under subsection 33(1) or 234(1) of the Trust and Loan Companies Act, this Act ceases to apply to the bank and that Act applies to the company so continued under that Act.

1991, c. 46, s. 574; 1997, c. 15, s. 4; 1999, c. 28, s. 11; 2001, c. 9, s. 50.

39.2 A bank may apply for letters patent continuing the bank as a company under subsection 33(1) of the Trust and Loan Companies Act or amalgamating and continuing the bank as a company under section 228 and subsection 234(1) of that Act.

1997, c. 15, s. 4; 2001, c. 9, s. 50.

Corporate Name

40. A bank may not be incorporated under this Act with a name

(a) that is prohibited by an Act of Parliament;

(b) that is, in the opinion of the Superintendent, deceptively misdescriptive;

(c) that is the same as or, in the opinion of the Superintendent, substantially the same as or confusingly similar to, any existing

(i) trade-mark or trade name, or

(ii) corporate name of a body corporate,

except where the trade-mark or trade name is being changed or the body corporate is being dissolved or is changing its corporate name and consent to the use of the trade-mark, trade name or corporate name is signified to the Superintendent in such manner as the Superintendent may require;

(d) that is the same as or, in the opinion of the Superintendent, substantially the same as or confusingly similar to, the known name under or by which any entity carries on business or is identified; or

(e) that is reserved under section 43 for another bank or an authorized foreign bank or a proposed bank or a proposed authorized foreign bank or under section 697 for a bank holding company or a proposed bank holding company.

1991, c. 46, s. 40; 1996, c. 6, s. 1; 1997, c. 15, s. 5; 1999, c. 28, s. 12; 2001, c. 9, s. 51.

41. Despite section 40, a bank that is affiliated with another entity may, with the consent of that entity and the approval of the Superintendent, be incorporated with, or change its name to, substantially the same name as that of the affiliated entity.

1991, c. 46, s. 41; 1996, c. 6, s. 1; 2001, c. 9, s. 52.

42. (1) The name of a bank may be set out in its letters patent in an English form, a French form, an English form and a French form or in a combined English and French form, and the bank may use and be legally designated by any such form.

(2) A bank may identify itself outside Canada by its name in any language and the bank may use and be legally designated by any such form of its name outside Canada.

(3) Subject to subsection (4) and section 255, a bank may carry on business under or identify itself by a name other than its corporate name.

(4) Where a bank is carrying on business under or identifying itself by a name other than its corporate name, the Superintendent may, by order, direct the bank not to use that other name if the Superintendent is of the opinion that that other name is a name referred to in any of paragraphs 40(a) to (e).

1991, c. 46, s. 42; 1996, c. 6, s. 2.

43. The Superintendent may, on request, reserve for ninety days a name for a proposed bank or proposed authorized foreign bank or for a bank or authorized foreign bank that intends to change its name.

1991, c. 46, s. 43; 1999, c. 28, s. 13.

44. (1) If through inadvertence or otherwise a bank

(a) comes into existence or is continued with a name, or

(b) on an application to change its name, is granted a name

that is prohibited by section 40, the Superintendent may, by order, direct the bank to change its name and the bank shall comply with that direction.

(2) If a bank has been directed under subsection (1) to change its name and has not, within sixty days after the service of the direction, changed its name to a name that is not prohibited by this Act, the Superintendent may revoke the name of the bank and assign to it a name and, until changed in accordance with section 215 or 217, the name of the bank is thereafter the name so assigned.

1991, c. 46, s. 44; 1996, c. 6, s. 3; 2001, c. 9, s. 53.

PART IV
ORGANIZATION AND COMMENCEMENT

Organization Meetings

45. (1) After letters patent incorporating a bank are issued, a meeting of the directors of the bank shall be held at which the directors may, subject to this Part,

(a) make by-laws;

(b) adopt forms of share certificates and corporate records;

(c) authorize the issue of shares of the bank;

(d) appoint officers;

(e) appoint, pursuant to subsection 314(1), an auditor or auditors to hold office until the first meeting of shareholders;

(f) make banking arrangements; and

(g) deal with any other matters necessary to organize the bank.

(2) An incorporator or a director named in the application for letters patent may call the meeting referred to in subsection (1) by giving, subject to subsection 181(2), no fewer than five days notice of the purpose, time and place of the meeting to each director of the bank.

46. (1) If at least five million dollars, or any greater amount that the Minister may specify, has been received by a bank in respect of which letters patent were issued under section 22 from the issue of its shares, the directors of the bank shall without delay call a meeting of the shareholders of the bank.

(2) The shareholders of a bank shall, by resolution at the meeting of shareholders called pursuant to subsection (1),

(a) approve, amend or reject any by-law made by the directors of the bank;

(b) subject to section 168, elect directors to hold office for a term expiring not later than the close of the third annual meeting of shareholders following the election; and

(c) appoint an auditor or auditors to hold office until the close of the first annual meeting of shareholders.

1991, c. 46, s. 46; 2001, c. 9, s. 54.

47. A director named in the application for letters patent to incorporate a bank holds office until the election of directors at the meeting of shareholders called pursuant to subsection 46(1).

Commencement and Carrying on of Business

48. (1) A bank shall not carry on any business until the Superintendent has, by order, approved the commencement and carrying on of business by the bank.

(2) If, on the day this subsection comes into force, an order approving the commencement and carrying on of business by a bank named in Schedule I or II as those Schedules read immediately before that day, has not been made, such an order is deemed to have been made in respect of the bank on that day.

(3) Except in respect of a body corporate that is continued as a bank under this Act for the purposes of forthwith amalgamating with one or more bodies corporate and continuing as a bank under this Act, where letters patent continuing a body corporate as a bank under this Act are issued, the Superintendent shall make an order approving the commencement and carrying on of business by the bank.

(4) Where letters patent amalgamating and continuing two or more bodies corporate as a bank under this Act are issued, the Superintendent shall make an order approving the commencement and carrying on of business by the bank.

(5) For greater certainty, subsection 49(2) and section 52 do not apply in respect of a bank referred to in subsections (3) and (4).

1991, c. 46, s. 48; 2001, c. 9, s. 55.

49. (1) On application by a bank, the Superintendent may make an order approving the commencement and carrying on of business by the bank.

(2) An application by a bank for an order under subsection (1) must contain a statement setting out the amounts paid or to be paid by the bank in connection with its incorporation and organization.

50. Until an order approving the commencement and carrying on of business is made for a bank, the bank shall not make any payment on account of incorporation or organization expenses out of moneys received from the issue of the shares of the bank and interest thereon, except reasonable sums

(a) for the remuneration of not more than two officers;

(b) for the payment of costs related to the issue of shares of the bank; and

(c) for the payment of clerical assistance, legal services, accounting services, office accommodation at one location, office expenses, advertising, stationery, postage and travel expenses.

51. Where a bank comes into existence but no order approving the commencement and carrying on of business is made for the bank, the bank may only

(a) deposit, in Canada, paid-in capital of the bank in another deposit-taking Canadian financial institution; or

(b) invest paid-in capital of the bank in unencumbered securities of the Government of Canada or the government of any province.

52. (1) The Superintendent shall not make an order approving the commencement and carrying on of business by a bank until it has been shown to the satisfaction of the Superintendent that

(a) the meeting of shareholders of the bank referred to in subsection 46(1) has been duly held;

(b) the bank has paid-in capital of at least five million dollars or any greater amount that is specified by the Minister under subsection 46(1);

(c) the expenses of incorporation and organization to be borne by the bank are reasonable; and

(d) all other relevant requirements of this Act have been complied with.

(2) The Superintendent shall not make an order approving the commencement and carrying on of business by a bank more than one year after the day on which the bank comes into existence.

1991, c. 46, s. 52; 2001, c. 9, s. 56.

53. An order approving the commencement and carrying on of business by a bank may contain such conditions or limitations that are consistent with this Act and relate to the business of the bank as the Superintendent deems expedient and necessary.

54. (1) In respect of the order approving the commencement and carrying on of business by a bank, the Superintendent may at any time, by further order,

(a) make the order subject to such conditions or limitations that are consistent with this Act and that relate to the business of the bank as the Superintendent deems expedient and necessary, or

(b) amend or revoke any authorization contained in the order or any condition or limitation to which the order is subject,

but before making any such further order the Superintendent shall provide the bank with an opportunity to make representations regarding that further order.

(2) to (6) [Repealed, 1996, c. 6, s. 4]

1991, c. 46, s. 54; 1996, c. 6, s. 4.

54.1 (1) The Minister may, by order, require a bank not to have average total assets in any three month period ending on the last day of a month subsequent to the month specified in the order exceeding the bank's average total assets in the three month period ending on the last day of the month immediately before the month specified in the order if the Minister is of the opinion that it is in the best interests of the financial system in Canada to do so, after having considered the Superintendent's opinion on

(a) the nature and extent of the financial services activities carried out by entities affiliated with the bank; and

(b) the impact that the nature and degree of supervision and regulation of those financial services activities have on the supervision and regulation of the bank.

(2) If the Minister is of the opinion that the circumstances giving rise to the order have ceased to exist or have changed substantially, the Minister may, by further order, revoke the order.

(3) For the purposes of subsection (1), the average total assets of a bank in a three month period shall be computed by adding the total assets of the bank as calculated for the month end of each of the three months in the period and by dividing the sum by three.

(4) For the purposes of subsections (1) and (3), "total assets", in respect of a bank, has the meaning given that expression by the regulations.

2001, c. 9, s. 57.

55. (1) On the recommendation of the Superintendent, the Minister may, at the same time that an order is made approving the commencement and carrying on of business by a bank that is the subsidiary of a foreign bank, by further order, grant the subsidiary permission to

(a) hold assets that banks are not otherwise permitted by this Act to hold if those assets consist of shares of a body corporate incorporated by or under an Act of Parliament or of the legislature of a province that, at the time application for letters patent incorporating the subsidiary was made, were held by the eligible foreign institution, as defined in subsection 370(1), that is the holding body corporate of the subsidiary or any affiliate of that eligible foreign institution; and

(b) hold assets that banks are not otherwise permitted by this Act to hold if, at the time application for letters patent incorporating the subsidiary was made, the assets were held by an affiliate of the eligible foreign institution, as defined in subsection 370(1), that is the holding body corporate of the subsidiary.

Despite any other provision of this Act or the regulations, the subsidiary may act in accordance with that permission.

(2) Permission granted to a bank by order of the Minister under subsection (1) is only for the period specified in the order. That period may not be more than two years, except that the Minister may extend the period by further order on application by the bank. The total of the period and any extensions of it may not, in any case, exceed ten years.

1991, c. 46, s. 55; 1997, c. 15, s. 6; 1999, c. 31, s. 9; 2001, c. 9, s. 58.

56. (1) On the making of an order approving the commencement and carrying on of business by a bank, the bank shall publish a notice of the making of the order in a newspaper in general circulation at or near the place where the head office of the bank is located.

(2) The Superintendent shall cause to be published in the Canada Gazette a notice of the making of an order approving the commencement and carrying on of business by a bank.

(3) For greater certainty, this section does not apply to a bank referred to in subsection 48(2).

57. Except for the sole purpose of winding up the bank's affairs, a bank ceases to exist one year after the day on which its incorporating instrument became effective if it does not obtain an order approving the commencement and carrying on of business within that year.

58. (1) Where an order approving the commencement and carrying on of business is not made for a bank, no part of the moneys of the bank shall be used for the payment of incorporation and organization expenses, other than remuneration and costs referred to in section 50, unless the payment has been approved by a special resolution.

(2) If the amount allowed by a special resolution for the payment of any incorporation and organization expenses referred to in subsection (1) is considered insufficient by the directors or if no special resolution for the payment of such expenses is passed, the directors may apply to any court having jurisdiction in the place where the head office of the bank is situated to settle and determine the amounts to be paid out of any moneys of the bank before distribution of the balance to the shareholders or, where there are no shareholders, to the incorporators.

(3) The directors shall, at least twenty-one days prior to the date fixed for the hearing of the application referred to in subsection (2), send to the shareholders or incorporators, as the case may be, a notice of the application, which notice shall contain a statement of the amounts that are proposed to be settled and determined by the court.

(4) In order that the amounts paid and payable under this section may be equitably borne by the shareholders or incorporators, as the case may be, the directors shall, after the amounts of the payments have been approved by special resolution or settled and determined by a court, fix the proportionate part thereof chargeable to each shareholder or incorporator as the ratio of the amount paid in by the shareholder or incorporator to the aggregate of all the amounts paid in by the shareholders or incorporators.

(5) After the amounts referred to in this section have been paid, the directors shall pay, with any interest earned thereon, to the shareholders or incorporators, the respective balances of the moneys paid in by them, less the amount chargeable to each shareholder or incorporator under subsection (4).

PART V
CAPITAL STRUCTURE

Share Capital

59. (1) Subject to this Act and the by-laws of the bank, shares of a bank may be issued at such times and to such persons and for such consideration as the directors of the bank may determine.

(2) Shares of a bank shall be in registered form and shall be without nominal or par value.

(3) Shares with nominal or par value of a bank that was in existence immediately prior to the day this Part comes into force are deemed to be shares without nominal or par value.

(4) Where a body corporate is continued as a bank under this Act, shares with nominal or par value issued by the body corporate before it was so continued are deemed to be shares without nominal or par value.

(5) If a right, other than a voting right, of a holder of a share with nominal or par value of a bank referred to in subsection (3) or a body corporate continued as a bank under this Act was stated or expressed in terms of the nominal or par value of the share immediately before the coming into force of this subsection or the continuance under this Act, as the case may be, that right is deemed, after the coming into force of this Part or the continuance, as the case may be, to be the same right stated or expressed without reference to the nominal or par value of the share.

1991, c. 46, s. 59; 2001, c. 9, s. 59.

60. (1) A bank shall have one class of shares, to be designated as "common shares", which are non-redeemable and in which the rights of the holders thereof are equal in all respects, and those rights include

(a) the right to vote at all meetings of shareholders except where only holders of a specified class of shares are entitled to vote;

(b) the right to receive dividends declared on those shares; and

(c) the right to receive the remaining property of the bank on dissolution.

(2) No bank shall designate more than one class of its shares as "common shares" or any variation of that term.

(3) A bank that is not in compliance with subsection (2) on the coming into force of this Part shall, within twelve months after the coming into force of this Part, redesignate its shares to comply with that subsection.

(4) A body corporate continued as a bank under this Act that is not in compliance with subsection (2) on the date letters patent continuing it as a bank are issued shall, within twelve months after that date, redesignate its shares to comply with that subsection.

61. (1) The by-laws of a bank may provide for more than one class of shares and, if they so provide, shall set out

(a) the rights, privileges, restrictions and conditions attaching to the shares of each class; and

(b) the maximum number, if any, of shares of any class that the bank is authorized to issue.

(2) Where a by-law referred to in subsection (1) is made, the directors of the bank shall submit the by-law to the shareholders at the next meeting of shareholders.

(3) A by-law referred to in subsection (1) is not effective until it is confirmed or confirmed with amendments by special resolution of the shareholders at the meeting referred to in subsection (2).

1991, c. 46, s. 61; 2001, c. 9, s. 60.

62. (1) The by-laws of a bank made pursuant to section 61 may authorize the issue of any class of shares in one or more series and may authorize the directors of the bank to fix the maximum number, if any, of shares in each series and to determine the designation, rights, privileges, restrictions and conditions attaching to the shares of each series, subject to the limitations set out in the by-laws.

(2) If any cumulative dividend or amounts payable on return of capital in respect of a series of shares are not paid in full, the shares of all series of the same class participate rateably in respect of accumulated dividends and return of capital.

(3) Where voting rights are attached to any series of a class of shares, the shares of every other series of that class shall have the same voting rights.

(4) No rights, privileges, restrictions or conditions attached to a series of shares authorized under this section confer on the series a priority in respect of dividends or return of capital over any other series of shares of the same class that are then outstanding.

(5) Before the issue of shares of a series of shares authorized under this section, the directors shall send to the Superintendent a copy of the by-law authorizing the directors to fix the rights, privileges, restrictions and conditions of those shares and shall provide the Superintendent with particulars of the proposed series of shares.

63. Where voting rights are attached to a share of a bank, the voting rights may confer only one vote in respect of that share.

64. Shares issued by a bank after the coming into force of this section are non-assessable and the shareholders are not liable to the bank or to its creditors in respect thereof.

65. (1) No share of any class of shares of a bank shall be issued until it is fully paid for in money or, with the approval of the Superintendent, in property.

(2) When issuing shares, a bank may provide that any aspect of the shares relating to money or involving the payment of or the liability to pay money be in a currency other than the currency of Canada.

66. (1) A bank shall maintain a separate stated capital account for each class and series of shares it issues.

(2) A bank shall record in the appropriate stated capital account the full amount of any consideration it receives for any shares it issues.

(3) Notwithstanding subsection (2), a bank may record in the appropriate stated capital account part of the amount of any consideration it receives for shares it issues

(a) in exchange for

(i) property of a person who immediately before the exchange did not deal with the bank at arm's length within the meaning of the Income Tax Act, or

(ii) shares of a body corporate that immediately before the exchange, or because of the exchange, did not deal with the bank at arm's length within the meaning of the Income Tax Act; or

(b) under an agreement referred to in subsection 224(1) to shareholders of an amalgamating body corporate who receive the shares in addition to or instead of securities of the amalgamated bank.

(4) On the issuance of a share, a bank shall not add to the stated capital account in respect of the share an amount greater than the amount of the consideration it receives for the share.

(5) Where a bank that has issued any outstanding shares of more than one class or series proposes to add to a stated capital account that it maintains in respect of a class or series of shares an amount that was not received by the bank as consideration for the issue of shares, the addition must be approved by special resolution unless all the issued and outstanding shares are of not more than two classes of convertible shares referred to in subsection 77(4).

1991, c. 46, s. 66; 1997, c. 15, s. 7.

67. (1) Where a body corporate is continued as a bank under this Act, the bank shall record in the stated capital account maintained for each class and series of shares then outstanding an amount that is equal to the aggregate of

(a) the aggregate amount paid up on the shares of each class and series of shares immediately before the body corporate was so continued, and

(b) the amount of the contributed surplus of the bank that is attributable to those shares.

(2) The amount of any contributed surplus recorded in the stated capital account pursuant to paragraph (1)(b) shall be deducted from the contributed surplus account of the bank.

(3) Any amount unpaid in respect of a share issued by a body corporate before it was continued as a bank under this Act and paid after it was so continued shall be recorded in the stated capital account maintained by the bank for the shares of that class or series.

68. (1) Where the by-laws of a bank so provide, no shares of any class shall be issued unless the shares have first been offered to the shareholders holding shares of that class, and those shareholders have a pre-emptive right to acquire the offered shares in proportion to their holdings of the shares of that class, at such price and on such terms as those shares are to be offered to others.

(2) Notwithstanding the existence of a pre-emptive right, a shareholder of a bank has no pre-emptive right in respect of shares of a class to be issued

(a) for a consideration other than money;

(b) as a share dividend; or

(c) pursuant to the exercise of conversion privileges, options or rights previously granted by the bank.

(3) Notwithstanding the existence of a pre-emptive right, a shareholder of a bank has no pre-emptive right in respect of shares to be issued

(a) where the issue of shares to the shareholder is prohibited by this Act; or

(b) where, to the knowledge of the directors of the bank, the offer of shares to a shareholder whose recorded address is in a country other than Canada ought not to be made unless the appropriate authority in that country is provided with information in addition to that submitted to the shareholders at the last annual meeting.

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

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

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

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

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

70. Except as provided in sections 71 to 74, or unless permitted by the regulations, a bank shall not

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

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

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

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

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

(2) A bank shall not make any payment to purchase or redeem any shares issued by it if there are reasonable grounds for believing that the bank is, or the payment would cause the bank to be, in contravention of any regulation referred to in subsection 485(1) or (2) or any direction made pursuant to subsection 485(3).

(3) A bank may accept from any shareholder a share of the bank surrendered to it as a gift, but may not extinguish or reduce a liability in respect of an amount unpaid on any such share except in accordance with section 75.

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

(2) A bank may, and may permit its subsidiaries to, by way of a security interest

(a) hold shares of the bank or of any body corporate that controls the bank, or

(b) hold any ownership interests of any entity that controls the bank,

where the security interest is nominal or immaterial when measured by criteria established by the bank that have been approved in writing by the Superintendent.

(3) Nothing in subsection (2) precludes a bank that was in existence immediately prior to the day this Part comes into force, or any of its subsidiaries, from holding any security interest held immediately prior to the coming into force of this Part.

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

(2) Where a bank or any of its subsidiaries, through the realization of security, acquires any shares of the bank or of any body corporate that controls the bank or any ownership interests in an unincorporated entity that controls the bank, the bank shall, or shall cause its subsidiaries to, as the case may be, within six months after the day of the realization, sell or otherwise dispose of the shares or ownership interests.

74. Subject to the regulations, a bank that was in existence immediately prior to the day this Part comes into force shall cause any subsidiary of the bank that holds shares of the bank, or of any body corporate that controls the bank, or any ownership interests of any unincorporated entity that controls the bank to sell or otherwise dispose of those shares or ownership interests within six months after the day this section comes into force.

75. (1) The stated capital of a bank may be reduced by special resolution.

(2) A bank shall not reduce its stated capital by special resolution if there are reasonable grounds for believing that the bank is, or the reduction would cause the bank to be, in contravention of any regulation referred to in subsection 485(1) or (2) or any direction made pursuant to subsection 485(3).

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

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

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

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

(a) the number of the bank's shares issued and outstanding,

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

(c) the bank's assets and liabilities, and

(d) the reason why the bank seeks the reduction of capital

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

76. (1) Where any money or property was paid or distributed to a shareholder or other person as a consequence of a reduction of capital made contrary to section 75, a creditor of the bank may apply to a court for an order compelling the shareholder or other person to pay the money or deliver the property to the bank.

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

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

(4) This section does not affect any liability that arises under section 207.

77. (1) On a purchase, redemption or other acquisition by a bank of shares or fractions thereof issued by it, other than shares acquired pursuant to section 72 or acquired through the realization of security and sold pursuant to subsection 73(2), the bank shall deduct from the stated capital account maintained for the class or series of shares so purchased, redeemed or otherwise acquired an amount equal to the result obtained by multiplying the stated capital in respect of the shares of that class or series by the number of shares of that class or series so purchased, redeemed or otherwise acquired and dividing by the number of shares of that class or series outstanding immediately before the purchase, redemption or other acquisition.

(2) A bank shall adjust its stated capital account or accounts in accordance with any special resolution referred to in section 75.

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

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

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

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

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

78. On a conversion of any debt obligation of a bank into shares of a class or series of shares, the bank shall

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

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

79. (1) The directors of a bank may declare and a bank may pay a dividend by issuing fully paid shares of the bank or options or rights to acquire fully paid shares of the bank and, subject to subsections (4) and (5), the directors of a bank may declare and a bank may pay a dividend in money or property, and where a dividend is to be paid in money, the dividend may be paid in a currency other than the currency of Canada.

(2) The directors of a bank shall notify the Superintendent of the declaration of a dividend at least ten days prior to the day fixed for its payment.

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

(4) The directors of a bank shall not declare and a bank shall not pay a dividend if there are reasonable grounds for believing that the bank is, or the payment would cause the bank to be, in contravention of any regulation referred to in subsection 485(1) or (2) or any direction made pursuant to subsection 485(3).

(5) The directors of a bank shall not declare and a bank shall not pay a dividend in any financial year without the approval of the Superintendent if, on the day the dividend is declared, the total of all dividends declared by the bank in that year would exceed the aggregate of the bank's net income up to that day in that year and of its retained net income for the preceding two financial years.

1991, c. 46, s. 79; 2001, c. 9, s. 61.

Subordinated Indebtedness

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

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

(3) Subordinated indebtedness issued by a bank is deemed not to be a deposit.

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

Security Certificates and Transfers

81. In this section and sections 82 to 135,

"adverse claim" includes a claim that a transfer was or would be wrongful or that a particular adverse person is the owner of or has an interest in a security;

"bona fide purchaser" means a purchaser for value in good faith and without notice of any adverse claim who takes delivery of a security in bearer form or order form or of a security in registered form issued to the purchaser or endorsed to the purchaser or endorsed in blank;

"clearing agency" means a person designated as a recognized clearing agency by the Superintendent;

"delivery" means voluntary transfer of possession;

"fungible", in respect of securities, means securities of which any unit is, by nature or usage of trade, the equivalent of any other like unit;

"genuine" means free of forgery or counterfeit;

"good faith" means honesty in fact in the conduct of the transaction concerned;

"over-issue" means the issue of securities in excess of any maximum number of securities that the issuer is authorized to issue;

"purchaser" means a person who takes an interest in a security by sale, mortgage, pledge, issue, reissue, gift or any other voluntary transaction;

"security" or "security certificate" means an instrument issued by a bank that is

(a) in bearer, order or registered form,

(b) of a type commonly dealt in on securities exchanges or markets or commonly recognized in any area in which it is issued or dealt in as a medium for investment,

(c) one of a class or series or by its terms divisible into a class or series of instruments, and

(d) evidence of a share, participation or other interest in or obligation of a bank,

but does not include an instrument evidencing a deposit;

"securities broker" means a person who is engaged for all or part of the person's time in the business of buying and selling securities and who, in the transaction concerned, acts for, or buys a security from, or sells a security to, a customer;

"trust indenture" has the meaning given that expression by section 294;

"unauthorized", in relation to a signature or an endorsement, means a signature or an endorsement made without actual, implied or apparent authority, and includes a forgery;

"uncertificated security" means a security, not evidenced by a security certificate, the issue and any transfer of which is registered or recorded in records maintained for that purpose by or on behalf of a bank;

"valid" means issued in accordance with the applicable law or validated under section 97.

82. The transfer of a security is governed by sections 83 to 135.

83. (1) A security is a negotiable instrument but, in the case of any inconsistency between the provisions of the Bills of Exchange Act and this Act, this Act prevails to the extent of the inconsistency.

(2) A security is in bearer form if it is payable to bearer according to its terms and not by reason of any endorsement.

(3) A security is in order form where the security is not a share and, by its terms, it is payable to the order or assigns of any person therein specified with reasonable certainty or to the person or the person's order.

(4) A security is in registered form if

(a) it specifies a person entitled to the security or to the rights it evidences, and its transfer is capable of being recorded in a securities register; or

(b) it bears a statement that it is in registered form.

84. A guarantor for an issuer of a security is deemed to be an issuer to the extent of the guarantee, whether or not the guarantor's obligation is noted on the security.

85. (1) Subject to Part VII, every security holder is entitled at the holder's option to a security certificate that complies with this Act or to a non-transferable written acknowledgement of the holder's right to obtain a security certificate that complies with this Act from a bank in respect of the securities of that bank held by the security holder.

(2) A bank may charge a fee, not exceeding a prescribed amount, for a security certificate issued in respect of a transfer.

(3) A bank is not required to issue more than one security certificate in respect of securities held jointly by several persons, and delivery of a security certificate to one of several joint holders is sufficient delivery to all joint holders of the security.

1991, c. 46, s. 85; 1999, c. 31, s. 10.

86. (1) A security certificate shall be signed manually

(a) by at least one director or officer of the bank,

(b) by or on behalf of a registrar, transfer agent or branch transfer agent of the bank, or

(c) by a trustee who certifies it in accordance with a trust indenture,

and any additional signatures required on a security certificate may be printed or otherwise mechanically produced thereon.

(2) Notwithstanding subsection (1), a manual signature is not required on a security certificate representing a fractional share, on an option or a right to acquire a security or on a scrip certificate.

(3) Where a security certificate contains a printed or mechanically reproduced signature of a person, the bank may issue the security certificate, notwithstanding that the person has ceased to be a director or an officer of the bank, and the security certificate is as valid as if the person were a director or an officer at the date of its issue.

87. There shall be stated on the face of each share certificate issued by a bank after the coming into force of this section

(a) the name of the bank;

(b) a statement that the bank is subject to the Bank Act;

(c) the name of the person to whom the share certificate is issued; and

(d) the number and class of shares and the designation of any series that the certificate represents.

88. (1) If a security certificate issued by a bank is or becomes subject to

(a) a restriction on its transfer other than a constraint under Part VII, or

(b) a lien in favour of the bank,

the restriction or lien is ineffective against a transferee of the security who has no actual knowledge of it, unless the restriction or lien or a reference to it is noted conspicuously on the security certificate.

(2) Where any of the issued shares of a bank are or were part of a distribution to the public and remain outstanding and are held by more than one person, the bank shall not have a restriction on the issue, transfer or ownership of its shares of any class or series except by way of a constraint under Part VII.

(3) If a body corporate that is continued as a bank under this Act has outstanding security certificates and the words "private company" or "private corporation" appear on the certificates, those words are deemed to be a notice of a restriction or lien for the purposes of subsection (1).

89. (1) There shall be stated legibly on a share certificate issued after the coming into force of this section by a bank that is authorized to issue shares of more than one class or series

(a) the rights, privileges, restrictions and conditions attached to the shares of each class and series existing when the share certificate is issued; or

(b) that the class or series of shares that the certificate represents has rights, privileges, restrictions or conditions attached thereto and that the bank will furnish a shareholder, on demand and without charge, with a full copy of

(i) the text of the rights, privileges, restrictions and conditions attached to each class authorized to be issued and to each series in so far as those rights, privileges, restrictions and conditions have been fixed by the directors, and

(ii) the text of the authority of the directors, if the directors are so authorized, to fix the rights, privileges, restrictions and conditions of subsequent series of shares.

(2) Where a share certificate issued by a bank contains the statement mentioned in paragraph (1)(b), the bank shall provide a shareholder, on demand and without charge, with a full copy of the texts referred to in subparagraphs (1)(b)(i) and (ii).

90. A bank may issue a certificate for a fractional share or may issue in place thereof a scrip certificate in bearer form that entitles the holder to receive a certificate for a full share by exchanging scrip certificates aggregating a full share.

91. The directors of a bank may attach conditions to any scrip certificate issued by the bank, including conditions that

(a) the scrip certificate becomes void if not exchanged for a share certificate representing a full share before a specified date; and

(b) any shares for which the scrip certificate is exchangeable may, notwithstanding any pre-emptive right, be issued by the bank to any person and the proceeds thereof may be distributed rateably to the holders of all the scrip certificates.

92. (1) A holder of a fractional share issued by a bank is not entitled to exercise voting rights or to receive a dividend in respect of the fractional share.

(2) A holder of a scrip certificate is not entitled to exercise voting rights or to receive a dividend in respect of the scrip certificate.

93. (1) A bank or a trustee within the meaning of section 294 may, subject to subsections 137(2) to (5) and sections 138 to 141 and 145, treat the registered owner of a security as the person exclusively entitled to vote, to receive notices, to receive any interest, dividend or other payment in respect of the security and to exercise all of the rights and powers of an owner of the security.

(2) Notwithstanding subsection (1), a bank may treat a person as a registered security holder entitled to exercise all of the rights of the security holder that the person represents, if that person provides the bank with evidence as described in subsection 127(4) that the person is

(a) the heir or personal representative of a deceased security holder or the personal representative of the heirs of the deceased security holder;

(b) the personal representative of a registered security holder who is an infant, an incompetent person or a missing person; or

(c) a liquidator of, or a trustee in bankruptcy for, a registered security holder.

(3) If a person on whom the ownership of a security of a bank devolves by operation of law, other than a person described in subsection (2), provides proof of that person's authority to exercise rights or privileges in respect of a security of the bank that is not registered in the person's name, the bank shall, subject to this Act, treat that person as entitled to exercise those rights or privileges.

(4) A bank is not required to inquire into the existence of, or see to the performance or observance of, any duty owed to a third person by a registered holder of any of its securities or by anyone whom it treats, as permitted or required by this Part, as the owner or registered holder thereof.

1991, c. 46, s. 93; 2001, c. 9, s. 62(F).

94. If an infant exercises any rights of ownership in the securities of a bank, no subsequent repudiation or avoidance is effective against the bank.

95. A bank may treat as owners of a security the survivors of persons to whom the security was issued as joint holders, if the bank receives proof satisfactory to it of the death of any of the joint holders.

96. (1) Subject to the provisions of Part VII and any applicable law relating to the collection of taxes, a person referred to in paragraph 93(2)(a) is entitled to become registered as the owner of a security, or to designate another person to be registered as the owner of a security, if the person referred to in paragraph 93(2)(a) delivers to the bank or its transfer agent

(a) the original grant of probate or of letters of administration, or a copy thereof certified to be a true copy by

(i) the court that granted the probate or letters of administration,

(ii) a trust company incorporated under the Trust and Loan Companies Act or under the laws of a province, or

(iii) a lawyer or notary acting on behalf of the person referred to in paragraph 93(2)(a), or

(b) in the case of transmission by notarial will in the Province of Quebec, a copy thereof authenticated pursuant to the laws of that Province,

together with

(c) an affidavit or declaration of transmission made by the person referred to in paragraph 93(2)(a) that states the particulars of the transmission, and

(d) the security certificate that was owned by the deceased holder

(i) in the case of a transfer to the person referred to in paragraph 93(2)(a), with or without the endorsement of that person, and

(ii) in the case of a transfer to any other person, endorsed in accordance with section 111,

and accompanied by any assurance the bank may require under section 127.

(2) Notwithstanding subsection (1), if the laws of the jurisdiction governing the transmission of a security of a deceased holder do not require a grant of probate or of letters of administration in respect of the transmission, a personal representative of the deceased holder is entitled, subject to Part VII and any applicable law relating to the collection of taxes, to become registered as the owner or to designate a person to be registered as the owner, if the personal representative delivers to the bank or its transfer agent the following documents, namely,

(a) the security certificate that was owned by the deceased holder; and

(b) reasonable proof of the governing laws, of the deceased holder's interest in the security and of the right of the personal representative or the designated person to become the registered shareholder.

(3) Subject to Part VII, delivery of the documents referred to in this section empowers a bank or its transfer agent to record in a securities register the transmission of a security from the deceased holder to a person referred to in paragraph 93(2)(a) or to such person as the person referred to in that paragraph may designate and, thereafter, to treat the person who becomes so registered as the owner of that security.

1991, c. 46, ss. 96, 575.

97. (1) The provisions of this Part that validate a security or compel its issue or reissue do not apply to the extent that a validation, issue or reissue would result in over-issue, but

(a) if a valid security similar in all respects to the security involved in the over-issue is reasonably available for purchase, the person entitled to the validation or issue may compel the issuer to purchase and deliver such a security to that person against surrender of the security that the person holds; or

(b) if a valid security similar in all respects to the security involved in the over-issue is not reasonably available for purchase, the person entitled to the validation or issue may recover from the issuer an amount equal to the price the last purchaser for value paid for the invalid security.

(2) Where an issuer is subsequently authorized to issue securities of a number equal to or exceeding the number of securities previously authorized plus the amount of the securities over-issued, the securities so over-issued are valid from the date of their issue.

(3) A purchase or payment by an issuer under subsection (1) is not a purchase or payment in respect of which section 71 or 77 applies.

98. In any action on a security,

(a) unless specifically denied in the pleadings, each signature on the security or in a necessary endorsement is admitted;

(b) a signature on the security is presumed to be genuine and authorized but, if the effectiveness of the signature is put in issue, the burden of establishing that it is genuine and authorized is on the party claiming under the signature;

(c) if a signature is admitted or established, production of the instrument entitles a holder to recover on it unless the defendant establishes a defence or a defect going to the validity of the security; and

(d) if the defendant establishes that a defence or defect exists, the plaintiff has the burden of establishing that the defence or defect is ineffective against the plaintiff or any person under whom the plaintiff claims.

99. Unless otherwise agreed, and subject to any applicable law, regulation or stock exchange rule, a person required to deliver securities may deliver any security of the specified issue in bearer form or registered in the name of the transferee or endorsed to the transferee or in blank.

100. (1) Even against a purchaser for value and without notice of a defect going to the validity of a security, the terms of the security include those stated on the security and those incorporated therein by reference to another instrument, statute, rule, regulation or order to the extent that the terms so referred to do not conflict with the stated terms, but such a reference is not of itself notice to a purchaser for value of a defect going to the validity of the security, notwithstanding that the security expressly states that a person accepting it admits the notice.

(2) A security is valid in the hands of a purchaser for value without notice of any defect going to its validity.

(3) Except as provided in section 101, the fact that a security is not genuine is a complete defence even against a purchaser for value and without notice.

(4) All defences of an issuer, including non-delivery and conditional delivery of a security but not including lack of genuineness, are ineffective against a purchaser for value without notice of the particular defence.

(5) After an event that creates a right to immediate performance of the principal obligation evidenced by a security, or that sets a date on or after which a security is to be presented or surrendered for redemption or exchange, a purchaser is deemed to have notice of any defect in its issue or of any defence of the issuer

(a) if the event requires the payment of money or the delivery of securities, or both, on presentation or surrender of the security, and the funds or securities are available on the date set for payment or exchange, and the purchaser takes the security more than one year after that date; or

(b) if the purchaser takes the security more than two years after the date set for presentation or surrender or the date on which the performance became due.

101. An unauthorized signature on a security before or in the course of issue is ineffective, except that the signature is effective in favour of a purchaser for value and without notice of the lack of authority, if the signing has been done by

(a) an authenticating trustee, registrar, transfer agent or other person entrusted by the issuer with the signing of the security, or of similar securities, or their immediate preparation for signing; or

(b) an employee of the issuer or of a person referred to in paragraph (a) who, in the ordinary course of the employee's duties, handles the security.

102. (1) Where a security contains the signatures necessary to its issue or transfer but is incomplete in any other respect,

(a) any person may complete it by filling in the blanks in accordance with the person's authority; and

(b) notwithstanding that the blanks are incorrectly filled in, the security as completed is enforceable by a purchaser who took it for value and without notice of the incorrectness.

(2) A completed security that has been improperly altered, even if fraudulently altered, remains enforceable, but only according to its original terms.

103. (1) A person signing a security, as authenticating trustee, registrar, transfer agent or other person entrusted by the issuer with the signing of the security, warrants to a purchaser for value without notice that

(a) the security is genuine;

(b) the person's acts in connection with the issue of the security are within the person's authority; and

(c) the person has reasonable grounds for believing that the security is in the form and within the amount the issuer is authorized to issue.

(2) Unless otherwise agreed, a person referred to in subsection (1) does not assume any further liability for the validity of a security.

104. (1) Subject to Part VII, on delivery of a security the purchaser acquires the rights in the security that the purchaser's transferor had or had authority to convey, except that the position of a purchaser who has been a party to any fraud or illegality affecting the security or who as a prior holder had notice of an adverse claim is not improved by taking from a later bona fide purchaser.

(2) A bona fide purchaser, in addition to acquiring the rights of a purchaser, also acquires the security free from any adverse claim.

(3) A purchaser of a limited interest acquires rights only to the extent of the interest purchased.

105. A purchaser of a security, or any securities broker for a seller or purchaser, is deemed to have notice of an adverse claim if

(a) the security, whether in bearer form or registered form, has been endorsed "for collection" or "for surrender" or for some other purpose not involving transfer; or

(b) the security is in bearer form and has on it a statement that it is the property of a person other than the transferor, except that the mere writing of a name on a security is not such a statement.

106. Notwithstanding that a purchaser, or any securities broker for a seller or purchaser, has notice that a security is held for a third person by, or is registered in the name of or endorsed by, a fiduciary, neither the purchaser nor the securities broker has any duty to inquire into the rightfulness of the transfer or any notice of an adverse claim, except that if the purchaser or securities broker for the seller or purchaser knows that the consideration is to be used for, or that the transaction is for, the personal benefit of the fiduciary or is otherwise in breach of the fiduciary's duty, the purchaser or securities broker is deemed to have notice of an adverse claim.

107. An event that creates a right to immediate performance of the principal obligation evidenced by a security or that sets a date on or after which the security is to be presented or surrendered for redemption or exchange is not of itself notice of an adverse claim, except in the case of a purchase

(a) made more than one year after any date set for such a presentation or surrender; or

(b) made more than six months after any date set for payment of money against such a presentation or surrender if funds are available for payment on that date.

108. (1) A person who presents a security for registration of transfer or for payment or exchange warrants to the issuer that the person is entitled to the registration, payment or exchange, except that a purchaser for value without notice of an adverse claim who receives a new, reissued or re-registered security on registration of transfer warrants only that the purchaser has no knowledge of any unauthorized signature in a necessary endorsement.

(2) A person by transferring a security to a purchaser for value warrants only that

(a) the transfer is effective and rightful;

(b) the security is genuine and has not been materially altered; and

(c) the person knows of nothing that might impair the validity of the security.

(3) Where a security is delivered by an intermediary known by the purchaser to be entrusted with delivery of the security on behalf of another or with collection of a draft or other claim to be collected against that delivery, the intermediary by that delivery warrants only the intermediary's own good faith and authority even if the intermediary has purchased or made advances against the draft or other claim to be collected against the delivery.

(4) A pledgee or other holder for purposes of security who redelivers a security received, or after payment and on order of the debtor delivers that security to a third person, gives only the warranties of an intermediary under subsection (3).

(5) A securities broker gives to the broker's customer, to the issuer and to a purchaser, as the case may be, the warranties provided in subsections (1) to (4) and has the rights and privileges of a purchaser under those subsections, and those warranties of and in favour of the broker acting as an agent are in addition to warranties given by the broker's customer and warranties given in favour of the broker's customer.

109. Where a security in registered form is delivered to a purchaser without a necessary endorsement, the purchaser may become a bona fide purchaser only as of the time the endorsement is supplied, but against the transferor the transfer is complete on delivery and the purchaser has a specifically enforceable right to have any necessary endorsement supplied.

110. (1) In this section, section 111, subsections 118(1), 121(4) and 126(1) and section 130, "appropriate person" means

(a) the person specified by the security or by special endorsement to be entitled to the security;

(b) if a person described in paragraph (a) is described as a fiduciary but is no longer serving in the described capacity, either that person or that person's successor;

(c) if the security or endorsement mentioned in paragraph (a) specifies more than one person as fiduciaries and one or more of those persons are no longer serving in the described capacity, the remaining fiduciary or fiduciaries, whether or not a successor has been appointed;

(d) if a person described in paragraph (a) is a natural person and is without capacity to act by reason of death, incompetence, minority or other reason, the person's fiduciary;

(e) if the security or endorsement mentioned in paragraph (a) specifies more than one person with right of survivorship and by reason of death not all of the persons can sign, the survivor or survivors;

(f) a person having power to sign under any applicable law or a power of attorney; or

(g) to the extent that a person described in any of paragraphs (a) to (f) may act through an agent, the person's authorized agent.

(2) Whether the person signing is an appropriate person is determined as of the time of signing, and an endorsement by such a person does not become unauthorized for the purposes of this Part by reason of any subsequent change of circumstances.

111. (1) An endorsement of a security in registered form is made when an appropriate person signs, either on the security or on a separate document, an assignment or transfer of the security or a power to assign or transfer it, or when the signature of an appropriate person is written without more on the back of the security.

(2) An endorsement may be special or in blank.

(3) An endorsement in blank includes an endorsement to bearer.

(4) A special endorsement specifies the person to whom the security is to be transferred, or who has power to transfer it.

(5) A holder may convert an endorsement in blank into a special endorsement.

112. Unless otherwise agreed, the endorser by the endorsement assumes no obligation that the security will be honoured by the issuer.

113. An endorsement purporting to be an endorsement of only part of a security representing units intended by the issuer to be separately transferable is effective to the extent of the endorsement.

114. Failure of a fiduciary to comply with a controlling instrument or with the law of the jurisdiction governing the fiduciary relationship, including any law requiring the fiduciary to obtain court approval of a transfer, does not render the fiduciary's endorsement unauthorized for the purposes of this Part.

115. An endorsement of a security, whether special or in blank, does not constitute a transfer until delivery of the security on which it appears or, if the endorsement is on a separate document, until delivery of both the security and that document.

116. An endorsement of a security in bearer form may give notice of an adverse claim under section 105 but does not otherwise affect any of the holder's rights.

117. (1) The owner of a security may assert the ineffectiveness of an endorsement against the issuer or any purchaser, other than a purchaser for value and without notice of an adverse claim, who has in good faith received a new, reissued or re-registered security on registration of transfer, unless the owner

(a) has ratified an unauthorized endorsement of the security; or

(b) is otherwise precluded from impugning the effectiveness of an unauthorized endorsement.

(2) An issuer who registers the transfer of a security on an unauthorized endorsement is liable for improper registration.

118. (1) A person who guarantees the signature of an endorser of a security warrants that, at the time of signing,

(a) the signature was genuine;

(b) the signer was an appropriate person to endorse; and

(c) the signer had legal capacity to sign.

(2) A person who guarantees the signature of an endorser does not otherwise warrant the rightfulness of the transfer to which the signature relates.

(3) A person who guarantees the endorsement of a security warrants both the signature and the rightfulness, in all respects, of the transfer to which the signature relates, but an issuer may not require a guarantee of endorsement as a condition to registration of transfer.

(4) The warranties referred to in subsections (1) to (3) are made to any person who, relying on the guarantee, takes or deals with the security, and the guarantor is liable to such a person for any loss resulting from breach of warranty.

119. Delivery to a purchaser occurs when

(a) the purchaser or a person designated by the purchaser acquires possession of a security;

(b) the purchaser's securities broker acquires possession of a security specially endorsed to or issued in the name of the purchaser;

(c) the purchaser's securities broker sends the purchaser confirmation of the purchase and the broker in the broker's records identifies a specific security as belonging to the purchaser; or

(d) in respect of an identified security to be delivered while still in the possession of a third person, that person acknowledges that it is held for the purchaser.

120. (1) A purchaser is the owner of a security held for the purchaser by a securities broker, but a purchaser is not a holder except in the cases referred to in paragraphs 119(b) and (c).

(2) If a security is part of a fungible bulk, a purchaser of the security is the owner of the proportionate interest in the fungible bulk.

(3) Notice of an adverse claim received by a securities broker or by a purchaser after the broker takes delivery as a holder for value is not effective against the broker or the purchaser, except that, as between the broker and the purchaser, the purchaser may demand delivery of an equivalent security in respect of which no notice of an adverse claim has been received.

121. (1) Unless otherwise agreed, if a sale of a security is made on a stock exchange or otherwise through securities brokers,

(a) the selling customer fulfils the customer's duty to deliver when the customer delivers the security to the selling securities broker or to a person designated by the selling securities broker or causes an acknowledgement to be made to the selling securities broker that it is held for the selling securities broker; and

(b) the selling securities broker, including a correspondent broker, acting for a selling customer fulfils the securities broker's duty to deliver by delivering the security or a like security to the buying securities broker or to a person designated by the buying securities broker or by effecting clearance of the sale in accordance with the rules of the exchange on which the transaction took place.

(2) Except as otherwise provided in this section and unless otherwise agreed, a transferor's duty to deliver a security under a contract of purchase is not fulfilled until the transferor delivers the security in negotiable form to the purchaser or to a person designated by the purchaser, or causes an acknowledgement to be made to the purchaser that the security is held for the purchaser.

(3) A sale to a securities broker purchasing for the securities broker's own account is subject to subsection (2) and not subsection (1), unless the sale is made on a stock exchange.

(4) If a security shown in the records of a clearing agency is evidenced by

(a) a security certificate in the custody of the clearing agency or a custodian, or a nominee of either, subject to the instructions of the clearing agency, and is in bearer form or endorsed in blank by an appropriate person or registered in the name of the clearing agency or a custodian, or of a nominee of either, or

(b) an uncertificated security registered or recorded in records maintained by or on behalf of the bank in the name of the clearing agency or a custodian, or of a nominee of either, subject to the instructions of the clearing agency,

then, in addition to other methods, a transfer or pledge of the security or any interest therein may be effected by the making of an appropriate entry in the records of the clearing agency.

(5) Under subsections (4) to (10), entries may be in respect of like securities or interests therein as part of a fungible bulk and may refer merely to a quantity of a particular security without reference to the name of the registered owner, certificate or bond number or the like and, in appropriate cases, may be on a net basis taking into account other transfers or pledges of the same security.

(6) A transfer or pledge under subsections (4) to (10) has the effect of a delivery of a security in bearer form or duly endorsed in blank representing the amount of the obligation or the number of shares or rights transferred or pledged.

(7) If a pledge or the creation of a security interest is intended, the making of entries has the effect of a taking of delivery by the pledgee or a secured party and the pledgee or secured party shall be deemed to have taken possession for all purposes.

(8) A person depositing a security certificate or an uncertificated security with a clearing agency, or a transferee or pledgee of a security under subsections (4) to (10), is a holder of the security and shall be deemed to have possession of the security so deposited, transferred or pledged, as the case may be, for all purposes.

(9) A transfer or pledge under subsections (4) to (10) does not constitute a registration of transfer under sections 126 to 133.

(10) That entries made in the records of the clearing agency as provided in subsection (4) are not appropriate does not affect the validity or effect of the entries nor the liabilities or obligations of the clearing agency to any person adversely affected thereby.

122. (1) A person against whom the transfer of a security is wrongful for any reason, including the person's incapacity, may, against anyone except a bona fide purchaser,

(a) reclaim possession of the security or obtain possession of any new security evidencing all or part of the same rights; or

(b) claim damages.

(2) If the transfer of a security is wrongful by reason of an unauthorized endorsement, the owner may reclaim possession of the security or a new security even from a bona fide purchaser if the ineffectiveness of the purported endorsement is asserted against the purchaser under section 117.

(3) The right to reclaim possession of a security may be specially enforced, its transfer may be restrained and the security may be impounded pending litigation.

123. (1) Unless otherwise agreed, a transferor shall, on demand, supply a purchaser with proof of the transferor's authority to transfer a security or with any other requisite that is necessary to obtain registration of the transfer of a security, but if the transfer is not for value, it is not necessary for a transferor to prove authority to transfer unless the purchaser pays the reasonable and necessary costs of the proof and transfer.

(2) If a transferor fails to comply with a demand under subsection (1) within a reasonable time, the purchaser may reject or rescind the transfer.

124. No seizure of a security or other interest evidenced thereby is effective until the person making the seizure obtains possession of the security.

125. An agent or bailee who in good faith, including observance of reasonable commercial standards if the agent or bailee is in the business of buying, selling or otherwise dealing with securities of a bank, has received securities and sold, pledged or delivered them according to the instructions of the agent's or bailee's principal is not liable for conversion or for participation in breach of fiduciary duty even though the principal has no right to dispose of the securities.

126. (1) Subject to Part VII, where a security in registered form is presented for transfer, the issuer shall register the transfer if

(a) the security is endorsed by an appropriate person;

(b) reasonable assurance is given that the endorsement is genuine and effective;

(c) the issuer has no duty to inquire into adverse claims or has discharged any such duty;

(d) all applicable laws relating to the collection of taxes have been complied with;

(e) the transfer is rightful or is to a bona fide purchaser; and

(f) the fee, if any, referred to in subsection 85(2) has been paid.

(2) Where an issuer has a duty to register a transfer of a security, the issuer is liable to the person presenting it for registration for any loss resulting from any unreasonable delay in registration or from the failure or refusal to register the transfer.

127. (1) An issuer may require an assurance that each necessary endorsement on a security is genuine and effective by requiring a guarantee of the signature of the person endorsing the security and by requiring

(a) if the endorsement is by an agent, reasonable assurance of authority to sign;

(b) if the endorsement is by a fiduciary, evidence of appointment or incumbency;

(c) if there is more than one fiduciary, reasonable assurance that all who are required to sign have done so; and

(d) in any other case, assurance that corresponds as closely as practicable to the foregoing.

(2) For the purposes of subsection (1), "guarantee of the signature" means a guarantee signed by or on behalf of a person whom the issuer believes, on reasonable grounds, to be a responsible person.

(3) An issuer may adopt reasonable standards to determine responsible persons for the purposes of subsection (2).

(4) For the purposes of paragraph (1)(b), "evidence of appointment or incumbency" means

(a) in the case of a fiduciary appointed by a court and referred to in subsection 96(1), a copy of the certified court order referred to in subsection 96(1) and dated not earlier than sixty days before the day a security is presented for transfer; or

(b) in the case of any other fiduciary, a copy of a document showing the appointment or other evidence believed by the issuer to be appropriate.

(5) An issuer may adopt reasonable standards with respect to evidence referred to in paragraph (4)(b).

(6) An issuer is deemed not to have notice of the contents of any document referred to in subsection (4) that is obtained by the issuer except to the extent that the contents relate directly to appointment or incumbency.

128. If an issuer, in relation to a transfer, demands assurance other than an assurance specified in subsection 127(1) and obtains a copy of a will, trust or partnership agreement or a by-law or similar document, the issuer is deemed to have notice of all matters contained therein affecting the transfer.

129. (1) An issuer to whom a security is presented for registration has a duty to inquire into adverse claims if

(a) the issuer receives written notice of an adverse claim at a time and in a manner that provides the issuer with a reasonable opportunity to act on it before the issue of a new, reissued or re-registered security and the notice discloses the name and address of the claimant, the registered owner and the issue of which the security is a part; or

(b) the issuer is deemed to have notice of an adverse claim from a document that it obtained under section 128.

(2) An issuer may discharge a duty of inquiry by any reasonable means, including notifying an adverse claimant by registered mail sent to the address provided by the adverse claimant or, if no such address has been provided, to the adverse claimant's residence or regular place of business, that a security has been presented for registration of transfer by a named person and that the transfer will be registered unless, within thirty days after the date of mailing of the notice, either

(a) the issuer is served with a restraining order or other order of a court, or

(b) the issuer is provided with an indemnity bond sufficient in the issuer's judgment to protect the issuer and any registrar, transfer agent or other agent of the issuer from any loss that may be incurred by any of them as a result of complying with the adverse claim.

130. Unless an issuer is deemed to have notice of an adverse claim from a document that it obtained under section 128 or has received notice of an adverse claim under subsection 129(1), if a security presented for registration is endorsed by the appropriate person, the issuer has no duty to inquire into adverse claims and, in particular,

(a) an issuer registering a security in the name of a person who is a fiduciary or who is described as a fiduciary is not bound to inquire into the existence, extent or correct description of the fiduciary relationship and thereafter the issuer may assume without inquiry that the newly registered owner continues to be the fiduciary until the issuer receives written notice that the fiduciary is no longer acting as such with respect to the particular security;

(b) an issuer registering a transfer on an endorsement by a fiduciary has no duty to inquire into whether the transfer is made in compliance with the document or with the law of the jurisdiction governing the fiduciary relationship; and

(c) an issuer is deemed not to have notice of the contents of any court record or any registered document even if the record or document is in the issuer's possession and even if the transfer is made on the endorsement of a fiduciary to the fiduciary specifically or to the fiduciary's nominee.

131. A written notice of adverse claim received by an issuer is effective for twelve months after the day it was received unless the notice is renewed in writing.

132. (1) Except as otherwise provided in any applicable law relating to the collection of taxes, an issuer is not liable to the owner or any other person who incurs a loss as a result of the registration of a transfer of a security if

(a) the necessary endorsements were on or with the security; and

(b) the issuer had no duty to inquire into adverse claims or had discharged any such duty.

(2) If an issuer has registered a transfer of a security to a person not entitled to it, the issuer shall on demand deliver a like security to the owner unless

(a) the issuer is not liable by virtue of subsection (1);

(b) the owner is precluded by subsection 133(1) from asserting any claim; or

(c) the delivery would result in over-issue in respect of which section 97 applies.

133. (1) Where a security has been lost, apparently destroyed or wrongfully taken, and the owner fails to notify the issuer of that fact by giving the issuer written notice of the owner's adverse claim within a reasonable time after the owner knows of the loss, destruction or taking, then, if the issuer has registered a transfer of the security before receiving the notice, the owner is precluded from asserting against the issuer any claim to a new security.

(2) Where the owner of a security claims that the security has been lost, destroyed or wrongfully taken, the issuer shall issue a new security in place of the original security if the owner

(a) so requests before the issuer has notice that the security has been acquired by a bona fide purchaser;

(b) provides the issuer with a sufficient indemnity bond; and

(c) satisfies any other reasonable requirements imposed by the issuer.

(3) If, after the issue of a new security under subsection (2), a bona fide purchaser of the original security presents the original security for registration of transfer, the issuer shall register the transfer unless registration would result in over-issue in respect of which section 97 applies.

(4) In addition to the rights that an issuer has by reason of an indemnity bond, the issuer may recover the new security issued under subsection (2) from the person to whom it was issued or any person taking under that person other than a bona fide purchaser.

134. An authenticating trustee, registrar, transfer agent or other agent of an issuer has, in respect of the issue, registration of transfer and cancellation of a security of the issuer,

(a) a duty to the issuer to exercise good faith and reasonable diligence; and

(b) the same obligations to the holder or owner of a security and the same rights, privileges and immunities as the issuer.

135. Notice to an authenticating trustee, registrar, transfer agent or other agent of an issuer is notice to the issuer in respect of the functions performed by the agent.

PART VI
CORPORATE GOVERNANCE

Shareholders

136. Meetings of shareholders of a bank shall be held at the place within Canada provided for in the by-laws of the bank or, in the absence of any such provision, at the place within Canada that the directors determine.

137. (1) The directors of a bank

(a) shall, after the meeting called pursuant to subsection 46(1), call the first annual meeting of shareholders of the bank, which meeting must be held not later than six months after the end of the first financial year of the bank, and subsequently call an annual meeting of shareholders, which meeting must be held not later than six months after the end of each financial year; and

(b) may at any time call a special meeting of shareholders.

(2) For the purpose of determining shareholders

(a) entitled to receive payment of a dividend,

(b) entitled to participate in a liquidation distribution, or

(c) for any other purpose except the right to receive notice of, or to vote at, a meeting,

the directors may fix in advance a date as the record date for the determination of shareholders, but the record date so fixed shall not precede by more than fifty days the particular action to be taken.

(3) For the purpose of determining shareholders entitled to receive notice of a meeting of shareholders, the directors may fix in advance a date as the record date for the determination of shareholders, but the record date so fixed shall not precede by more than fifty days or by less than twenty-one days the date on which the meeting is to be held.

(4) If no record date is fixed pursuant to subsection (2) or (3),

(a) the record date for the determination of shareholders for any purpose, other than to establish a shareholder's right to receive notice of a meeting or to vote, is the day on which the directors pass the resolution relating to the particular purpose; and

(b) the record date for the determination of shareholders entitled to receive notice of, or to vote at, a meeting of shareholders is

(i) the day immediately preceding the day on which the notice is given, or

(ii) if no notice is given, the day on which the meeting is held.

(5) When a record date is fixed for a bank, unless notice of the record date is waived in writing by every holder of a share of the class or series affected whose name is set out in the central securities register at the close of business on the date the directors fix the record date, notice thereof shall, not less than seven days before the record date, be given

(a) by advertisement in a newspaper in general circulation in the place where the head office of the bank is situated and in each place in Canada where the bank has a transfer agent or where a transfer of the bank's shares may be recorded; and

(b) by written notice to each stock exchange, if any, in Canada on which the shares of the bank are listed for trading.

138. (1) Notice of the time and place of a meeting of shareholders of a bank shall be sent not less than twenty-one days or more than fifty days before the meeting

(a) to each shareholder entitled to vote at the meeting;

(b) to each director; and

(c) to the auditor or auditors of the bank.

(1.1) A bank with equity of five billion dollars or more shall set out in the notice of a meeting the number of eligible votes, as defined under subsection 156.09(1), that may be cast at the meeting as of the record date for determining those shareholders entitled to receive the notice of meeting or, if there are to be separate votes of shareholders at the meeting, the number of eligible votes, as defined in that subsection, in respect of each separate vote to be held at the meeting.

(2) In addition to the notice required under subsection (1), where any class of shares of a bank is publicly traded on a recognized stock exchange in Canada, notice of the time and place of a meeting of shareholders shall be published once a week for at least four consecutive weeks before the date of the meeting in a newspaper in general circulation in the place where the head office of the bank is situated and in each place in Canada where the bank has a transfer agent or where a transfer of the bank's shares may be recorded.

1991, c. 46, s. 138; 2001, c. 9, s. 63.

139. (1) A notice of a meeting of shareholders is not required to be sent to shareholders who were not registered on the records of the bank or its transfer agent on the record date fixed or determined under subsection 137(3) or (4).

(2) Failure to receive a notice of a meeting of shareholders does not deprive a shareholder of the right to vote at the meeting.

140. (1) If a meeting of shareholders is adjourned for less than thirty days, it is not necessary, unless the by-laws otherwise provide, to give notice of the adjourned meeting, other than by announcement at the earliest meeting that is adjourned.

(2) If a meeting of shareholders is adjourned by one or more adjournments for a total of thirty days or more, notice of the continuation of the meeting shall be given as for an original meeting but, unless the meeting is adjourned by one or more adjournments for a total of more than ninety days, subsection 156.04(1) does not apply.

1991, c. 46, s. 140; 1997, c. 15, s. 8.

141. (1) All matters dealt with at a special meeting of shareholders and all matters dealt with at an annual meeting of shareholders, except consideration of the financial statements, report of the auditor or auditors, election of directors, remuneration of directors and reappointment of the incumbent auditor or auditors, are deemed to be special business.

(2) Notice of a meeting of shareholders at which special business is to be transacted must

(a) state the nature of the special business in sufficient detail to permit a shareholder to form a reasoned judgment thereon; and

(b) contain the text of any special resolution to be submitted to the meeting.

142. (1) A shareholder and any other person entitled to attend a meeting of shareholders may in any manner waive notice of a meeting of shareholders.

(2) Attendance at a meeting of shareholders is a waiver of notice of the meeting, except when a person attends the meeting for the express purpose of objecting to the transaction of any business on the grounds that the meeting is not lawfully called.

1991, c. 46, s. 142; 2001, c. 9, s. 64(F).

143. (1) A shareholder entitled to vote at an annual meeting of shareholders of a bank may

(a) submit to the bank notice of any matter that the shareholder proposes to raise at the meeting; and

(b) discuss at the meeting any matter in respect of which the shareholder would have been entitled to submit a proposal.

(2) A bank that solicits proxies shall, in the management proxy circular required by subsection 156.05(1), set out any proposal of a shareholder submitted for consideration at a meeting of shareholders or attach the proposal to the management proxy circular.

(3) If so requested by a shareholder who submits a proposal to a bank, the bank shall include in the management proxy circular, or attach thereto, a statement by the shareholder of not more than two hundred words in support of the proposal and the name and address of the shareholder.

(4) A proposal may include nominations for the election of directors if the proposal is signed by one or more holders of shares representing in the aggregate not less than 5 per cent of the shares or 5 per cent of the shares of a class of shares of the bank entitled to vote at the meeting to which the proposal is to be presented.

(5) A bank is not required to comply with subsections (2) and (3) if

(a) the proposal is not submitted to the bank at least ninety days before the anniversary date of the previous annual meeting of shareholders;

(b) it clearly appears that the proposal is submitted by the shareholder primarily for the purpose of enforcing a personal claim or redressing a personal grievance against the bank or its directors, officers or security holders, or primarily for the purpose of promoting general economic, political, racial, religious, social or similar causes;

(c) the bank, at the shareholder's request, included in a management proxy circular a proposal relating to a meeting of shareholders held within two years preceding the receipt of the request, and the shareholder failed to present the proposal, in person or by proxy, at the meeting;

(d) substantially the same proposal was submitted to shareholders in a management proxy circular or a dissident's proxy circular relating to a meeting of shareholders held within two years preceding the receipt of the shareholder's request and the proposal was defeated; or

(e) the rights conferred by subsections (1) to (4) are being abused to secure publicity.

(6) No bank or person acting on behalf of a bank incurs any liability by reason only of circulating a proposal or statement in compliance with subsections (2) and (3).

1991, c. 46, s. 143; 1997, c. 15, s. 9.

144. (1) If a bank refuses to include a proposal in a management proxy circular, the bank shall, within ten days after receiving the proposal, notify the shareholder submitting the proposal of its intention to omit the proposal from the management proxy circular and send to the shareholder a statement of the reasons for the refusal.

(2) On the application of a shareholder claiming to be aggrieved by a bank's refusal under subsection (1), a court may restrain the holding of the meeting at which the proposal is sought to be presented and make any further order it thinks fit.

(3) A bank or any person claiming to be aggrieved by a proposal may apply to a court for an order permitting the bank to omit the proposal from the management proxy circular, and the court, if it is satisfied that subsection 143(5) applies, may make such order as it thinks fit.

(4) An applicant under subsection (2) or (3) shall give the Superintendent written notice of the application and the Superintendent may appear and be heard at the hearing of the application in person or by counsel.

145. (1) A bank shall prepare a list, which may be in electronic form, of its shareholders entitled to receive notice of a meeting under paragraph 138(1)(a), arranged in alphabetical order and showing the number of shares held by each shareholder, which list must be prepared

(a) if a record date is fixed under subsection 137(3), not later than ten days after that date; or

(b) if no record date is fixed,

(i) at the close of business on the day immediately preceding the day on which the notice is given, or

(ii) where no notice is given, on the day on which the meeting is held.

(2) Where a bank fixes a record date under subsection 137(3), a person named in the list prepared under paragraph (1)(a) is, subject to this Act, entitled to vote the shares shown opposite that person's name at the meeting to which the list relates, except to the extent that

(a) the person has transferred the ownership of any of those shares after the record date, and

(b) the transferee of those shares

(i) produces properly endorsed share certificates, or

(ii) otherwise establishes that the transferee owns the shares,

and demands, not later than ten days before the meeting or such shorter period before the meeting as the by-laws of the bank provide, that the transferee's name be included in the list before the meeting,

in which case the transferee may vote those transferred shares at the meeting.

(3) Where a bank does not fix a record date under subsection 137(3), a person named in the list prepared under paragraph (1)(b) is, subject to this Act, entitled to vote the shares shown opposite that person's name at the meeting to which the list relates, except to the extent that

(a) the person has transferred the ownership of any of those shares after the date on which a list was prepared under subparagraph (1)(b)(i), and

(b) the transferee of those shares

(i) produces properly endorsed share certificates, or

(ii) otherwise establishes that the transferee owns the shares,

and demands, not later than ten days before the meeting or such shorter period before the meeting as the by-laws of the bank provide, that the transferee's name be included in the list before the meeting,

in which case the transferee may vote those transferred shares at the meeting.

(4) A shareholder of a bank may examine the list of shareholders referred to in subsection (1)

(a) during usual business hours at the head office of the bank or at the place where its central securities register is maintained; and

(b) at the meeting of shareholders for which the list was prepared.

1991, c. 46, s. 145; 2001, c. 9, s. 65.

146. (1) Unless the by-laws otherwise provide, a quorum of shareholders is present at a meeting of shareholders if the holders of a majority of the shares who are entitled to vote at the meeting are present in person or represented by proxyholders.

(2) If a quorum is present at the opening of a meeting of shareholders, the shareholders present may, unless the by-laws otherwise provide, proceed with the business of the meeting, notwithstanding that a quorum is not present throughout the meeting.

(3) If a quorum is not present at the opening of a meeting of shareholders, the shareholders present may adjourn the meeting to a fixed time and place but may not transact any other business.

147. If a bank has only one shareholder, or only one holder of any class or series of shares, the shareholder present in person or represented by a proxyholder constitutes a meeting of shareholders or a meeting of shareholders of that class or series.

148. Subject to section 156.09, if a share of a bank entitles the holder of the share to vote at a meeting of shareholders, that share entitles the shareholder to one vote at the meeting.

1991, c. 46, s. 148; 2001, c. 9, s. 66.

149. (1) If an entity is a shareholder of a bank, the bank shall recognize any natural person authorized by a resolution of the directors or governing body or similar authority of the entity to represent it at meetings of shareholders of the bank.

(2) A natural person authorized under subsection (1) to represent an entity may exercise on behalf of the entity all the powers the entity could exercise if it were a natural person as well as a shareholder.

150. Unless the by-laws otherwise provide, if two or more persons hold shares jointly, one of those holders present at a meeting of shareholders may in the absence of the others vote the shares, but if two or more of those persons who are present in person or represented by proxyholder vote, they shall vote as one on the shares jointly held by them.

151. (1) Unless the by-laws otherwise provide, voting at a meeting of shareholders shall take place by show of hands except when a ballot is demanded by either a shareholder or proxyholder entitled to vote at the meeting.

(2) A shareholder or proxyholder may demand a ballot either before or after any vote by show of hands.

152. (1) Except where a written statement is submitted by a director under section 174 or by an auditor under subsection 321(1),

(a) a resolution in writing signed by all the shareholders entitled to vote on that resolution at a meeting of shareholders is as valid as if it had been passed at a meeting of the shareholders; and

(b) a resolution in writing dealing with all matters required by this Act to be dealt with at a meeting of shareholders, and signed by all the shareholders entitled to vote at that meeting, satisfies all the requirements of this Act relating to meetings of shareholders.

(2) A copy of every resolution referred to in subsection (1) shall be kept with the minutes of the meetings of shareholders.

153. (1) Shareholders who together hold not less than 5 per cent of the issued and outstanding shares of a bank that carry the right to vote at a meeting sought to be held may requisition the directors to call a meeting of shareholders for the purposes stated in the requisition.

(2) A requisition referred to in subsection (1)

(a) must state the business to be transacted at the meeting and must be sent to each director and to the head office of the bank; and

(b) may consist of several documents of like form, each signed by one or more shareholders.

(3) On receipt of a requisition referred to in subsection (1), the directors shall call a meeting of shareholders to transact the business stated in the requisition, unless

(a) a record date has been fixed under subsection 137(3) and notice thereof has been given under subsection 137(5);

(b) the directors have called a meeting of shareholders and have given notice thereof under section 138; or

(c) the business of the meeting as stated in the requisition includes matters described in paragraphs 143(5)(b) to (e).

(4) If the directors do not call a meeting within twenty-one days after receiving the requisition referred to in subsection (1), any shareholder who signed the requisition may call the meeting.

(5) A meeting called under this section shall be called as nearly as possible in the manner in which meetings are to be called pursuant to the by-laws and this Act.

(6) Unless the shareholders otherwise resolve at a meeting called under subsection (4), the bank shall reimburse the shareholders for any expenses reasonably incurred by them in requisitioning, calling and holding the meeting.

154. (1) Where it is impracticable

(a) to call a meeting of shareholders of a bank in the manner in which meetings of those shareholders are to be called, or

(b) to conduct the meeting in the manner required by the by-laws and this Act,

or where a court thinks fit to do so for any other reason, the court, on the application of a director or a shareholder entitled to vote at the meeting, may order a meeting to be called, held and conducted in such manner as the court directs.

(2) Without restricting the generality of subsection (1), a court may order that the quorum required by the by-laws or this Act be varied or dispensed with at a meeting called, held and conducted pursuant to this section.

(3) A meeting called, held and conducted pursuant to this section is for all purposes a meeting of shareholders of the bank duly called, held and conducted.

155. (1) A bank or a shareholder or director of a bank may apply to a court to resolve any dispute in respect of the election or appointment of a director or an auditor of the bank.

(2) On an application under subsection (1), a court may make any order it thinks fit including, without limiting the generality of the foregoing,

(a) an order restraining a director or auditor whose election or appointment is challenged from acting pending determination of the dispute;

(b) an order declaring the result of the disputed election or appointment;

(c) an order requiring a new election or appointment, and including in the order directions for the management of the business and affairs of the bank until a new election is held or the new appointment is made; and

(d) an order determining the voting rights of shareholders and of persons claiming to own shares.

156. (1) A person who makes an application under subsection 154(1) or 155(1) shall give notice of the application to the Superintendent before the hearing and shall deliver a copy of the order of the court, if any, to the Superintendent.

(2) The Superintendent may appear and be heard in person or by counsel at the hearing of an application referred to in subsection (1).

Proxies

156.01 The definitions in this section apply in this section and sections 156.02 to 156.08.

"registrant" means a securities broker or dealer required to be registered to trade or deal in securities under the laws of any jurisdiction.

"solicit" or "solicitation" includes

(a) a request for a proxy, whether or not accompanied by or included in a form of proxy,

(b) a request to execute or not to execute a form of proxy or to revoke a proxy,

(c) the sending of a form of proxy or other communication to a shareholder under circumstances reasonably calculated to result in the procurement, withholding or revocation of a proxy, and

(d) the sending of a form of proxy to a shareholder under section 156.04,

but does not include

(e) the sending of a form of proxy in response to an unsolicited request made by or on behalf of a shareholder,

(f) the performance of administrative acts or professional services on behalf of a person soliciting a proxy,

(g) the sending by a registrant of the documents referred to in section 156.07, or

(h) a solicitation by a person in respect of shares of which that person is the beneficial owner.

"solicitation by or on behalf of the management of a bank" means a solicitation by any person pursuant to a resolution or instruction of, or with the acquiescence of, the directors or a committee of the directors of the bank.

1997, c. 15, s. 10.

156.02 (1) A shareholder who is entitled to vote at a meeting of shareholders may, by executing a form of proxy, appoint a proxyholder or one or more alternate proxyholders, who are not required to be shareholders, to attend and act at the meeting in the manner and to the extent authorized by the proxy and with the authority conferred by the proxy.

(2) A form of proxy shall be executed by a shareholder or by a shareholder's attorney authorized in writing to do so.

(3) No appointment of a proxyholder provides authority for the proxyholder to act in respect of the appointment of an auditor or the election of a director unless a nominee proposed in good faith for the appointment or election is named in the form of proxy, a management proxy circular, a dissident's proxy circular or a proposal under subsection 143(1).

(4) A form of proxy must indicate, in bold-face type, that the shareholder by whom or on whose behalf it is executed may appoint a proxyholder, other than a person designated in the form of proxy, to attend and act on the shareholder's behalf at a meeting to which the proxy relates, and must contain instructions as to the manner in which the shareholder may do so.

(5) A proxy is valid only at the meeting in respect of which it is given or at a continuation of the meeting after an adjournment.

(6) A shareholder may revoke a proxy

(a) by depositing an instrument in writing executed by the shareholder or by the shareholder's attorney authorized in writing to do so

(i) at the head office of the bank at any time up to and including the last business day before the day of a meeting, or a continuation of the meeting after an adjournment, at which the proxy is to be used, or

(ii) with the chairperson of the meeting on the day of the meeting or a continuation of the meeting after an adjournment; or

(b) in any other manner permitted by law.

1997, c. 15, s. 10.

156.03 The directors may specify, in a notice calling a meeting of shareholders or a continuation of a meeting of shareholders after an adjournment, a time before which executed forms of proxy to be used at the meeting or the continued meeting must be deposited with the bank or its transfer agent. The time specified may not be more than forty-eight hours, excluding Saturdays and holidays, before the meeting or the continued meeting.

1997, c. 15, s. 10.

156.04 (1) Subject to subsection 140(2) and subsection (2), the management of a bank shall, concurrently with giving notice of a meeting of shareholders, send a form of proxy in prescribed form to each shareholder entitled to receive notice of the meeting.

(2) If a bank has fewer than fifteen shareholders, the management of the bank is not required to send a form of proxy to the shareholders under subsection (1). For the purpose of this subsection, two or more joint shareholders are counted as one shareholder.

1997, c. 15, s. 10.

156.05 (1) A person shall not solicit proxies unless

(a) in the case of solicitation by or on behalf of the management of a bank, a management proxy circular in prescribed form, either as an appendix to, or as a separate document accompanying, the notice of the meeting, is sent to the auditor or auditors of the bank and to each shareholder whose proxy is solicited; and

(b) in the case of any other solicitation, a dissident's proxy circular in prescribed form stating the purposes of the solicitation is sent to the auditor or auditors of the bank, to each shareholder whose proxy is solicited and to the bank.

(2) A person who sends a management proxy circular or dissident's proxy circular shall at the same time file with the Superintendent

(a) in the case of a management proxy circular, a copy of it together with a copy of the notice of meeting, form of proxy and any other documents for use in connection with the meeting; and

(b) in the case of a dissident's proxy circular, a copy of it together with a copy of the form of proxy and any other documents for use in connection with the meeting.

(3) On the application of an interested person, the Superintendent may, on any terms that the Superintendent thinks fit, exempt the person from any of the requirements of subsection (1) and section 156.04, and the exemption may be given retroactive effect.

(4) The Superintendent shall set out in a periodical available to the public the particulars of each exemption granted under subsection (3) together with the reasons for the exemption.

1997, c. 15, s. 10.

156.06 (1) A person who solicits a proxy and is appointed proxyholder shall attend in person or cause an alternate proxyholder to attend the meeting in respect of which the proxy is valid, and the proxyholder or alternate proxyholder shall comply with the directions of the shareholder who executed the form of proxy.

(2) A proxyholder or an alternate proxyholder has the same rights as the appointing shareholder to speak at a meeting of shareholders in respect of any matter, to vote by way of ballot at the meeting and, except where a proxyholder or an alternate proxyholder has conflicting instructions from more than one shareholder, to vote at the meeting in respect of any matter by way of a show of hands.

(3) Where the chairperson of a meeting of shareholders declares to the meeting that, if a ballot were conducted, the total number of votes attached to shares represented at the meeting by proxy required to be voted against what, to the knowledge of the chairperson, would be the decision of the meeting in relation to any matter or group of matters is less than five per cent of all the votes that might be cast at the meeting on the ballot, unless a shareholder or proxyholder demands a ballot,

(a) the chairperson may conduct the vote in respect of that matter or group of matters by way of a show of hands; and

(b) a proxyholder or alternate proxyholder may vote in respect of that matter or group of matters by way of a show of hands.

1997, c. 15, s. 10.

156.07 (1) Shares of a bank that are registered in the name of a registrant or registrant's nominee and that are not beneficially owned by the registrant shall not be voted unless the registrant sends to the beneficial owner

(a) a copy of the notice of the meeting, annual statement, management proxy circular, dissident's proxy circular and any other documents, other than the form of proxy, that were sent to shareholders by or on behalf of any person for use in connection with the meeting; and

(b) a written request for voting instructions, except where the registrant has already received written voting instructions from the beneficial owner.

(2) The documents to be sent to the beneficial owner under subsection (1) shall be sent by the registrant without delay after the registrant receives the documents referred to in paragraph (1)(a).

(3) A registrant shall not vote or appoint a proxyholder to vote shares of a bank registered in the registrant's name or in the name of the registrant's nominee that the registrant does not beneficially own unless the registrant receives voting instructions from the beneficial owner.

(4) A person by or on behalf of whom a solicitation is made shall, at the request of a registrant, without delay provide the registrant, at the person's expense, with the necessary number of copies of the documents referred to in paragraph (1)(a).

(5) A registrant shall vote or appoint a proxyholder to vote any shares referred to in subsection (1) in accordance with any written voting instructions received from the beneficial owner.

(6) If requested by a beneficial owner, a registrant shall appoint the beneficial owner or a nominee of the beneficial owner as proxyholder.

(7) The failure of a registrant to comply with any of subsections (1) to (6) does not render void any meeting of shareholders or any action taken at the meeting.

(8) Nothing in this Part gives a registrant the right to vote shares that the registrant is otherwise prohibited from voting.

1997, c. 15, s. 10.

156.08 (1) If a form of proxy, management proxy circular or dissident's proxy circular contains an untrue statement of a material fact or omits to state a material fact that is required to be contained in it or that is necessary to make a statement contained in it not misleading in light of the circumstances in which the statement is made, an interested person or the Superintendent may apply to a court and the court may make any order it thinks fit, including

(a) an order restraining the solicitation or the holding of the meeting, or restraining any person from implementing or acting on a resolution passed at the meeting, to which the form of proxy, management proxy circular or dissident's proxy circular relates;

(b) an order requiring correction of any form of proxy or proxy circular and a further solicitation; and

(c) an order adjourning the meeting.

(2) Where a person other than the Superintendent is an applicant under subsection (1), the applicant shall give notice of the application to the Superintendent and the Superintendent is entitled to appear and to be heard in person or by counsel.

1997, c. 15, s. 10.

Restrictions on Voting

156.09 (1) In this section, "eligible votes" means the total number of votes that may be cast by or on behalf of shareholders on a vote of shareholders or a vote of holders of a class or series of shares, as the case may be, in respect of any particular matter, calculated without regard to subsection (2).

(2) At a meeting of shareholders of a bank with equity of five billion dollars or more, no person and no entity controlled by any person may, in respect of any vote of shareholders or holders of any class or series of shares of the bank, cast votes in respect of any shares beneficially owned by the person or the entity that are, in aggregate, more than 20 per cent of the eligible votes that may be cast in respect of that vote.

(3) No person who is a proxyholder for a person or for an entity controlled by a person may cast votes to which the proxy relates that the person or entity may not cast by reason of subsection (2).

(4) If a person is, with respect to a bank, a person referred to in subsection 375(1), subsections (2) and (3) do not apply with respect to votes cast by or on behalf of the person during any period that the person is entitled under section 375 to remain a major shareholder of the bank.

(5) Subsections (2) and (3) do not apply in respect of votes cast by or on behalf of any entity that controls the bank or any entity that is controlled by an entity that controls the bank.

(6) Subsection (2) does not apply in respect of a vote held under section 218.

(7) A vote in respect of a particular matter is not invalid merely because a person voted contrary to subsection (2) or (3).

(8) If, with respect to any bank, a person contravenes subsection (2) or (3), the Minister may, by order, direct the shareholder of the shares to which the contravention relates or any person controlled by that shareholder to dispose of any number of shares of the bank beneficially owned by any of those persons that the Minister specifies in the order, within the time specified in the order and in the proportion, if any, as between the shareholder and the persons controlled by that shareholder that is specified in the order.

(9) If the Minister makes an order under subsection (8), the person to whom the order relates may not, in person or by proxy, exercise any voting rights that are attached to shares of the bank beneficially owned by the person.

(10) Subsection (9) ceases to apply in respect of a person when the shares to which the order relates have been disposed of.

(11) For the purpose of this section, a person is entitled to rely on the number of eligible votes set out in a notice of a meeting under subsection 138(1.1).

(12) For the purpose of this section, the Minister may, with respect to a particular bank, designate two or more persons who are parties to an agreement, commitment or understanding referred to in section 9 to be a single person.

2001, c. 9, s. 67.

Directors and Officers

Duties

157. (1) Subject to this Act, the directors of a bank shall manage or supervise the management of the business and affairs of the bank.

(2) Without limiting the generality of subsection (1), the directors of a bank shall

(a) establish an audit committee to perform the duties referred to in subsections 194(3) and (4);

(b) establish a conduct review committee to perform the duties referred to in subsection 195(3);

(c) establish procedures to resolve conflicts of interest, including techniques for the identification of potential conflict situations and for restricting the use of confidential information;

(d) designate a committee of the board of directors to monitor the procedures referred to in paragraph (c);

(e) establish procedures to provide disclosure of information to customers of the bank that is required to be disclosed by this Act and for dealing with complaints as required by subsection 455(1);

(f) designate a committee of the board of directors to monitor the procedures referred to in paragraph (e) and satisfy itself that they are being adhered to by the bank; and

(g) establish investment and lending policies, standards and procedures in accordance with section 465.

(3) Paragraphs (2)(a) and (b) do not apply to the directors of a bank if

(a) all the voting shares of the bank are beneficially owned by a Canadian financial institution described in any of paragraphs (a) to (d) of the definition "financial institution" in section 2; and

(b) the audit committee or conduct review committee of the financial institution performs for and on behalf of the bank all the functions that would otherwise be required to be performed by the audit committee or conduct review committee of the bank under this Act.

1991, c. 46, s. 157; 1997, c. 15, s. 11; 2001, c. 9, s. 68(F).

158. (1) Every director and officer of a bank in exercising any of the powers of a director or an officer and discharging any of the duties of a director or an officer shall

(a) act honestly and in good faith with a view to the best interests of the bank; and

(b) exercise the care, diligence and skill that a reasonably prudent person would exercise in comparable circumstances.

(2) Every director, officer and employee of a bank shall comply with this Act, the regulations, the bank's incorporating instrument and the by-laws of the bank.

(3) No provision in any contract, in any resolution or in the by-laws of a bank relieves any director, officer or employee of the bank from the duty to act in accordance with this Act and the regulations or relieves a director, officer or employee from liability for a breach thereof.

Qualification and Number -- Directors

159. (1) A bank shall have at least seven directors.

(2) At least one half of the directors of a bank that is a subsidiary of a foreign bank and at least two thirds of the directors of any other bank must be, at the time of each director's election or appointment, resident Canadians.

1991, c. 46, s. 159; 2001, c. 9, s. 69.

160. The following persons are disqualified from being directors of a bank:

(a) a person who is less than eighteen years of age;

(b) a person who is of unsound mind and has been so found by a court in Canada or elsewhere;

(c) a person who has the status of a bankrupt;

(d) a person who is not a natural person;

(e) a person who is prohibited by section 392 or 401.3 or subsection 156.09(9) from exercising voting rights attached to shares of the bank;

(f) a person who is an officer, director or full time employee of an entity that is prohibited by section 392 or 401.3 or subsection 156.09(9) from exercising voting rights attached to shares of the bank;

(g) a person who is an agent or employee of Her Majesty in right of Canada or in right of a province;

(h) a minister of Her Majesty in right of Canada or in right of a province; and

(i) a person who is an agent or employee of the government of a foreign country or any political subdivision thereof.

1991, c. 46, s. 160; 1994, c. 47, s. 15; 1997, c. 15, s. 12; 2001, c. 9, s. 70.

160.1 Paragraph 160(g) does not apply to a person if

(a) the person is employed in a department or agency of the Government of Canada that is not involved in the regulation or supervision of financial institutions;

(b) the person's duties do not involve financial institutions; and

(c) the bank is controlled by a local cooperative credit society, as defined in section 2 of the Cooperative Credit Associations Act, in which the following persons, in aggregate, hold more than 50 per cent or, if a percentage has been prescribed for the purpose of this paragraph, the prescribed percentage, of the ownership interests in the local cooperative credit society, namely,

(i) employees of Her Majesty in right of Canada or of a province,

(ii) former employees of Her Majesty in right of Canada or of a province,

(iii) the spouse or common-law partner of a person referred to in subparagraph (i) or (ii), and

(iv) a child who is less than eighteen years of age of a person referred to in subparagraph (i) or (ii).

2001, c. 9, s. 71.

161. A director of a bank is not required to hold shares of the bank.

162. The Governor in Council may make regulations specifying the circumstances under which a natural person is affiliated with a bank for the purposes of this Act.

162.1 (1) Notwithstanding section 162, the Superintendent may determine that a particular director is affiliated with a bank for the purposes of this Act if, in the opinion of the Superintendent, the director has a significant or sufficient commercial, business or financial relationship with the bank or with an affiliate of the bank to the extent that the relationship can be construed as being material to the director and can reasonably be expected to affect the exercise of the director's best judgment.

(2) A determination by the Superintendent under subsection (1)

(a) becomes effective on the day of the next annual meeting of the shareholders unless a notice in writing by the Superintendent revoking the determination is received by the bank prior to that day; and

(b) ceases to be in effect on the day of the next annual meeting of the shareholders after a notice in writing by the Superintendent revoking the determination is received by the bank.

1996, c. 6, s. 5.

163. (1) At the election of directors at each annual meeting of a bank and at all times until the day of the next annual meeting, no more than two thirds of the directors may be persons affiliated with the bank.

(2) Subsection (1) does not apply where all the voting shares of a bank, other than directors' qualifying shares, if any, are beneficially owned by a Canadian financial institution incorporated by or under an Act of Parliament.

(3) For the purposes of subsection (1), whether or not a person is affiliated with a bank shall be determined as at the day the notice of the annual meeting is sent to shareholders pursuant to section 138 and that determination becomes effective on the day of that meeting, and a person shall be deemed to continue to be affiliated or unaffiliated, as the case may be, until the next annual meeting of the shareholders.

(4) Subsection (1) does not apply in respect of a bank that was in existence immediately prior to the day that subsection comes into force until the day that is three years after the day that subsection comes into force.

164. No more than 15 per cent of the directors of a bank may, at each director's election or appointment, be employees of the bank or a subsidiary of the bank, except that up to four persons who are employees of the bank or a subsidiary of the bank may be directors of the bank if those directors constitute not more than one half of the directors of the bank.

Election and Tenure -- Directors

165. (1) Subject to subsection 159(1) and sections 168 and 217, the directors of a bank shall, by by-law, determine the number of directors or the minimum and maximum number of directors, but no by-law that decreases the number of directors shortens the term of an incumbent director.

(2) A by-law made pursuant to subsection (1) that provides for a minimum and maximum number of directors may provide that the number of directors to be elected at any annual meeting of the shareholders be such number as is fixed by the directors prior to the annual meeting.

166. (1) Except where this Act or the by-laws of a bank provide for cumulative voting, a bank may, by by-law, provide that the directors be elected for terms of one, two or three years.

(2) A director elected for a term of one, two or three years holds office until the close of the first, second or third annual meeting of shareholders, as the case may be, following the election of the director.

(3) A director who is not elected for an expressly stated term of office ceases to hold office at the close of the next annual meeting of shareholders following the election of the director.

(4) It is not necessary that all directors elected at a meeting of shareholders hold office for the same term.

(5) If a by-law of a bank provides that the directors be elected for a term of two or three years, it may also provide that the term of office of each director be for the whole of that term, or that, as nearly as may be, one half of the directors retire each year if the term is two years, and that one third of the directors retire each year if the term is three years.

(6) Subject to subsection 163(4), where a director of a bank is elected or appointed for a term of more than one year, the bank shall comply with subsections 159(2) and 163(1) and section 164 at each annual meeting of shareholders during the director's term of office as if that director were elected or appointed on that date.

167. (1) Except where this Act or the by-laws of a bank provide for cumulative voting, the persons, to the number authorized to be elected, who receive the greatest number of votes at an election of directors of a bank shall be the directors thereof.

(2) If, at any election of directors referred to in subsection (1), two or more persons receive an equal number of votes and there are not sufficient vacancies remaining to enable all the persons receiving an equal number of votes to be elected, the directors who receive a greater number of votes or the majority of them shall, in order to complete the full number of directors, determine which of the persons so receiving an equal number of votes are to be elected.

168. (1) Where this Act or the by-laws provide for cumulative voting,

(a) there shall be a stated number of directors fixed by by-law and not a minimum and maximum number of directors;

(b) each shareholder entitled to vote at an election of directors has the right to cast a number of votes equal to the number of votes attached to the shares held by the shareholder multiplied by the number of directors to be elected, and the shareholder may cast all such votes in favour of one candidate or distribute them among the candidates in any manner;

(c) a separate vote of shareholders shall be taken with respect to each candidate nominated for director unless a resolution is passed unanimously permitting two or more persons to be elected by a single vote;

(d) if a shareholder has voted for more than one candidate without specifying the distribution of the votes among the candidates, the shareholder is deemed to have distributed the votes equally among the candidates for whom the shareholder voted;

(e) if the number of candidates nominated for director exceeds the number of positions to be filled, the candidates who receive the least number of votes shall be eliminated until the number of candidates remaining equals the number of positions to be filled;

(f) each director ceases to hold office at the close of the next annual meeting of shareholders following the director's election;

(g) a director may not be removed from office if the votes cast against the removal would be sufficient to elect the director and those votes could be voted cumulatively at an election at which the same total number of votes were cast and the same number of directors required by the by-laws were then being elected; and

(h) the number of directors required by the by-laws may not be decreased if the votes cast against the motion to decrease would be sufficient to elect a director and those votes could be voted cumulatively at an election at which the same total number of votes were cast and the same number of directors required by the by-laws were then being elected.

(2) Where the aggregate of the voting shares beneficially owned by a person and any entities controlled by the person carries more than 10 per cent of the voting rights attached to all the outstanding voting shares of a bank, the directors shall be elected by cumulative voting.

(3) Subsection (2) does not apply

(a) where all the voting shares of the bank that are outstanding are beneficially owned by

(i) one person,

(ii) one person and one or more entities controlled by that person, or

(iii) one or more entities controlled by the same person;

(b) in respect of a bank that was in existence immediately prior to the day that subsection comes into force whose shareholders are confined to entities incorporated or formed by or under an Act of Parliament or of the legislature of a province that are, in the opinion of the directors, operating as credit unions or cooperative associations.

(3.1) Subsection (2) does not apply to a widely held bank with equity of five billion dollars or more or to a bank in respect of which subsection 378(1) applies.

(4) Where this Act or the by-laws of a bank provide for cumulative voting, the shareholders of the bank shall,

(a) at the first annual meeting of shareholders held not earlier than ninety days following the date that cumulative voting is required under subsection (2) or provided for in the by-laws, and

(b) at each succeeding annual meeting,

elect the stated number of directors to hold office until the close of the next annual meeting of shareholders following their election.

(5) Nothing in this Act precludes the holders of any class or series of shares of a bank from having an exclusive right to elect one or more directors.

1991, c. 46, s. 168; 1997, c. 15, s. 14; 2001, c. 9, s. 73.

169. A director who has completed a term of office is, if otherwise qualified, eligible for re-election.

Incomplete Elections and Director Vacancies

170. (1) If, immediately after the time of any purported election or appointment of directors, the board of directors would fail to comply with subsection 159(2) or 163(1) or section 164, the purported election or appointment of all persons purported to be elected or appointed at that time is void unless the directors, within forty-five days after the discovery of the non-compliance, develop a plan, approved by the Superintendent, to rectify the non-compliance.

(2) Where, at the close of a meeting of shareholders of a bank, the shareholders have failed to elect the number or minimum number of directors required by this Act or the by-laws of a bank, the purported election of directors at the meeting

(a) is valid if the directors purported to be elected and those incumbent directors, if any, whose terms did not expire at the close of the meeting, together constitute a quorum; or

(b) is void if the directors purported to be elected and those incumbent directors, if any, whose terms did not expire at the close of the meeting, together do not constitute a quorum.

(3) and (4) [Repealed, 1997, c. 15, s. 15]

1991, c. 46, s. 170; 1997, c. 15, s. 15.

171. (1) Notwithstanding subsections 166(2) and (3) and paragraphs 168(1)(f) and 172(1)(a), where subsection 170(1) or (2) applies at the close of any meeting of shareholders of a bank, the board of directors shall, until their successors are elected or appointed, consist solely of

(a) where paragraph 170(2)(a) applies, the directors referred to in that paragraph; or

(b) where subsection 170(1) or paragraph 170(2)(b) applies, the persons who were the incumbent directors immediately before the meeting.

(2) Notwithstanding subsections 166(2) and (3) and paragraphs 168(1)(f) and 172(1)(a), where a plan to rectify the non-compliance referred to in subsection 170(1) has not been approved by the Superintendent by the end of the forty-five day period referred to in that subsection, the board of directors shall, until their successors are elected or appointed, consist solely of the persons who were the incumbent directors immediately before the meeting at which the purported election or appointment referred to in that subsection occurred.

(3) Where subsection (1) or (2) applies, the board of directors referred to in that subsection shall without delay call a special meeting of shareholders to fill the vacancies, where paragraph 170(2)(a) applies, or elect a new board of directors, where subsection 170(1) or paragraph 170(2)(b) applies.

(4) Where the directors fail to call a special meeting required by subsection (3), the meeting may be called by any shareholder.

1991, c. 46, s. 171; 1997, c. 15, s. 16.

172. (1) A director ceases to hold office

(a) at the close of the annual meeting at which the director's term of office expires;

(b) when the director dies or resigns;

(c) when the director becomes disqualified under section 160 or ineligible to hold office pursuant to subsection 203(2);

(d) when the director is removed under section 173; or

(e) when the director is removed from office under section 647 or 647.1.

(2) The resignation of a director of a bank becomes effective at the time a written resignation is sent to the bank by the director or at the time specified in the resignation, whichever is later.

1991, c. 46, s. 172; 2001, c. 9, s. 74.

173. (1) Subject to paragraph 168(1)(g), the shareholders of a bank may by resolution at a special meeting remove any director or all the directors from office.

(2) Where the holders of any class or series of shares of a bank have the exclusive right to elect one or more directors, a director so elected may be removed only by a resolution at a meeting of the shareholders of that class or series.

(3) Subject to paragraphs 168(1)(b) to (e), a vacancy created by the removal of a director may be filled at the meeting of the shareholders at which the director is removed or, if not so filled, may be filled under section 177 or 178.

174. (1) A director who

(a) resigns,

(b) receives a notice or otherwise learns of a meeting of shareholders called for the purpose of removing the director from office, or

(c) receives a notice or otherwise learns of a meeting of directors or shareholders at which another person is to be appointed or elected to fill the office of director, whether because of the director's resignation or removal or because the director's term of office has expired or is about to expire,

is entitled to submit to the bank a written statement giving the reasons for the resignation or the reasons why the director opposes any proposed action or resolution.

(2) Where a director resigns as a result of a disagreement with the other directors or the officers of a bank, the director shall submit to the bank and the Superintendent a written statement setting out the nature of the disagreement.

175. (1) A bank shall without delay on receipt of a director's statement referred to in subsection 174(1) relating to a matter referred to in paragraph 174(1)(b) or (c), or a director's statement referred to in subsection 174(2), send a copy of it to each shareholder entitled to receive a notice of meetings and to the Superintendent, unless the statement is included in or attached to a management proxy circular required by subsection 156.05(1).

(2) No bank or person acting on its behalf incurs any liability by reason only of circulating a director's statement in compliance with subsection (1).

1991, c. 46, s. 175; 1997, c. 15, s. 17.

176. The by-laws of a bank may provide that a vacancy among the directors is to be filled only

(a) by a vote of the shareholders; or

(b) by a vote of the holders of any class or series of shares having an exclusive right to elect one or more directors if the vacancy occurs among the directors elected by the holders of that class or series.

177. (1) Notwithstanding section 183 but subject to subsection (2) and sections 176 and 178, a quorum of directors may fill a vacancy among the directors except a vacancy among the directors resulting from a change in the by-laws by which the number or minimum number of directors is increased or from a failure to elect the number or minimum number of directors required by the by-laws.

(2) Notwithstanding sections 176 and 183, where by reason of a vacancy the number of directors or the composition of the board of directors fails to meet any of the requirements of section 159, subsection 163(1) and section 164, the directors who, in the absence of any by-law, would be empowered to fill that vacancy shall do so forthwith.

178. Notwithstanding section 183, where the holders of any class or series of shares of a bank have an exclusive right to elect one or more directors and a vacancy occurs among those directors, then, subject to section 176,

(a) the remaining directors elected by the holders of that class or series may fill the vacancy except a vacancy resulting from an increase in the number or minimum number of directors for that class or series or from a failure to elect the number or minimum number of directors for that class or series;

(b) if there are no such remaining directors and, by reason of the vacancy, the number of directors or the composition of the board of directors fails to meet any of the requirements of section 159, subsection 163(1) and section 164, the other directors may fill that vacancy; and

(c) if there are no such remaining directors and paragraph (b) does not apply, any holder of shares of that class or series may call a meeting of the holders thereof for the purpose of filling the vacancy.

179. (1) Unless the by-laws otherwise provide, a director elected or appointed to fill a vacancy holds office for the unexpired term of the director's predecessor in office.

(2) Notwithstanding subsection 163(3), the affiliation of a person to be elected or appointed to fill a vacancy shall be determined as at the date of the person's election or appointment and that person shall be deemed to continue to be affiliated or unaffiliated, as the case may be, until the next annual meeting of the shareholders.

179.1 (1) The directors of a bank may appoint one or more additional directors where the by-laws of the bank allow them to do so and the by-laws determine the minimum and maximum numbers of directors.

(2) A director appointed under subsection (1) holds office for a term expiring not later than the close of the next annual meeting of shareholders of the bank.

(3) The total number of directors appointed under subsection (1) may not exceed one third of the number of directors elected at the previous annual meeting of shareholders of the bank.

1997, c. 15, s. 18.

Meetings of the Board

180. (1) The directors shall meet at least four times during each financial year.

(2) The directors may meet at any place unless the by-laws provide otherwise.

(3) The notice for the meetings must be given as required by the by-laws.

1991, c. 46, s. 180; 1997, c. 15, s. 19.

181. (1) A notice of a meeting of directors shall specify each matter referred to in section 198 that is to be dealt with at the meeting but, unless the by-laws otherwise provide, need not otherwise specify the purpose of or the business to be transacted at the meeting.

(2) A director may in any manner waive notice of a meeting of directors and the attendance of a director at a meeting of directors is a waiver of notice of that meeting except where the director attends the meeting for the express purpose of objecting to the transaction of any business on the grounds that the meeting is not lawfully called.

(3) Notice of an adjourned meeting of directors is not required to be given if the time and place of the adjourned meeting was announced at the original meeting.

182. (1) Subject to section 183, the number of directors referred to in subsection (2) constitutes a quorum at any meeting of directors or a committee of directors and, notwithstanding any vacancy among the directors, a quorum of directors may exercise all the powers of the directors.

(2) The number of directors constituting a quorum at any meeting of directors or a committee of directors shall be

(a) a majority of the minimum number of directors required by this Act for the board of directors or a committee of directors; or

(b) such greater number of directors than the number calculated pursuant to paragraph (a) as may be established by the by-laws of the bank.

(3) Any director present at a meeting of directors who is not present at any particular time during the meeting for the purposes of subsection 203(1) shall be considered as being present for the purposes of this section.

183. (1) The directors of a bank shall not transact business at a meeting of directors or of a committee of directors unless

(a) in the case of a bank that is a subsidiary of a foreign bank, at least one half of the directors present are resident Canadians; or

(b) in any other case, a majority of the directors present are resident Canadians.

(2) Notwithstanding subsection (1), the directors of a bank may transact business at a meeting of directors or of a committee of directors without the required proportion of directors present who are resident Canadians if

(a) a director who is a resident Canadian unable to be present approves, in writing or by telephonic, electronic or other communications facilities, the business transacted at the meeting; and

(b) there would have been present the required proportion of directors who are resident Canadians had that director been present at the meeting.

1991, c. 46, s. 183; 2001, c. 9, s. 75.

183.1 (1) The directors of a bank shall not transact business at a meeting of directors unless at least one of the directors who is not affiliated with the bank is present.

(2) Despite subsection (1), the directors of a bank may transact business at a meeting of directors if a director who is not affiliated with the bank and who is not able to be present approves, in writing or by telephonic, electronic or other communications facilities, the business transacted at the meeting.

(3) Subsection (1) does not apply if all the voting shares of the bank, other than directors' qualifying shares, if any, are beneficially owned by a Canadian financial institution incorporated by or under an Act of Parliament.

2001, c. 9, s. 76.

184. (1) Subject to the by-laws of a bank, a meeting of directors or of a committee of directors may be held by means of such telephonic, electronic or other communications facilities as permit all persons participating in the meeting to communicate adequately with each other during the meeting.

(2) A director participating in a meeting by any means referred to in subsection (1) is deemed for the purposes of this Act to be present at that meeting.

184.1 (1) A resolution in writing signed by all the directors entitled to vote on that resolution at a meeting of directors is as valid as if it had been passed at a meeting of directors.

(2) A copy of the resolution referred to in subsection (1) shall be kept with the minutes of the proceedings of the directors.

(3) A resolution in writing signed by all the directors entitled to vote on that resolution at a meeting of a committee of directors, other than a resolution of the audit committee in carrying out its duties under subsection 194(3) or a resolution of the conduct review committee in carrying out its duties under subsection 195(3), is as valid as if it had been passed at a meeting of that committee.

(4) A copy of the resolution referred to in subsection (3) shall be kept with the minutes of the proceedings of that committee.

1997, c. 15, s. 20.

185. (1) A director of a bank who is present at a meeting of directors or a committee of directors is deemed to have consented to any resolution passed or action taken at that meeting unless

(a) the director requests that the director's dissent be entered or the director's dissent is entered in the minutes of the meeting;

(b) the director sends a written dissent to the secretary of the meeting before the meeting is adjourned; or

(c) the director sends the director's dissent by registered mail or delivers it to the head office of the bank immediately after the meeting is adjourned.

(2) A director of a bank who votes for or consents to a resolution is not entitled to dissent under subsection (1).

(3) A director of a bank who is not present at a meeting at which a resolution is passed or action taken is deemed to have consented thereto unless, within seven days after the director becomes aware of the resolution, the director

(a) causes the director's dissent to be placed with the minutes of the meeting; or

(b) sends the director's dissent by registered mail or delivers it to the head office of the bank.

186. (1) A bank shall keep a record of the attendance at each meeting of directors and each committee meeting of directors.

(2) A bank shall attach to the notice of each annual meeting it sends to its shareholders a statement showing, in respect of the financial year immediately preceding the meeting, the total number of directors' meetings and directors' committee meetings held during the financial year and the number of those meetings attended by each director.

1991, c. 46, s. 186; 1997, c. 15, s. 21.

187. (1) Where in the opinion of the Superintendent it is necessary, the Superintendent may, by notice in writing, require a bank to hold a meeting of directors of the bank to consider the matters set out in the notice.

(2) The Superintendent may attend and be heard at a meeting referred to in subsection (1).

By-laws

188. (1) Unless this Act otherwise provides, the directors of a bank may by resolution make, amend or repeal any by-law that regulates the business or affairs of the bank.

(2) The directors shall submit a by-law, or an amendment to or a repeal of a by-law, that is made under subsection (1) to the shareholders at the next meeting of shareholders, and the shareholders may, by resolution, confirm or amend the by-law, amendment or repeal.

(3) Unless this Act otherwise provides, a by-law, or an amendment to or a repeal of a by-law, is effective from the date of the resolution of the directors under subsection (1) until it is confirmed, confirmed as amended or rejected by the shareholders under subsection (2) or until it ceases to be effective under subsection (4) and, where the by-law is confirmed, or confirmed as amended, it continues in effect in the form in which it was so confirmed.

(4) If a by-law, or an amendment to or a repeal of a by-law, is rejected by the shareholders, or is not submitted to the shareholders by the directors as required under subsection (2), the by-law, amendment or repeal ceases to be effective from the date of its rejection or the date of the next meeting of shareholders, as the case may be, and no subsequent resolution of the directors to make, amend or repeal a by-law having substantially the same purpose or effect is effective until it is confirmed, or confirmed as amended, by the shareholders.

189. A shareholder entitled to vote at an annual meeting of shareholders may, in accordance with sections 143 and 144, make a proposal to make, amend or repeal a by-law.

190. Subject to section 191, where a by-law of a bank that was in existence immediately prior to the day this section comes into force was in effect immediately prior to that day, the by-law continues in effect until amended or repealed, unless it is contrary to a provision of this Act.

191. (1) A by-law of a bank respecting the remuneration of the directors of the bank, as directors, that is in effect on the coming into force of this section ceases to have effect on the day on which the first annual meeting is held following the coming into force of this section.

(2) A by-law made by the directors of a bank under section 45 of the Bank Act, being chapter B-1 of the Revised Statutes of Canada, 1985, as that section read immediately prior to the day this section comes into force, and not confirmed by the shareholders of the bank in accordance with that section on or before the day this section comes into force, continues to have effect, unless it is contrary to the provisions of this Act, until the first meeting of the shareholders following the day this section comes into force.

(3) A by-law referred to in subsection (2) shall be submitted to the shareholders at the first meeting of shareholders following the coming into force of this section.

(4) Subsections 188(3) and (4) and section 189 apply in respect of a by-law referred to in this section as if it were a by-law made under section 188.

192. (1) Any matter that,

(a) immediately prior to the day this section comes into force, was provided for in the incorporating instrument of a bank that was in existence immediately prior to that day, or

(b) immediately prior to the day a body corporate is continued as a bank under this Act, was provided for in the incorporating instrument of the body corporate,

and that, under this Act, would be provided for in the by-laws of a bank, is deemed to be provided for in the by-laws of the bank.

(2) Where a by-law of the bank made in accordance with sections 188 and 189 amends or repeals any matter referred to in subsection (1), the by-law prevails.

Committees of the Board

193. The directors of a bank may appoint from their number, in addition to the committees referred to in subsection 157(2), such other committees as they deem necessary and, subject to section 198, delegate to those committees such powers of the directors, and assign to those committees such duties, as the directors consider appropriate.

194. (1) The audit committee of a bank shall consist of at least three directors.

(2) A majority of the members of the audit committee must consist of directors who are not persons affiliated with the bank and none of the members of the audit committee may be officers or employees of the bank or a subsidiary of the bank.

(3) The audit committee of a bank shall

(a) review the annual statement of the bank before the annual statement is approved by the directors;

(b) review such returns of the bank as the Superintendent may specify;

(c) require the management of the bank to implement and maintain appropriate internal control procedures;

(c.1) review, evaluate and approve those procedures;

(d) review such investments and transactions that could adversely affect the well-being of the bank as the auditor or auditors or any officer of the bank may bring to the attention of the committee;

(e) meet with the auditor or auditors to discuss the annual statement and the returns and transactions referred to in this subsection; and

(f) meet with the chief internal auditor of the bank, or the officer or employee of the bank acting in a similar capacity, and with management of the bank, to discuss the effectiveness of the internal control procedures established for the bank.

(4) In the case of the annual statement and returns of a bank that under this Act must be approved by the directors of the bank, the audit committee of the bank shall report thereon to the directors before the approval is given.

(5) The audit committee of a bank may call a meeting of the directors of the bank to consider any matter of concern to the committee.

(6) Subsection (2), in so far as it relates to the affiliation of directors with the bank, does not apply in respect of a bank that was in existence immediately prior to the day that subsection comes into force until the day that is three years after the day that subsection comes into force.

1991, c. 46, s. 194; 1997, c. 15, s. 22.

195. (1) The conduct review committee of a bank shall consist of at least three directors.

(2) A majority of the members of the conduct review committee of a bank must consist of directors who are not persons affiliated with the bank and none of the members of the conduct review committee may be officers or employees of the bank or a subsidiary of the bank.

(3) The conduct review committee of a bank shall

(a) require the management of the bank to establish procedures for complying with Part XI;

(b) review those procedures and their effectiveness in ensuring that the bank is complying with Part XI;

(b.1) if a widely held bank holding company or a widely held insurance holding company has a significant interest in any class of shares of the bank,

(i) establish policies for entering into transactions referred to in subsection 495.1(1), and

(ii) review transactions referred to in subsection 495.3(1); and

(c) review the practices of the bank to ensure that any transactions with related parties of the bank that may have a material effect on the stability or solvency of the bank are identified.

(4) A bank shall report to the Superintendent on the mandate and responsibilities of the conduct review committee and the procedures referred to in paragraph (3)(a).

(5) After each meeting of the conduct review committee of the bank, the committee shall report to the directors of the bank on matters reviewed by the committee.

(6) Within ninety days after the end of each financial year, the directors of a bank shall report to the Superintendent on what the conduct review committee did during the year in carrying out its responsibilities under subsection (3).

(7) [Repealed, 1997, c. 15, s. 23]

1991, c. 46, s. 195; 1997, c. 15, s. 23; 2001, c. 9, s. 77.

Directors and Officers -- Authority

196. (1) The directors of a bank shall appoint from their number a chief executive officer who must be ordinarily resident in Canada and, subject to section 198, may delegate to that officer any of the powers of the directors.

(2) [Repealed, 1997, c. 15, s. 24]

1991, c. 46, s. 196; 1997, c. 15, s. 24.

197. (1) The directors of a bank may, subject to the by-laws, designate the offices of the bank, appoint officers thereto, specify the duties of those officers and delegate to them powers, subject to section 198, to manage the business and affairs of the bank.

(2) Subject to section 164, a director of a bank may be appointed to any office of the bank.

(3) Two or more offices of a bank may be held by the same person.

198. The directors of a bank may not delegate any of the following powers, namely, the power to

(a) submit to the shareholders a question or matter requiring the approval of the shareholders;

(b) fill a vacancy among the directors or a committee of directors or in the office of auditor;

(c) issue or cause to be issued securities except in the manner and on terms authorized by the directors;

(d) declare a dividend;

(e) authorize the redemption or other acquisition by the bank pursuant to section 71 of shares issued by the bank;

(f) authorize the payment of a commission on a share issue;

(g) approve a management proxy circular;

(h) except as provided in this Act, approve the annual statement of the bank and any other financial statements issued by the bank; or

(i) adopt, amend or repeal by-laws.

1991, c. 46, s. 198; 1997, c. 15, s. 25.

199. (1) Subject to this section and the by-laws, the directors of a bank may fix the remuneration of the directors, officers and employees of the bank.

(2) No remuneration shall be paid to a director as director until a by-law fixing the aggregate of all amounts that may be paid to all directors in respect of directors' remuneration during a fixed period of time has been confirmed by special resolution.

1991, c. 46, s. 199; 1994, c. 26, s. 4.

200. (1) An act of a director or an officer of a bank is valid notwithstanding a defect in the director's qualification or an irregularity in the director's election or in the appointment of the director or officer.

(2) An act of the board of directors of a bank is valid notwithstanding a defect in the composition of the board or an irregularity in the election of the board or in the appointment of a member of the board.

201. A director of a bank is entitled to attend and to be heard at every meeting of shareholders.

Conflicts of Interest

202. (1) A director or an officer of a bank who

(a) is a party to a material contract or proposed material contract with the bank,

(b) is a director or an officer of any entity that is a party to a material contract or proposed material contract with the bank, or

(c) has a material interest in any person who is a party to a material contract or proposed material contract with the bank

shall disclose in writing to the bank or request to have entered in the minutes of the meetings of directors the nature and extent of that interest.

(2) The disclosure required by subsection (1) shall be made, in the case of a director,

(a) at the meeting of directors at which a proposed contract is first considered;

(b) if the director was not then interested in a proposed contract, at the first meeting after the director becomes so interested;

(c) if the director becomes interested after a contract is made, at the first meeting after the director becomes so interested; or

(d) if a person who is interested in a contract later becomes a director, at the first meeting after that person becomes a director.

(3) The disclosure required by subsection (1) shall be made, in the case of an officer who is not a director,

(a) forthwith after the officer becomes aware that a proposed contract is to be considered or a contract has been considered at a meeting of directors;

(b) if the officer becomes interested after a contract is made, forthwith after the officer becomes so interested; or

(c) if a person who is interested in a contract later becomes an officer, forthwith after the person becomes an officer.

(4) If a material contract or proposed material contract is one that, in the ordinary course of business of the bank, would not require approval by the directors or shareholders, a director or an officer referred to in subsection (1) shall disclose in writing to the bank or request to have entered in the minutes of meetings of directors the nature and extent of the director's or officer's interest forthwith after the director or officer becomes aware of the contract or proposed contract.

203. (1) Where subsection 202(1) applies to a director in respect of a contract, the director shall not be present at any meeting of directors while the contract is being considered at the meeting or vote on any resolution to approve the contract unless the contract is

(a) an arrangement by way of security for money lent to or obligations undertaken by the director for the benefit of the bank or a subsidiary of the bank;

(b) a contract relating primarily to the director's remuneration as a director or an officer, employee or agent of the bank or a subsidiary of the bank or an entity controlled by the bank or an entity in which the bank has a substantial investment;

(c) a contract for indemnity under section 212 or for insurance under section 213; or

(d) a contract with an affiliate of the bank.

(2) Any director who knowingly contravenes subsection (1) ceases to hold office as director and is not eligible, for a period of five years after the date on which the contravention occurred, for election or appointment as a director of any financial institution that is incorporated or formed by or under an Act of Parliament.

(3) An act of the board of directors of a bank, or of a committee of the board of directors, is not invalid because a person acting as a director had ceased under subsection (2) to hold office as a director.

1991, c. 46, s. 203; 1997, c. 15, s. 26.

204. For the purposes of subsection 202(1), a general notice to the directors by a director or an officer declaring that the director or officer is a director or officer of an entity, or has a material interest in a person, and is to be regarded as interested in any contract made with that entity or person, is a sufficient declaration of interest in relation to any contract so made.

1991, c. 46, s. 204; 2001, c. 9, s. 77.1(F).

205. A material contract between a bank and one or more of its directors or officers, or between a bank and another entity of which a director or an officer of the bank is a director or an officer or between a bank and a person in which the director or officer has a material interest, is neither void nor voidable

(a) by reason only of that relationship, or

(b) by reason only that a director with an interest in the contract is present at or is counted to determine the presence of a quorum at the meeting of directors or the committee of directors that authorized the contract,

if the director or officer disclosed the interest in accordance with subsection 202(2), (3) or (4) or section 204 and the contract was approved by the directors or the shareholders and it was reasonable and fair to the bank at the time it was approved.

206. Where a director or an officer of a bank fails to disclose an interest in a material contract in accordance with sections 202 and 204, a court may, on the application of the bank or a shareholder of the bank, set aside the contract on such terms as the court thinks fit.

Liability, Exculpation and Indemnification

207. (1) The directors of a bank who vote for or consent to a resolution of the directors authorizing the issue of a share contrary to subsection 65(1) or the issue of subordinated indebtedness contrary to section 80 for a consideration other than money are jointly and severally liable to the bank to make good any amount by which the consideration received is less than the fair equivalent of the money that the bank would have received if the share or subordinated indebtedness had been issued for money on the date of the resolution.

(2) The directors of a bank who vote for or consent to a resolution of the directors authorizing

(a) a redemption or purchase of shares contrary to section 71,

(b) a reduction of capital contrary to section 75,

(c) a payment of a dividend contrary to section 79,

(d) a payment of an indemnity contrary to section 212, or

(e) any transaction contrary to Part XI

are jointly and severally liable to restore to the bank any amounts so distributed or paid and not otherwise recovered by the bank and any amounts in relation to any loss suffered by the bank.

208. (1) A director who has satisfied a judgment in relation to the director's liability under section 207 is entitled to contribution from the other directors who voted for or consented to the unlawful act on which the judgment was founded.

(2) A director who is liable under section 207 is entitled to apply to a court for an order compelling a shareholder or other person to pay or deliver to the director

(a) any money or property that was paid or distributed to the shareholder or other person contrary to section 71, 75, 79 or 212; or

(b) an amount equal to the value of the loss suffered by the bank as a result of any transaction contrary to Part XI.

(3) Where an application is made to a court under subsection (2), the court may, where it is satisfied that it is equitable to do so,

(a) order a shareholder or other person to pay or deliver to a director any money or property that was paid or distributed to the shareholder or other person contrary to section 71, 75, 79 or 212 or any amount referred to in paragraph (2)(b);

(b) order a bank to return or issue shares to a person from whom the bank has purchased, redeemed or otherwise acquired shares; or

(c) make any further order it thinks fit.

209. An action to enforce a liability imposed by section 207 may not be commenced after two years from the date of the resolution authorizing the action complained of.

210. (1) Subject to subsections (2) and (3), the directors of a bank are jointly and severally liable to each employee of the bank for all debts not exceeding six months wages payable to the employee for services performed for the bank while they are directors.

(2) A director is not liable under subsection (1) unless

(a) the bank has been sued for the debt within six months after it has become due and execution has been returned unsatisfied in whole or in part;

(b) the bank has commenced liquidation and dissolution proceedings or has been dissolved and a claim for the debt has been proven within six months after the earlier of the date of commencement of the liquidation and dissolution proceedings and the date of dissolution; or

(c) a winding-up order has been issued in respect of the bank under the Winding-up and Restructuring Act and a claim for the debt has been allowed or proven within six months after the issue of the winding-up order.

(3) A director is not liable under subsection (1) unless the director is sued for a debt referred to in that subsection while a director or within two years after the director has ceased to be a director.

(4) Where execution referred to in paragraph (2)(a) has issued, the amount recoverable from a director is the amount remaining unsatisfied after execution.

(5) Where a director of a bank pays a debt referred to in subsection (1) that is proven in liquidation and dissolution or winding-up proceedings, the director is entitled to any preference that the employee would have been entitled to and, where a judgment has been obtained, the director is entitled to an assignment of the judgment.

(6) A director of a bank who has satisfied a claim under this section is entitled to a contribution from the other directors of the bank who are liable for the claim.

1991, c. 46, s. 210; 1996, c. 6, s. 167.

211. A director, an officer or an employee of a bank is not liable under subsection 158(1) or (2), section 207 or 210 or subsection 506(1) if the director, officer or employee relies in good faith on

(a) financial statements of the bank represented to the director, officer or employee by an officer of the bank or in a written report of the auditor or auditors of the bank fairly to reflect the financial condition of the bank; or

(b) a report of an accountant, lawyer, notary or other professional person whose profession lends credibility to a statement made by the professional person.

1991, c. 46, s. 211; 2001, c. 9, s. 78.

212. (1) Except in respect of an action by or on behalf of the bank to procure a judgment in its favour, a bank may indemnify

(a) a director or an officer of the bank,

(b) a former director or officer of the bank, or

(c) any person who acts or acted at the bank's request as a director or an officer of an entity of which the bank is or was a shareholder or creditor

against all costs, charges and expenses, including an amount paid to settle an action or satisfy a judgment reasonably incurred by the person in respect of any civil, criminal or administrative action or proceeding to which the person is made a party by reason of being or having been a person referred to in any of paragraphs (a) to (c), if

(d) the director, officer or person acted honestly and in good faith with a view to the best interests of the bank, and

(e) in the case of a criminal or administrative action or proceeding enforced by a monetary penalty, the director, officer or person had reasonable grounds for believing that the impugned conduct was lawful.

(2) A bank may, with the approval of a court, indemnify a person referred to in subsection (1), in respect of an action by or on behalf of the bank or entity to procure a judgment in its favour to which the person is made a party by reason of being or having been a director or an officer of the bank or entity, against all costs, charges and expenses, including an amount paid to settle an action or satisfy a judgment, reasonably incurred by the person in connection with that action if the person fulfils the conditions set out in paragraphs (1)(d) and (e).

(3) Notwithstanding anything in this section, a person referred to in subsection (1) is entitled to indemnity from the bank in respect of all costs, charges and expenses, including an amount paid to settle an action or satisfy a judgment, reasonably incurred by the person in connection with the defence of any civil, criminal or administrative action or proceeding to which the person is made a party by reason of being or having been a director or an officer of the bank or an entity, if the person seeking indemnity

(a) was substantially successful on the merits in the defence of the action or proceedings; and

(b) fulfils the conditions set out in paragraphs (1)(d) and (e).

(4) A bank may, to the extent referred to in subsections (1) to (3) in respect of the person, indemnify the heirs or personal representatives of any person the bank may indemnify pursuant to subsections (1) to (3).

1991, c. 46, s. 212; 2001, c. 9, s. 79(F).

213. A bank may purchase and maintain insurance for the benefit of any person referred to in section 212 against any liability incurred by the person

(a) in the capacity of a director or an officer of the bank, except where the liability relates to a failure to act honestly and in good faith with a view to the best interests of the bank; or

(b) in the capacity of a director or an officer of another entity where the person acts or acted in that capacity at the bank's request, except where the liability relates to a failure to act honestly and in good faith with a view to the best interests of the entity.

214. (1) A bank or a person referred to in section 212 may apply to a court for an order approving an indemnity under that section and the court may so order and make any further order it thinks fit.

(2) An applicant under subsection (1) shall give the Superintendent written notice of the application and the Superintendent is entitled to appear and to be heard at the hearing of the application in person or by counsel.

(3) On an application under subsection (1), the court may order notice to be given to any interested person and that person is entitled to appear and to be heard in person or by counsel at the hearing of the application.

Fundamental Changes

Amendments

215. On the application of a bank duly authorized by special resolution, the Minister may approve a proposal to add, change or remove any provision that is permitted by this Act to be set out in the bank's incorporating instrument.

1991, c. 46, s. 215; 2001, c. 9, s. 80.

216. (1) On receipt of an application referred to in section 215, the Minister may issue letters patent to effect the proposal.

(2) Letters patent issued pursuant to subsection (1) become effective on the day stated in the letters patent.

1991, c. 46, s. 216; 2001, c. 9, s. 81.

217. (1) The directors of a bank may make, amend or repeal any by-laws, in the manner set out in subsections (2) and (3) and sections 218 to 222, to

(a) change the maximum number, if any, of shares of any class that the bank is authorized to issue;

(b) create new classes of shares;

(c) change the designation of any or all of the bank's shares, and add, change or remove any rights, privileges, restrictions and conditions, including rights to accrued dividends, in respect of any or all of the bank's shares, whether issued or unissued;

(d) change the shares of any class or series, whether issued or unissued, into a different number of shares of the same class or series or into the same or a different number of shares of other classes or series;

(e) divide a class of shares, whether issued or unissued, into series and fix the maximum number of shares, if any, in each series and the rights, privileges, restrictions and conditions attached thereto;

(f) authorize the directors to divide any class of unissued shares into series and fix the maximum number of shares, if any, in each series and the rights, privileges, restrictions and conditions attached thereto;

(g) authorize the directors to change the rights, privileges, restrictions and conditions attached to unissued shares of any series;

(h) revoke, diminish or enlarge any authority conferred under paragraphs (f) and (g);

(i) increase or decrease the number of directors or the minimum or maximum number of directors, subject to subsection 159(1) and section 168;

(i.1) change the name of the bank; or

(j) change the place in Canada where the head office of the bank is to be situated.

(2) The directors shall submit a by-law, or an amendment to or a repeal of a by-law, that is made under subsection (1) to the shareholders, and the shareholders may, by special resolution, confirm, amend or reject the by-law, amendment or repeal.

(3) A by-law, or an amendment to or a repeal of a by-law, made under subsection (1) is not effective until it is confirmed or confirmed as amended by the shareholders under subsection (2) and, in the case of a by-law referred to in paragraph (1)(i.1), approved by the Superintendent.

1991, c. 46, s. 217; 2001, c. 9, s. 82.

218. (1) The holders of shares of a class or, subject to subsection (2), of a series are, unless the by-laws otherwise provide in the case of an amendment to the by-laws referred to in paragraph (a), (b) or (e), entitled to vote separately as a class or series on a proposal to amend the by-laws to

(a) increase or decrease any maximum number of authorized shares of that class, or increase any maximum number of authorized shares of a class having rights or privileges equal or superior to the shares of that class;

(b) effect an exchange, reclassification or cancellation of all or part of the shares of that class;

(c) add, change or remove the rights, privileges, restrictions or conditions attached to the shares of that class and, without limiting the generality of the foregoing,

(i) remove or change prejudicially rights to accrued dividends or rights to cumulative dividends,

(ii) add, remove or change prejudicially redemption rights,

(iii) reduce or remove a dividend preference or a liquidation preference, or

(iv) add, remove or change prejudicially conversion privileges, options, voting, transfer or pre-emptive rights, or rights to acquire securities of the bank, or sinking fund provisions;

(d) increase the rights or privileges of any class of shares having rights or privileges equal or superior to the shares of that class;

(e) create a new class of shares equal or superior to the shares of that class;

(f) make any class of shares having rights or privileges inferior to the shares of that class equal or superior to the shares of that class; or

(g) effect an exchange or create a right of exchange of all or part of the shares of another class into the shares of that class.

(2) The holders of a series of shares of a class are entitled to vote separately as a series under subsection (1) if that series is affected by an addition or amendment to the by-laws in a manner different from other shares of the same class.

(3) Subsections (1) and (2) apply whether or not the shares of a class otherwise carry the right to vote.

219. A proposed addition or amendment to the by-laws referred to in subsection 218(1) is adopted when the holders of the shares of each class or series entitled to vote separately thereon as a class or series have approved the addition or amendment by a special resolution.

220. Where a special resolution referred to in subsection 217(2) so states, the directors may, without further approval of the shareholders, revoke the special resolution.

221. (1) Subject to subsection (2), a director or a shareholder who is entitled to vote at an annual meeting of shareholders of a bank may, in accordance with sections 143 and 144, make a proposal to make an application referred to in section 215 or to make, amend or repeal the by-laws referred to in subsection 217(1) of the bank.

(2) Notice of a meeting of shareholders at which a proposal to amend the incorporating instrument or to make, amend or repeal the by-laws of a bank is to be considered must set out the proposal.

1991, c. 46, s. 221; 2001, c. 9, s. 83.

222. No amendment to the incorporating instrument or by-laws of a bank affects an existing cause of action or claim or liability to prosecution in favour of or against the bank or its directors or officers, or any civil, criminal or administrative action or proceeding to which the bank or any of its directors or officers are a party.

Amalgamation

223. (1) On the joint application of two or more bodies corporate incorporated by or under an Act of Parliament, including banks and bank holding companies, the Minister may issue letters patent amalgamating and continuing the applicants as one bank.

(2) Despite subsection (1), if one of the applicants is a bank named in Schedule I as that Schedule read immediately before the day section 184 of the Financial Consumer Agency of Canada Act comes into force, other than a bank in respect of which the Minister has specified that subsection 378(1) no longer applies, the Minister shall not issue letters patent referred to in subsection (1) unless

(a) the amalgamated bank would be a widely held bank; or

(b) the amalgamated bank would be controlled by a widely held bank holding company that, at the time the application was made, controlled

(i) the applicant, or

(ii) any other applicant that is a bank named in Schedule I as that Schedule read immediately before the day section 184 of the Financial Consumer Agency of Canada Act comes into force, other than a bank in respect of which the Minister has specified that subsection 378(1) no longer applies.

(3) Despite subsection (1), if the amalgamated bank would be a bank with equity of five billion dollars or more, the Minister shall not issue letters patent referred to in that subsection unless the amalgamated bank is

(a) widely held;

(b) controlled, within the meaning of paragraphs 3(1)(a) and (d), by a widely held bank, or by a widely held bank holding company, that controlled one of the applicants at the time the application was made; or

(c) controlled, within the meaning of paragraph 3(1)(d), by a widely held insurance holding company, or by an eligible Canadian financial institution, as defined in subsection 370(1), other than a bank, or by an eligible foreign institution, as defined in subsection 370(1), that controlled one of the applicants at the time the application was made.

1991, c. 46, s. 223; 2001, c. 9, s. 84.

224. (1) Each applicant proposing to amalgamate shall enter into an amalgamation agreement.

(2) Every amalgamation agreement shall set out the terms and means of effecting the amalgamation and, in particular,

(a) the name of the amalgamated bank and the place in Canada where its head office is to be situated;

(b) the name and place of ordinary residence of each proposed director of the amalgamated bank;

(c) the manner in which the shares of each applicant are to be converted into shares or other securities of the amalgamated bank;

(d) if any shares of an applicant are not to be converted into shares or other securities of the amalgamated bank, the amount of money or securities that the holders of those shares are to receive in addition to or in lieu of shares or other securities of the amalgamated bank;

(e) the manner of payment of money in lieu of the issue of fractional shares of the amalgamated bank or of any other body corporate that are to be issued in the amalgamation;

(f) the proposed by-laws of the amalgamated bank;

(g) details of any other matter necessary to perfect the amalgamation and to provide for the subsequent management and operation of the amalgamated bank; and

(h) the proposed effective date of the amalgamation.

(3) If shares of one of the applicants are held by or on behalf of another of the applicants, other than shares held in the capacity of a personal representative or by way of security, the amalgamation agreement must provide for the cancellation of those shares when the amalgamation becomes effective without any repayment of capital in respect thereof, and no provision shall be made in the agreement for the conversion of those shares into shares of the amalgamated bank.

225. An amalgamation agreement shall be submitted to the Minister for approval and any approval of such an agreement pursuant to subsection 226(4) by the holders of any class or series of shares of an applicant is invalid unless, prior to the date of the approval, the Minister has approved the agreement in writing.

226. (1) The directors of each applicant shall submit an amalgamation agreement for approval to a meeting of the holders of shares of the applicant bank or body corporate of which they are directors and, subject to subsection (3), to the holders of each class or series of such shares.

(2) Each share of an applicant carries the right to vote in respect of an amalgamation whether or not it otherwise carries the right to vote.

(3) The holders of shares of a class or series of shares of an applicant are entitled to vote separately as a class or series in respect of an amalgamation if the amalgamation agreement contains a provision that, if contained in a proposed amendment to the by-laws or incorporating instrument of the applicant, would entitle those holders to vote separately as a class or series.

(4) Subject to subsection (3), an amalgamation agreement is approved when the shareholders of each applicant bank or body corporate have approved the amalgamation by special resolution.

(5) An amalgamation agreement may provide that, at any time before the issue of letters patent of amalgamation, the agreement may be terminated by the directors of an applicant notwithstanding that the agreement has been approved by the shareholders of all or any of the applicant banks or bodies corporate.

227. (1) A bank may, without complying with sections 224 to 226, amalgamate with one or more bodies corporate that are incorporated by or under an Act of Parliament if the body or bodies corporate, as the case may be, are wholly-owned subsidiaries of the bank and

(a) the amalgamation is approved by a resolution of the directors of the bank and of each amalgamating subsidiary; and

(b) the resolutions provide that

(i) the shares of each amalgamating subsidiary will be cancelled without any repayment of capital in respect thereof,

(ii) the letters patent of amalgamation and the by-laws of the amalgamated bank will be the same as the incorporating instrument and the by-laws of the amalgamating bank that is the holding body corporate, and

(iii) no securities will be issued by the amalgamated bank in connection with the amalgamation.

(2) Two or more bodies corporate incorporated by or under an Act of Parliament may amalgamate and continue as one bank without complying with sections 224 to 226 if

(a) at least one of the applicants is a bank;

(b) the applicants are all wholly-owned subsidiaries of the same holding body corporate;

(c) the amalgamation is approved by a resolution of the directors of each of the applicants; and

(d) the resolutions provide that

(i) the shares of all applicants, except those of one of the applicants that is a bank, will be cancelled without any repayment of capital in respect thereof,

(ii) the letters patent of amalgamation and the by-laws of the amalgamated bank will be the same as the incorporating instrument and the by-laws of the amalgamating bank whose shares are not cancelled, and

(iii) the stated capital of the amalgamating banks and bodies corporate whose shares are cancelled will be added to the stated capital of the amalgamating bank whose shares are not cancelled.

228. (1) Subject to subsection (2), unless an amalgamation agreement is terminated in accordance with subsection 226(5), the applicants shall, within three months after the approval of the agreement in accordance with subsection 226(4) or the approval of the directors in accordance with subsection 227(1) or (2), jointly apply to the Minister for letters patent of amalgamation continuing the applicants as one bank.

(2) No application for the issue of letters patent under subsection (1) may be made unless

(a) notice of intention to make such an application has been published at least once a week for a period of four consecutive weeks in the Canada Gazette and in a newspaper in general circulation at or near the place where the head office of each applicant is situated; and

(b) the application is supported by satisfactory evidence that the applicants have complied with the requirements of this Part relating to amalgamations.

(3) If two or more bodies corporate, none of which is a bank, apply for letters patent under subsection (1), sections 23 to 26 apply in respect of the application with any modifications that the circumstances require.

(4) Before issuing letters patent of amalgamation continuing the applicants as one bank, the Minister shall take into account all matters that the Minister considers relevant to the application, including

(a) the sources of continuing financial support for the amalgamated bank;

(b) the soundness and feasibility of the plans of the applicants for the future conduct and development of the business of the amalgamated bank;

(c) the business record and experience of the applicants;

(d) the reputation of the applicants for being operated in a manner that is consistent with the standards of good character and integrity;

(e) whether the amalgamated bank will be operated responsibly by persons with the competence and experience suitable for involvement in the operation of a financial institution;

(f) the impact of any integration of the operations and businesses of the applicants on the conduct of those operations and businesses;

(g) the opinion of the Superintendent regarding the extent to which the proposed corporate structure of the amalgamated bank and its affiliates may affect the supervision and regulation of the amalgamated bank, having regard to

(i) the nature and extent of the proposed financial services activities to be carried out by the amalgamated bank and its affiliates, and

(ii) the nature and degree of supervision and regulation applying to the proposed financial services activities to be carried out by the affiliates of the amalgamated bank; and

(h) the best interests of the financial system in Canada.

1991, c. 46, s. 228; 2001, c. 9, s. 85.

229. (1) Where an application has been made to the Minister in accordance with section 228, the Minister may issue letters patent of amalgamation continuing the applicants as one bank.

(2) Where letters patent are issued pursuant to this section, section 28 applies with such modifications as the circumstances require in respect of the issue of the letters patent.

(3) The Superintendent shall cause to be published in the Canada Gazette notice of the issuance of letters patent pursuant to subsection (1).

229.1 (1) If a bank or any director, officer, employee or agent of a bank is contravening or has failed to comply with any term or condition made in respect of the issuance of letters patent of amalgamation, the Minister may, in addition to any other action that may be taken under this Act, apply to a court for an order directing the bank or the director, officer, employee or agent to comply with the term or condition, cease the contravention or do any thing that is required to be done, and on the application the court may so order and make any other order it thinks fit.

(2) An appeal from an order of a court under this section lies in the same manner as, and to the same court to which, an appeal may be taken from any other order of the court.

2001, c. 9, s. 86.

230. (1) On the day provided for in the letters patent issued under section 229

(a) the amalgamation of the applicants and their continuance as one bank becomes effective;

(b) the property of each applicant continues to be the property of the amalgamated bank;

(c) the amalgamated bank continues to be liable for the obligations of each applicant;

(d) any existing cause of action, claim or liability to prosecution is unaffected;

(e) any civil, criminal or administrative action or proceeding pending by or against an applicant may be continued to be prosecuted by or against the amalgamated bank;

(f) any conviction against, or ruling, order or judgment in favour of or against, an applicant may be enforced by or against the amalgamated bank;

(g) if any director or officer of an applicant continues as a director or officer of the amalgamated bank, any disclosure by that director or officer of a material interest in any contract made to the applicant shall be deemed to be disclosure to the amalgamated bank; and

(h) [Repealed, 2001, c. 9, s. 87]

(i) the letters patent of amalgamation are the incorporating instrument of the amalgamated bank.

(2) Any deemed disclosure under paragraph (1)(g) shall be recorded in the minutes of the first meeting of directors of the amalgamated bank.

1991, c. 46, ss. 230, 576; 1997, c. 15, s. 27; 1999, c. 28, s. 14; 2001, c. 9, s. 87.

231. (1) Notwithstanding any other provision of this Act or the regulations, the Minister may, by order, on the recommendation of the Superintendent, grant to a bank in respect of which letters patent were issued under subsection 229(1) permission to

(a) engage in a business activity specified in the order that a bank is not otherwise permitted by this Act to engage in and that one or more of the amalgamating bodies corporate was engaging in at the time application for the letters patent was made;

(b) continue to have issued and outstanding debt obligations the issue of which is not authorized by this Act if the debt obligations were outstanding at the time the application for the letters patent was made;

(c) [Repealed, 1994, c. 47, s. 16]

(d) hold assets that a bank is not otherwise permitted by this Act to hold if the assets were held by one or more of the amalgamating bodies corporate at the time the application for the letters patent was made;

(e) acquire and hold assets that a bank is not otherwise permitted by this Act to acquire or hold if one or more of the amalgamating bodies corporate were obliged, at the time the application for the letters patent was made, to acquire those assets; and

(f) maintain outside Canada any records or registers required by this Act to be maintained in Canada and maintain and process, outside Canada, information and data relating to the preparation and maintenance of such records or registers.

(2) The permission granted under any of paragraphs (1)(a) to (f) shall be expressed to be granted for a period specified in the order not exceeding

(a) with respect to any matter described in paragraph (1)(a), thirty days after the date of issue of the letters patent or, where the activity is conducted pursuant to an agreement existing on the date of issue of the letters patent, the expiration of the agreement;

(b) with respect to any matter described in paragraph (1)(b), ten years; and

(c) with respect to any matter described in any of paragraphs (1)(d) to (f), two years.

(3) Subject to subsection (4), the Minister may, by order on the recommendation of the Superintendent, renew a permission granted by order under subsection (1) with respect to any matter described in any of paragraphs (1)(b) to (e) for any further period or periods that the Minister considers necessary.

(4) The Minister shall not grant to a bank any permission

(a) with respect to matters described in paragraph (1)(b), that purports to be effective more than ten years after the date of the approval for the bank to commence and carry on business, unless the Minister is satisfied on the basis of evidence on oath provided by an officer of the bank that the bank will not be able at law to redeem at the end of the ten years the outstanding debt obligations to which the permission relates; and

(b) with respect to matters described in paragraphs (1)(d) and (e), that purports to be effective more than ten years after the date of issue of the letters patent.

1991, c. 46, s. 231; 1994, c. 47, s. 16; 1997, c. 15, s. 28.

Transfer of Business

232. (1) A bank may sell all or substantially all of its assets to a financial institution incorporated by or under an Act of Parliament or to an authorized foreign bank in respect of its business in Canada if the purchasing financial institution or authorized foreign bank assumes all or substantially all of the liabilities of the bank.

(2) An agreement of purchase and sale (in subsection (3), section 233, subsections 234(1) and (4) and section 236 referred to as a "sale agreement") shall set out the terms of, and means of effecting, the sale of assets referred to in subsection (1).

(3) Notwithstanding anything in this Act, the consideration for a sale referred to in subsection (1) may be cash or fully paid securities of the purchasing financial institution or authorized foreign bank or in part cash and in part fully paid securities of the purchasing financial institution or authorized foreign bank or any other consideration that is provided for in the sale agreement.

1991, c. 46, s. 232; 1999, c. 28, s. 15.

233. A sale agreement shall be submitted to the Minister prior to the sending of the sale agreement to shareholders of the selling bank under subsection 234(1).

234. (1) The directors of a selling bank shall submit a sale agreement for approval to a meeting of the holders of shares of the bank and, subject to subsection (3), to the holders of each class or series of shares of the bank.

(2) Each share of a selling bank carries the right to vote in respect of a sale referred to in subsection 232(1) whether or not the share otherwise carries the right to vote.

(3) The holders of shares of a class or series of shares of a selling bank are entitled to vote separately as a class or series in respect of a sale referred to in subsection 232(1) only if the shares of the class or series are affected by the sale in a manner different from the shares of another class or series.

(4) A sale agreement is approved when the shareholders, and the holders of each class or series of shares entitled to vote separately as a class or series pursuant to subsection (3), of the selling bank have approved the sale by special resolution.

235. Where a special resolution approving a sale under subsection 234(4) so states, the directors of a selling bank may, subject to the rights of third parties, abandon the sale without further approval of the shareholders.

236. (1) Subject to subsection (2), unless a sale agreement is abandoned in accordance with section 235, the selling bank shall, within three months after the approval of the sale agreement in accordance with subsection 234(4), apply to the Minister for approval of the sale agreement.

(2) No application for approval under subsection (1) may be made unless

(a) notice of intention to make such an application has been published at least once a week for a period of four consecutive weeks in the Canada Gazette and in a newspaper in general circulation at or near the place where the head office of the selling bank is situated; and

(b) the application is supported by satisfactory evidence that the selling bank has complied with the requirements of sections 232 to 235 and this section.

(3) A sale agreement has no force or effect until it has been approved by the Minister.

(4) Where an application has been made to the Minister in accordance with subsections (1) and (2), the Minister may approve the sale agreement to which the application relates.

Corporate Records

Head Office and Corporate Records

237. (1) A bank shall at all times have a head office in the place within Canada specified in its incorporating instrument or by-laws.

(2) The directors of a bank may change the address of the head office within the place specified in the incorporating instrument or by-laws.

(3) A bank shall send to the Superintendent, within fifteen days after any change of address of its head office, a notice of the change of address.

238. (1) A bank shall prepare and maintain records containing

(a) its incorporating instrument and the by-laws of the bank and all amendments thereto;

(b) minutes of meetings and resolutions of shareholders;

(c) the information referred to in paragraphs 632(1)(a), (c) and (e) to (h) contained in all returns provided to the Superintendent pursuant to section 632;

(d) particulars of any authorizations, conditions and limitations established by the Superintendent pursuant to section 53 or subsection 54(1) that are from time to time applicable to the bank;

(e) particulars of exceptions granted under section 39, 55 or 231 that are from time to time applicable to the bank; and

(f) particulars from Schedule I or II that are applicable to the bank as they are from time to time amended and published in the Canada Gazette.

(2) In addition to the records described in subsection (1), a bank shall prepare and maintain adequate

(a) corporate accounting records;

(b) records containing minutes of meetings and resolutions of the directors and any committee thereof; and

(c) records showing, for each customer of the bank, on a daily basis, particulars of the transactions between the bank and that customer and the balance owing to or by the bank in respect of that customer.

(3) For the purposes of paragraph (1)(b) and subsection (2),

(a) in the case of a body corporate continued as a bank under this Act, "records" includes similar records required by law to be maintained by the body corporate before it was so continued; and

(b) in the case of a body corporate amalgamated and continued as a bank under this Act, "records" includes similar records required by law to be maintained by the body corporate before it was so amalgamated.

1991, c. 46, s. 238; 1997, c. 15, s. 29(E); 1999, c. 28, s. 16.

239. (1) The records described in section 238 shall be kept at the head office of the bank or at such other place in Canada as the directors think fit.

(2) Where any of the records described in section 238 are not kept at the head office of a bank, the bank shall notify the Superintendent of the place where the records are kept.

(3) Subsection (1) does not apply in respect of records of a branch of the bank outside Canada or in respect of customers of such a branch.

(4) The records described in section 238, other than those described in paragraph 238(2)(c), shall at all reasonable times be open to inspection by the directors.

(5) Shareholders and creditors of a bank and their personal representatives may examine the records referred to in subsection 238(1) during the usual business hours of the bank, and may take extracts therefrom, free of charge, or have copies made thereof on payment of a reasonable fee and, where the bank is a distributing bank within the meaning of subsection 265(1), any other person may, on payment of a reasonable fee, examine such records and take extracts therefrom or copies thereof.

(5.1) A bank may make the information contained in records referred to in subsection 238(1) available to persons by any system of mechanical or electronic data processing or any other information storage device that is capable of reproducing the records in intelligible written form within a reasonable time.

(6) Every shareholder of a bank is entitled, on request made not more frequently than once in each calendar year, to receive, free of charge, one copy of the by-laws of the bank.

1991, c. 46, s. 239; 2001, c. 9, s. 88.

240. (1) A person who is entitled to a basic list of shareholders of a bank (in this section referred to as the "applicant") may request the bank to furnish the applicant with a basic list within ten days after receipt by the bank of the affidavit referred to in subsection (2) and, on payment of a reasonable fee by the applicant, the bank shall comply with the request.

(2) A request under subsection (1) must be accompanied by an affidavit containing

(a) the name and address of the applicant,

(b) the name and address for service of the entity, if the applicant is an entity, and

(c) an undertaking that the basic list and any supplemental lists obtained pursuant to subsections (5) and (6) will not be used except as permitted under section 242,

and, if the applicant is an entity, the affidavit shall be made by a director or an officer of the entity, or any person acting in a similar capacity.

(3) Every shareholder or creditor of a bank or the personal representative of a shareholder or creditor of a bank is entitled to a basic list of shareholders of the bank, but, if the bank is a distributing bank within the meaning of subsection 265(1), any person is entitled to a basic list of shareholders of the bank on request therefor.

(4) A basic list of shareholders of a bank consists of a list of shareholders that is made up to a date not more than ten days before the receipt of the affidavit referred to in subsection (2) and that sets out

(a) the names of the shareholders of the bank;

(b) the number of shares owned by each shareholder; and

(c) the address of each shareholder as shown in the records of the bank.

(5) A person requiring a bank to supply a basic list of shareholders may, if the person states in the accompanying affidavit that supplemental lists are required, request the bank or its agent, on payment of a reasonable fee, to provide supplemental lists of shareholders setting out any changes from the basic list in the names and addresses of the shareholders and the number of shares owned by each shareholder for each business day following the date to which the basic list is made up.

(6) A bank or its agent shall provide a supplemental list of shareholders required under subsection (5)

(a) within ten days following the date the basic list is provided, where the information relates to changes that took place prior to that date; and

(b) within ten days following the day to which the supplemental list relates, where the information relates to changes that took place on or after the date the basic list was provided.

241. A person requiring a bank to supply a basic list or a supplemental list of shareholders may also require the bank to include in that list the name and address of any known holder of an option or right to acquire shares of the bank.

242. A list of shareholders obtained under section 240 shall not be used by any person except in connection with

(a) an effort to influence the voting of shareholders of the bank;

(b) an offer to acquire shares of the bank; or

(c) any other matter relating to the affairs of the bank.

243. (1) A register or other record required or authorized by this Act to be prepared and maintained by a bank

(a) may be in a bound or loose-leaf form or in a photographic film form; or

(b) may be entered or recorded by any system of mechanical or electronic data processing or any other information storage device that is capable of reproducing any required information in intelligible written form within a reasonable time.

(2) Registers and records maintained in one form may be converted to any other form.

(3) Notwithstanding section 246, a bank may destroy any register or other record referred to in subsection (1) at any time after the register or other record has been converted to another form.

244. A bank and its agents shall take reasonable precautions to

(a) prevent loss or destruction of,

(b) prevent falsification of entries in,

(c) facilitate detection and correction of inaccuracies in, and

(d) ensure that unauthorized persons do not have access to or use of information in

the registers and records required or authorized by this Act to be prepared and maintained.

245. (1) Subject to subsection (3), a bank shall maintain and process in Canada any information or data relating to the preparation and maintenance of the records referred to in section 238 unless the Superintendent has, subject to any terms and conditions that the Superintendent considers appropriate, exempted the bank from the application of this section.

(2) Subject to subsections (4) and (5), a bank may maintain copies of the records referred to in subsection (1) outside Canada and may further process outside Canada any information or data relating to those copies.

(3) Subsection (1) does not apply in respect of a branch of the bank outside Canada or in respect of customers of such a branch.

(4) Where a bank, in accordance with subsection (2), maintains outside Canada copies of any records referred to in subsection (1) or further processes information or data relating to those copies outside Canada, the bank shall so inform the Superintendent and provide the Superintendent with a list of those copies maintained outside Canada and a description of the further processing of information or data relating to those copies outside Canada and such other information as the Superintendent may require from time to time.

(5) If the Superintendent is at any time of the opinion that the maintenance outside Canada of any copies referred to in subsection (4), or the further processing of information or data relating to any such copies outside Canada, is incompatible with the fulfilment of the Superintendent's responsibilities under this Act or the Superintendent is advised by the Minister that, in the opinion of the Minister, such maintenance or further processing is not in the national interest, the Superintendent shall direct the bank to maintain those copies, or to further process information or data relating to those copies, in Canada.

(6) A bank shall forthwith comply with any direction issued under subsection (5).

(7) The Superintendent shall issue guidelines respecting the circumstances under which an exemption referred to in subsection (1) may be available.

1991, c. 46, s. 245; 2001, c. 9, s. 89.

246. (1) A bank shall retain

(a) the records of the bank referred to in subsection 238(1);

(b) any record of the bank referred to in paragraph 238(2)(a) or (b); and

(c) the central securities register referred to in subsection 248(1).

(2) A bank shall retain all signature cards and signing authorities or copies thereof relating to any deposit or instrument in respect of which the bank has paid an amount to the Bank of Canada pursuant to section 438 until the Bank of Canada notifies the bank that they need no longer be retained.

(3) Copies of the signature cards and signing authorities referred to in subsection (2) may be kept in any manner or form referred to in paragraphs 243(1)(a) and (b) and any such copies, or prints therefrom, are admissible in evidence in the same manner and to the same extent as the original signature cards and signing authorities.

(4) Nothing in this section affects the operation of any statute of limitation or prescription or relieves the bank from any obligation to the Bank of Canada in respect of any deposit or instrument in respect of which section 438 applies.

247. The Governor in Council may make regulations respecting the records, papers and documents to be retained by a bank and the length of time those records, papers and documents are to be retained.

Securities Registers

248. (1) A bank shall maintain a central securities register in which it shall record the securities, within the meaning of section 81, issued by it in registered form, showing in respect of each class or series of securities

(a) the names, alphabetically arranged, and latest known addresses of the persons who are security holders, and the names and latest known addresses of the persons who have been security holders;

(b) the number of securities held by each security holder; and

(c) the date and particulars of the issue and transfer of each security.

(2) For the purposes of subsection (1), "central securities register" includes similar registers required by law to be maintained by a bank that was in existence immediately prior to the day that subsection comes into force or by a body corporate continued, or amalgamated and continued, as a bank under this Act before the continuance, amalgamation or coming into force of that subsection, as the case may be.

(3) Subsections 239(5) and (5.1) and sections 240 and 242 to 245 apply, with any modifications that the circumstances require, in respect of a central securities register.

1991, c. 46, s. 248; 2001, c. 9, s. 90.

249. A bank may establish as many branch securities registers as it considers necessary.

250. A bank may appoint an agent to maintain its central securities register and each of its branch securities registers.

251. (1) The central securities register of a bank shall be maintained by the bank at its head office or at any other place in Canada designated by the directors of the bank.

(2) A branch securities register of a bank may be kept at any place in or outside Canada designated by the directors of the bank.

252. Registration of the issue or transfer of a security in the central securities register or in a branch securities register is complete and valid registration for all purposes.

253. (1) A branch securities register shall only contain particulars of the securities issued or transferred at the branch for which that register is established.

(2) Particulars of each issue or transfer of a security registered in a branch securities register of a bank shall also be kept in the central securities register of the bank.

254. A bank, its agent or a trustee within the meaning of section 294 is not required to produce

(a) a cancelled security certificate in registered form or an instrument referred to in subsection 69(1) that is cancelled or a like cancelled instrument in registered form after six years from the date of its cancellation;

(b) a cancelled security certificate in bearer form or an instrument referred to in subsection 69(1) that is cancelled or a like cancelled instrument in bearer form after the date of its cancellation; or

(c) an instrument referred to in subsection 69(1) or a like instrument, irrespective of its form, after the date of its expiration.

Corporate Name and Seal

255. A bank shall set out its name in legible characters in all contracts, invoices, negotiable instruments and other documents evidencing rights or obligations with respect to other parties that are issued or made by or on behalf of the bank.

256. An instrument or agreement executed on behalf of a bank by a director, an officer or an agent of the bank is not invalid merely because a corporate seal is not affixed thereto.

257. to 264. [Repealed, 1997, c. 15, s. 30]

Insiders

265. (1) In this section and sections 266 to 272,

"affiliate" means a body corporate that is affiliated with another body corporate within the meaning of subsection 6(2);

"business combination" means an acquisition of all or substantially all the assets of one body corporate by another body corporate or an amalgamation of two or more bodies corporate;

"call" means an option, transferable by delivery, to demand delivery of a specified number or amount of shares at a fixed price within a specified time but does not include an option or right to acquire shares of the body corporate that granted the option or right to acquire;

"distributing bank" means a bank, any of the issued securities of which are or were part of a distribution to the public and remain outstanding and are held by more than one person;

"insider" means, except in subsections 271(2) and 272(1),

(a) a director or an officer of a distributing bank,

(b) a distributing bank that purchases or otherwise acquires, except by means of a donation or redemption, shares issued by it or by any of its affiliates, or

(c) a person who beneficially owns more than 10 per cent of the shares of a distributing bank or who exercises control or direction over more than 10 per cent of the votes attached to shares of a distributing bank, excluding shares owned by a securities underwriter under an underwriting agreement while those shares are in the course of a distribution to the public;

"officer", in relation to a bank, means

(a) an officer as defined in paragraph (a) of the definition "officer" in section 2, or

(b) any natural person who performs functions for the bank similar to those performed by a person referred to in paragraph (a) of the definition "officer" in section 2;

"put" means an option, transferable by delivery, to deliver a specified number or amount of shares at a fixed price within a specified time;

"share" means a voting share and includes

(a) a security currently convertible into a voting share, and

(b) a currently exercisable option or a right to acquire a voting share or a security referred to in paragraph (a).

(2) For the purposes of this section and sections 266 to 272, a person controls a body corporate when the person controls the body corporate within the meaning of section 3, determined without regard to paragraph 3(1)(d).

(3) For the purposes of this section and sections 266 to 272,

(a) a director or an officer of a body corporate that is an insider of a distributing bank is deemed to be an insider of the distributing bank;

(b) a director or an officer of a body corporate that is a subsidiary of a distributing bank is deemed to be an insider of the distributing bank;

(c) a person is deemed to beneficially own shares beneficially owned by a body corporate controlled directly or indirectly by that person;

(d) a body corporate is deemed to beneficially own shares beneficially owned by its affiliates; and

(e) the acquisition or disposition by an insider of an option or right to acquire a share is deemed to be a change in the beneficial ownership of the share to which the option or right to acquire relates.

(4) For the purposes of this section and sections 266 to 272,

(a) if a body corporate becomes an insider of a distributing bank or enters into a business combination with a distributing bank, or

(b) if a distributing bank becomes an insider of a body corporate,

every director or officer of the body corporate and every shareholder of the body corporate who is a person referred to in paragraph (c) of the definition "insider" in subsection (1) is deemed to have been an insider of the distributing bank for the previous six months or for such shorter period as the director, officer or shareholder was a director, officer or shareholder of the body corporate.

Insider Reporting

266. (1) An insider shall send to the Superintendent an insider report in prescribed form not later than ten days after the later of

(a) the end of the month in which the person became an insider, and

(b) the end of the month in which regulations prescribing the form of an insider report come into force.

(2) [Repealed, 1997, c. 15, s. 31]

(3) A person who is an insider of a body corporate on the day it is continued as a bank under this Act shall, if the bank is a distributing bank, send to the Superintendent an insider report in prescribed form not later than ten days after

(a) the end of the month in which the body corporate is continued under this Act, or

(b) the end of the month in which regulations prescribing the form of an insider report come into force,

whichever is later.

(4) A person who is deemed to have been an insider under subsection 265(4) shall, not later than ten days after

(a) the end of the month in which the person is deemed to have become an insider, or

(b) the end of the month in which regulations prescribing the form of an insider report come into force,

whichever is later, send to the Superintendent, in prescribed form and for the period in respect of which the person is deemed to have been an insider, the insider report that the person would have been required to send under this section had the person been otherwise an insider for that period.

1991, c. 46, s. 266; 1997, c. 15, s. 31.

267. An insider whose interest in securities of a distributing bank changes from that shown or required to be shown in the last insider report sent or required to be sent by the insider shall, within ten days after the end of the month in which the change takes place, send to the Superintendent an insider report in prescribed form.

267.1 Under prescribed circumstances, an insider is exempt from any of the requirements of section 266 or 267.

1997, c. 15, s. 32.

268. (1) An insider report of a person that includes securities deemed to be beneficially owned by that person is deemed to be an insider report of a body corporate referred to in paragraph 265(3)(c) and the body corporate is not required to send a separate insider report.

(2) An insider report of a body corporate that includes securities deemed to be beneficially owned by the body corporate is deemed to be an insider report of an affiliate referred to in paragraph 265(3)(d) and the affiliate is not required to send a separate insider report.

(3) An insider report of a person that includes securities deemed to be beneficially owned by that person pursuant to paragraph 265(3)(c) or (d) shall disclose separately

(a) the number of securities owned by a body corporate; and

(b) the name of the body corporate.

269. (1) On an application by or on behalf of an insider, the Superintendent may, in writing, on such terms as the Superintendent thinks fit, exempt the insider from any of the requirements of sections 266 to 268, and the exemption may be given retroactive effect.

(2) The Superintendent shall summarize or cause to be summarized in a periodical available to the public the information contained in insider reports sent to the Superintendent under sections 266 to 268 and the particulars of exemptions granted under subsection (1) together with the reasons therefor.

Insider Trading

270. (1) An insider shall not knowingly sell, directly or indirectly, a share of the distributing bank or any of its affiliates if the insider does not own or has not fully paid for the share to be sold.

(2) Notwithstanding subsection (1), an insider may sell a share that the insider does not own if the insider owns another share convertible into the share sold or an option or right to acquire the share sold and, within ten days after the sale, the insider

(a) exercises the conversion privilege, option or right and delivers the share so acquired to the purchaser; or

(b) transfers the convertible share, option or right to the purchaser.

(3) An insider shall not, directly or indirectly, buy or sell a call or put in respect of a share of the bank or any of its affiliates.

Civil Remedies

271. (1) In subsections (2) and 272(1), "insider" means, with respect to a bank,

(a) the bank;

(b) an affiliate of the bank;

(c) a director or an officer of the bank;

(d) a person who beneficially owns more than 10 per cent of the shares of the bank or who exercises control or direction over more than 10 per cent of the votes attached to the shares of the bank;

(e) a person employed or retained by the bank; and

(f) a person who receives specific confidential information from a person described in this section, including a person described in this paragraph, and who has knowledge that the person giving the information is a person described in this section, including a person described in this paragraph.

(2) For the purposes of subsection 272(1),

(a) if a body corporate becomes an insider of a bank or enters into a business combination with a bank, or

(b) if a bank becomes an insider of a body corporate,

every director or officer of the body corporate is deemed to have been an insider of the bank for the previous six months or for such shorter period as the director or officer was a director or officer of the body corporate.

272. (1) An insider who, in connection with a transaction in a security of the bank or any of its affiliates, makes use of any specific confidential information for the insider's own benefit or advantage that, if generally known, might reasonably be expected to affect materially the value of the security

(a) is liable to compensate any person for any direct loss suffered by that person as a result of the transaction, unless the information was known or in the exercise of reasonable diligence should have been known to that person; and

(b) is accountable to the bank for any direct benefit or advantage received or receivable by the insider as a result of the transaction.

(2) An action to enforce a right created by subsection (1) may not be commenced

(a) after a period of two years after discovery of the facts that gave rise to the cause of action; or

(b) if the transaction was required to be reported under sections 266 to 268, after a period of two years from the time of reporting under those sections.

Prospectus

273. (1) A bank shall not distribute any of its securities and a person shall not distribute any securities of a bank unless a preliminary prospectus and a prospectus in a form substantially as prescribed have been filed with the Superintendent in relation to the distribution and receipts have been received therefor from the Superintendent.

(2) Where there is filed in any jurisdiction a preliminary prospectus, prospectus, short-form prospectus or similar document relating to the distribution of securities in a form substantially as prescribed, a copy of that document may be accepted by the Superintendent under subsection (1).

(3) For the purposes of this section and sections 274 to 282, "distribution" means

(a) a trade by or on behalf of a bank in securities of the bank that have not previously been issued; or

(b) a trade in previously issued securities of a bank from the holdings of any person or group of persons who act in concert and who hold in excess of 10 per cent of the shares of any class of voting shares of the bank.

274. (1) A preliminary prospectus in relation to the distribution of securities shall substantially comply with the requirements of this Act and any regulations made under subsection 275(1) respecting the form and content of a prospectus, except that any report or reports of the auditor or auditors of the bank required by the regulations need not be included.

(2) A preliminary prospectus in relation to the distribution of securities need not include information in respect of the price to the securities underwriter or the offering price of any securities or any other matters dependent on or relating to that price.

275. (1) The Governor in Council may make regulations

(a) respecting the form and content of a preliminary prospectus and a prospectus;

(b) specifying the financial statements, reports and other documents that are to be included with a preliminary prospectus and a prospectus;

(c) respecting, for the purposes of subsection 279(1), the disclosure of material facts in relation to securities to be distributed;

(d) respecting the distribution of a preliminary prospectus and a prospectus to prospective purchasers;

(e) exempting any class of distributions from the application of sections 273, 274 and 276 to 282; and

(f) generally, for carrying out the purposes and provisions of sections 273, 274 and 276 to 282.

(2) Any regulation made under subsection (1) may authorize the Superintendent to permit or require additions to, variations in or omissions from

(a) a preliminary prospectus or prospectus; or

(b) any information, report or document contained or required to be contained in the preliminary prospectus or prospectus or related thereto.

(3) Where a regulation described in subsection (2) has been made, the Superintendent may exercise the authority thereby given in any case where the Superintendent is satisfied that it is necessary to do so owing to the circumstances related to the issue of the securities concerned.

(4) All additions, variations or omissions referred to in subsection (2) shall be made in accordance with the permission or requirement of the Superintendent under that subsection and shall be in accordance with such terms and conditions, if any, as the Superintendent may impose as being necessary to ensure, to the greatest extent possible, a full, true and plain disclosure of all material facts relating to the securities to be distributed.

1991, c. 46, s. 275; 1994, c. 26, s. 5(F); 1999, c. 31, s. 11.

276. (1) On application by a bank or any person proposing to make a distribution, the Superintendent may, by order, exempt that distribution from the application of sections 273, 274 and 277 to 282 if the Superintendent is satisfied that the bank has filed or is about to file, in compliance with the laws of the relevant jurisdiction, a prospectus relating to the distribution that, in form and content, substantially complies with the requirements of this Act and any regulations made under subsection 275(1).

(2) An order under subsection (1) may contain such conditions or limitations as the Superintendent deems appropriate.

1991, c. 46, s. 276; 1999, c. 31, s. 12.

277. (1) The Superintendent shall issue a receipt for a preliminary prospectus forthwith on its filing with the Superintendent.

(2) A person proposing to distribute securities of a bank to which a preliminary prospectus relates shall maintain a record of all persons to whom a copy of the preliminary prospectus has been sent.

(3) Where it appears to the Superintendent, after providing a reasonable opportunity to the person by whom the preliminary prospectus was filed to make representations, that a preliminary prospectus in respect of which a receipt has been issued under subsection (1) is defective in that it does not substantially comply with the requirements of this Act and the regulations, the receipt may be withdrawn and the person by whom the preliminary prospectus was filed shall forthwith be notified of its withdrawal.

(4) Notice of withdrawal of a receipt under subsection (3) shall forthwith be sent by the person by whom the preliminary prospectus was filed to any persons proposing to take part in the distribution of the securities to which the preliminary prospectus relates and, by the bank and each such person, to each person named on the records maintained in respect of the preliminary prospectus by the bank and each such person.

278. (1) The Superintendent shall issue a receipt for a prospectus forthwith on its filing with the Superintendent unless, after providing a reasonable opportunity to the person by whom the prospectus was filed to make representations, it appears to the Superintendent that

(a) the prospectus or any document required to be filed therewith

(i) fails to substantially comply with any of the requirements of this Act or the regulations, or

(ii) contains a misrepresentation or any statement, promise, estimate or forecast that is misleading, false or deceptive; or

(b) it would not be in the public interest to issue a receipt for the prospectus.

(2) to (4) [Repealed, 1996, c. 6, s. 6]

1991, c. 46, s. 278; 1996, c. 6, s. 6.

279. (1) A prospectus shall provide full, true and plain disclosure of all material facts relating to the securities to be distributed and shall contain or be accompanied by such financial statements, reports or other documents as are required by any regulations made under subsection 275(1).

(2) A prospectus shall include a certificate in prescribed form signed

(a) by the chief executive officer and the chief financial officer of the bank making the distribution or, in the event of the absence or inability to act of either of those officers, any other officer of the bank authorized by the directors to sign in the stead of the officer who is absent or unable to act, and such other persons as are prescribed, and

(b) in the case of an initial distribution of shares of a bank, by each person who is a promoter of the bank,

to the effect that, according to the person's information, knowledge and belief, the disclosure required by subsection (1) and by any regulations made under subsection 275(1) has been provided.

(3) For the purposes of subsection (2) and section 281, "promoter" means an applicant for letters patent to incorporate a bank or a director named in the application for letters patent, but such an applicant or director is a promoter only for the period of two years following the application.

280. Where a securities underwriter is associated in the distribution of securities of a bank, a prospectus shall include a certificate in prescribed form signed by each securities underwriter who, with respect to the securities offered by the prospectus, is in a contractual relationship with the bank or other distributor of the securities, to the effect that, according to the securities underwriter's information, knowledge and belief, the disclosure required by subsection 279(1) and by any regulations made under subsection 275(1) has been provided.

281. With the consent of the Superintendent, an agent, duly authorized in writing, of a promoter or a securities underwriter referred to in subsection 279(2) or section 280 may, on behalf of the promoter or securities underwriter, as the circumstances require, sign the certificate referred to in that subsection or section.

282. No person shall distribute a preliminary prospectus or a prospectus in relation to a distribution of securities of a bank except in accordance with any regulations made under subsection 275(1).

Compulsory Acquisitions

283. (1) In this section and sections 284 to 293,

"affiliate" means a body corporate that is affiliated with another body corporate within the meaning of subsection 6(2);

"associate of the offeror" means

(a) a body corporate that an offeror, directly or indirectly, controls, determined without regard to paragraph 3(1)(d), or of which an offeror beneficially owns shares or securities currently convertible into shares carrying more than 10 per cent of the voting rights under all circumstances or by reason of the occurrence of an event that has occurred and is continuing, or a currently exercisable option or right to purchase the shares or the convertible securities,

(b) a partner of the offeror acting on behalf of the partnership of which they are partners,

(c) a trust or estate in which the offeror has a substantial beneficial interest or in respect of which the offeror serves as a trustee or in a similar capacity,

(d) a spouse or common-law partner of the offeror,

(e) a child of the offeror or of the offeror's spouse or common-law partner, or

(f) a relative of the offeror or of the offeror's spouse or common-law partner, if that relative has the same residence as the offeror;

"dissenting offeree" means, in respect of a take-over bid made for all the shares of a class of shares, a holder of a share of that class who does not accept the take-over bid and includes a subsequent holder of that share who acquires it from the first-mentioned holder;

"exempt offer" means an offer

(a) to fewer than fifteen shareholders to purchase shares by way of separate agreements,

(b) to purchase shares through a stock exchange or in the over-the-counter market in such circumstances as may be prescribed,

(c) to purchase shares of a bank that has fewer than fifteen shareholders, two or more joint holders being counted as one shareholder, or

(d) exempted under the order of a court having jurisdiction in the place where the head office of the offeree bank is located;

"offeree" means a person to whom a take-over bid is made;

"offeree bank" means a bank the shares of which are the object of a take-over bid;

"offeror" means a person, other than an agent, who makes a take-over bid, and includes two or more persons who, directly or indirectly,

(a) make take-over bids jointly or in concert, or

(b) intend to exercise jointly or in concert voting rights attached to shares for which a take-over bid is made;

"share" includes

(a) a security currently convertible into a share, and

(b) a currently exercisable option or right to acquire a share or a security referred to in paragraph (a);

"take-over bid" means

(a) an offer, other than an exempt offer, made by an offeror to shareholders at approximately the same time to acquire shares that, if combined with shares already beneficially owned or controlled, directly or indirectly, by the offeror or an affiliate or associate of the offeror on the date of the offer, would exceed 10 per cent of any class of issued shares of an offeree bank, and

(b) an offer to purchase shares of a bank having fewer than fifteen shareholders if the offer is made to all shareholders in the prescribed form and manner,

and includes every offer, other than an exempt offer, by an issuer to repurchase its own shares.

(2) For the purposes of this section and sections 284 to 293, a person controls a body corporate when the person controls the body corporate within the meaning of section 3, determined without regard to paragraph 3(1)(d).

(3) A take-over bid is deemed to be dated as of the date on which it is sent.

1991, c. 46, s. 283; 2000, c. 12, s. 4.

284. If, within one hundred and twenty days after the date of a take-over bid, the bid is accepted by the holders of not less than 90 per cent of the shares of any class of shares to which the take-over bid relates, other than shares held at the date of the take-over bid by or on behalf of the offeror or an affiliate or associate of the offeror, the offeror is entitled, on complying with sections 285 to 290, subsections 291(1) and (2) and section 292, to acquire the shares held by the dissenting offerees.

285. (1) An offeror may acquire shares held by a dissenting offeree by sending by registered mail within sixty days after the date of termination of the take-over bid and in any event within one hundred and eighty days after the date of the take-over bid, an offeror's notice to each dissenting offeree and to the Superintendent stating that

(a) offerees holding not less than 90 per cent of the shares of any class of shares to which the take-over bid relates, other than shares held at the date of the take-over bid by or on behalf of the offeror or an affiliate or associate of the offeror, have accepted the take-over bid;

(b) the offeror is bound to take up and pay for or has taken up and paid for the shares of the offerees who accepted the take-over bid;

(c) a dissenting offeree is required to elect

(i) to transfer the dissenting offeree's shares to the offeror on the same terms on which the offeror acquired the shares from the offerees who accepted the take-over bid, or

(ii) to demand payment of the fair value of the dissenting offeree's shares in accordance with sections 289 to 292 by notifying the offeror within twenty days after receipt of the offeror's notice;

(d) a dissenting offeree who does not notify the offeror in accordance with subparagraph (c)(ii) is deemed to have elected to transfer the dissenting offeree's shares to the offeror on the same terms on which the offeror acquired the shares from the offerees who accepted the take-over bid; and

(e) a dissenting offeree must send the dissenting offeree's shares to which the take-over bid relates to the offeree bank within twenty days after the dissenting offeree receives the offeror's notice.

(2) Concurrently with sending the offeror's notice under subsection (1), the offeror shall send to the offeree bank a notice of adverse claim in accordance with subsection 129(1) with respect to each share held by a dissenting offeree.

286. A dissenting offeree to whom an offeror's notice is sent under subsection 285(1) shall, within twenty days after receipt of that notice, send the dissenting offeree's share certificates of the class of shares to which the take-over bid relates to the offeree bank.

287. (1) Within twenty days after the offeror sends an offeror's notice under subsection 285(1), the offeror shall pay or transfer to the offeree bank the amount of money or other consideration that the offeror would have had to pay or transfer to a dissenting offeree if the dissenting offeree had elected to transfer the dissenting offeree's shares as described in subparagraph 285(1)(c)(i).

(2) An offeree bank is deemed to hold in a fiduciary capacity for the dissenting offerees the money or other consideration it receives under subsection (1).

(3) An offeree bank shall deposit the money received under subsection (1) in a separate account in another deposit-taking financial institution in Canada and the offeree bank shall place any other consideration in the custody of another deposit-taking financial institution in Canada.

288. Within thirty days after an offeror sends an offeror's notice under subsection 285(1), the offeree bank shall

(a) issue to the offeror a share certificate in respect of the shares that were held by dissenting offerees;

(b) give to each dissenting offeree who elects to transfer shares as described in subparagraph 285(1)(c)(i) and who sends the share certificates as required under section 286, the money or other consideration to which that dissenting offeree is entitled, disregarding fractional shares, which may be paid for in money; and

(c) send to each dissenting offeree who has not sent share certificates as required under section 286 a notice stating that

(i) the shares have been cancelled,

(ii) the offeree bank or some designated person holds in a fiduciary capacity for that offeree the money or other consideration to which that offeree is entitled as payment for or in exchange for the shares, and

(iii) the offeree bank will, subject to sections 289 to 292, send that money or other consideration to that offeree forthwith after receiving the share certificates.

289. (1) Where a dissenting offeree has elected to demand payment of the fair value of the offeree's shares as described in subparagraph 285(1)(c)(ii), the offeror may, within twenty days after it has paid the money or transferred the other consideration under subsection 287(1), apply to a court to fix the fair value of the shares of that dissenting offeree.

(2) If an offeror fails to apply to a court under subsection (1), a dissenting offeree may apply to a court for the same purpose within a further period of twenty days.

(3) An application under subsection (1) or (2) shall be made to a court having jurisdiction in the place at which the head office of the bank is situated or in the province in which the dissenting offeree resides if the bank carries on business in that province.

(4) A dissenting offeree is not required to give security for costs in an application made under subsection (1) or (2).

290. On an application under subsection 289(1) or (2),

(a) all dissenting offerees who have made elections under subparagraph 285(1)(c)(ii) and whose shares have not been acquired by the offeror shall be joined as parties and are bound by the decision of the court; and

(b) the offeror shall notify each affected dissenting offeree of the date, place and consequences of the application and of the dissenting offeree's right to appear and be heard in person or by counsel at the hearing of the application.

291. (1) On an application to a court under subsection 289(1) or (2), the court may determine whether any other person is a dissenting offeree who should be joined as a party, and the court shall then fix a fair value for the shares of all dissenting offerees.

(2) A court may in its discretion appoint one or more appraisers to assist the court in fixing a fair value for the shares of a dissenting offeree.

(3) The final order of a court shall be made against the offeror in favour of each dissenting offeree and for the amount for each dissenting offeree's shares as fixed by the court.

(4) In connection with proceedings under subsection 289(1) or (2), a court may make any order it thinks fit and, without limiting the generality of the foregoing, may

(a) fix the amount of money or other consideration that is deemed to be held in a fiduciary capacity under subsection 287(2);

(b) order that the money or other consideration is to be held in trust by a person other than the offeree bank;

(c) allow a reasonable rate of interest on the amount payable to each dissenting offeree from the date the dissenting offeree sends the share certificates required under section 286 until the date of payment; or

(d) order that any money payable to a shareholder who cannot be found is to be paid to the Minister.

292. Where no application is made to a court under subsection 289(2) within the period set out in that subsection, a dissenting offeree is deemed to have elected to transfer the dissenting offeree's shares to the offeror on the same terms on which the offeror acquired the shares from the offerees who accepted the take-over bid.

293. The Minister shall pay to the Bank of Canada any amounts paid to the Minister under subsection 291(4), and section 367 applies in respect thereof as if the amounts paid under subsection 291(4) had been paid under subsection 366(3).

Trust Indentures

294. In this section and sections 295 to 306,

"event of default" means, in relation to a trust indenture, an event specified in the trust indenture on the occurrence of which the principal, interest and other moneys payable thereunder become or may be declared to be payable before maturity, but the event is not an event of default until all the conditions set out in the trust indenture in connection with the giving of notice of the event have been satisfied or the period of time for giving the notice has elapsed;

"issuer" means a bank that has issued, is about to issue or is in the process of issuing subordinated indebtedness;

"trustee" means any person appointed as trustee under the terms of a trust indenture to which a bank is a party, and includes any successor trustee;

"trust indenture" means any deed, indenture or other instrument, including any supplement or amendment thereto, made by a bank under which the bank issues subordinated indebtedness and in which a person is appointed as trustee for the holders of the subordinated indebtedness issued thereunder.

295. Sections 296 to 306 apply in respect of a trust indenture if the subordinated indebtedness issued or to be issued under the trust indenture is part of a distribution to the public.

296. The Superintendent may, in writing, exempt a trust indenture from the application of sections 297 to 306 if, in the Superintendent's opinion, the trust indenture and the subordinated indebtedness are subject to a law of a province or other jurisdiction, other than Canada, that is substantially equivalent to the provisions of this Act relating to trust indentures.

297. (1) No person shall be appointed as trustee if at the time of the appointment there is a material conflict of interest between the person's role as trustee and any other role of the person.

(2) A trustee shall, within ninety days after the trustee becomes aware that a material conflict of interest exists,

(a) eliminate the conflict of interest; or

(b) resign from office.

298. A trust indenture and any subordinated indebtedness issued thereunder are valid notwithstanding a material conflict of interest of the trustee.

299. If a trustee is appointed in contravention of subsection 297(1) or if a trustee contravenes subsection 297(2), any interested person may apply to a court for an order that the trustee be replaced, and the court may make an order on such terms as it thinks fit.

300. A trustee, or at least one of the trustees if more than one is appointed, must be

(a) a company to which the Trust and Loan Companies Act applies; or

(b) a body corporate that is incorporated by or under an Act of the legislature of a province and authorized to carry on business as a trustee.

1991, c. 46, ss. 300, 577.

301. (1) A holder of subordinated indebtedness issued under a trust indenture may, on payment to the trustee of a reasonable fee and on delivery of a statutory declaration to the trustee, require the trustee to provide, within fifteen days after the delivery to the trustee of the statutory declaration, a list setting out

(a) the names and addresses of the registered holders of the outstanding subordinated indebtedness,

(b) the principal amount of outstanding subordinated indebtedness owned by each such holder, and

(c) the aggregate principal amount of subordinated indebtedness outstanding

as shown on the records maintained by the trustee on the day the statutory declaration is delivered to that trustee.

(2) On the demand of a trustee, the issuer of subordinated indebtedness shall provide the trustee with the information required to enable the trustee to comply with subsection (1).

(3) Where the person requiring the trustee to provide a list under subsection (1) is an entity, the statutory declaration required under that subsection shall be made by a director or an officer of the entity or a person acting in a similar capacity.

(4) The statutory declaration required under subsection (1) must state

(a) the name and address of the person requiring the trustee to provide the list and, if the person is an entity, the address for service thereof; and

(b) that the list will not be used except as permitted by subsection (5).

(5) No person shall use a list obtained under this section except in connection with

(a) an effort to influence the voting of the holders of subordinated indebtedness;

(b) an offer to acquire subordinated indebtedness; or

(c) any other matter relating to the subordinated indebtedness or the affairs of the issuer or guarantor thereof.

302. (1) An issuer or a guarantor of subordinated indebtedness issued or to be issued under a trust indenture shall, before undertaking

(a) the issue, certification and delivery of subordinated indebtedness under the trust indenture, or

(b) the satisfaction and discharge of the trust indenture,

provide the trustee with evidence of compliance with the conditions in the trust indenture in respect thereof.

(2) On the demand of a trustee, the issuer or guarantor of subordinated indebtedness issued or to be issued under a trust indenture shall provide the trustee with evidence of compliance with the conditions in the trust indenture by the issuer or guarantor in respect of any act to be done by the trustee at the request of the issuer or guarantor.

(3) The following documents constitute evidence of compliance for the purposes of subsections (1) and (2):

(a) a statutory declaration or certificate made by a director or an officer of the issuer or guarantor stating that the conditions referred to in subsections (1) and (2) have been complied with;

(b) an opinion of legal counsel that the conditions of the trust indenture requiring review by legal counsel have been complied with, if the trust indenture requires compliance with conditions that are subject to review by legal counsel; and

(c) an opinion or report of the auditors of the issuer or guarantor, or such other accountant as the trustee selects, that the conditions of the trust indenture have been complied with, if the trust indenture requires compliance with conditions that are subject to review by auditors.

(4) The evidence of compliance referred to in subsection (3) shall include a statement by the person giving the evidence

(a) declaring that the person has read and understands the conditions of the trust indenture referred to in subsections (1) and (2);

(b) describing the nature and scope of the examination or investigation on which the person based the certificate, statement or opinion; and

(c) declaring that the person has made such examination or investigation as the person believes necessary to enable the statements to be made or the opinions contained or expressed therein to be given.

303. (1) On the request of a trustee, the issuer or guarantor of subordinated indebtedness issued under a trust indenture shall provide the trustee with evidence in such form as the trustee requires of compliance with any condition thereof relating to any action required or permitted to be taken by the issuer or guarantor under the trust indenture.

(2) At least once in each twelve month period beginning on the date of the trust indenture and at any other time on the demand of a trustee, the issuer or guarantor of subordinated indebtedness issued under a trust indenture shall provide the trustee with a certificate stating that the issuer or guarantor has complied with all requirements contained in the trust indenture that, if not complied with, would, with the giving of notice, lapse of time or otherwise, constitute an event of default, or, if there has been failure to so comply, giving particulars thereof.

304. A trustee shall, within thirty days after the trustee becomes aware of the occurrence thereof, give to the holders of subordinated indebtedness issued under a trust indenture notice of every event of default arising under the trust indenture and continuing at the time the notice is given, unless the trustee believes on reasonable grounds that it is in the best interests of the holders of the subordinated indebtedness to withhold the notice and so informs the issuer and guarantor in writing.

305. (1) In exercising a trustee's powers and discharging a trustee's duties, the trustee shall

(a) act honestly and in good faith with a view to the best interests of the holders of the subordinated indebtedness issued under the trust indenture; and

(b) exercise the care, diligence and skill of a reasonably prudent trustee.

(2) Notwithstanding subsection (1), a trustee is not liable if the trustee relies in good faith on statements contained in a statutory declaration, certificate, opinion or report that complies with this Act or the trust indenture.

306. No term of a trust indenture or of any agreement between a trustee and the holders of subordinated indebtedness issued thereunder or between the trustee and the issuer or guarantor operates to relieve a trustee from the duties imposed on the trustee by sections 297, 301 and 304 and subsection 305(1).

Financial Statements and Auditors

Annual Financial Statement

307. (1) The financial year of a bank ends, at the election of the bank in its by-laws, on the expiration of the thirty-first day of October or the thirty-first day of December in each year.

(2) If a bank, after the first day of July in any year, obtains an order approving the commencement and carrying on of business, the first financial year of the bank ends, at the election of the bank in its by-laws, on the expiration of the thirty-first day of October or the thirty-first day of December in the next calendar year.

(3) Despite subsection (1), the financial year of a bank named in Schedule I as that Schedule read immediately before the day section 184 of the Financial Consumer Agency of Canada Act comes into force ends on the expiration of the thirty-first day of October in each year unless the bank elects in its by-laws to have its financial year end on the thirty-first day of December in each year.

1991, c. 46, s. 307; 2001, c. 9, s. 91.

308. (1) The directors of a bank shall place before the shareholders at every annual meeting

(a) a comparative annual financial statement (in this Act referred to as an "annual statement") relating separately to

(i) the financial year immediately preceding the meeting, and

(ii) the financial year, if any, immediately preceding the financial year referred to in subparagraph (i);

(b) the report of the auditor or auditors of the bank; and

(c) any further information respecting the financial position of the bank and the results of its operations required by the by-laws of the bank to be placed before the shareholders at the annual meeting.

(2) An annual statement of a bank must contain, with respect to each of the financial years to which it relates,

(a) a balance sheet as at the end of the financial year,

(b) a statement of income for the financial year,

(c) a statement of change of financial position for the financial year, and

(d) a statement of changes in shareholders' equity for the financial year,

showing such information and particulars as in the opinion of the directors are necessary to present fairly, in accordance with the accounting principles referred to in subsection (4), the financial position of the bank as at the end of the financial year to which it relates and the results of the operations and changes in the financial position of the bank for that financial year.

(3) A bank shall include with its annual statement

(a) a list of the subsidiaries of the bank, other than subsidiaries that are not required to be listed by the regulations and subsidiaries acquired pursuant to section 472 or pursuant to a realization of security in accordance with section 473 and which the bank would not otherwise be permitted to hold, showing, with respect to each subsidiary,

(i) its name and the address of its head or principal office,

(ii) the book value of the aggregate of any shares of the subsidiary beneficially owned by the bank and by other subsidiaries of the bank, and

(iii) the percentage of the voting rights attached to all the outstanding voting shares of the subsidiary that is carried by the aggregate of any voting shares of the subsidiary beneficially owned by the bank and by other subsidiaries of the bank; and

(b) such other information as the Governor in Council may, by order, require in such form as may be prescribed.

(4) The financial statements referred to in subsection (1), paragraph (3)(b) and subsection 310(1) shall, except as otherwise specified by the Superintendent, be prepared in accordance with generally accepted accounting principles, the primary source of which is the Handbook of the Canadian Institute of Chartered Accountants. A reference in any provision of this Act to the accounting principles referred to in this subsection shall be construed as a reference to those generally accepted accounting principles with any specifications so made.

(5) The Governor in Council may make regulations respecting subsidiaries that are not required to be listed for the purposes of paragraph (3)(a).

1991, c. 46, s. 308; 1997, c. 15, s. 33; 2001, c. 9, s. 92.

309. (1) The directors of a bank shall approve the annual statement and the approval of the directors shall be evidenced by the signature of

(a) the chief executive officer or, in the event of that officer's absence or inability to act, any other officer of the bank authorized by the directors to sign in the stead of the chief executive officer; and

(b) one director, if the signature required by paragraph (a) is that of a director, or two directors if the signature required by that paragraph is that of an officer who is not a director.

(2) A bank shall not publish copies of an annual statement unless it is approved and signed in accordance with subsection (1).

310. (1) A bank shall keep at its head office a copy of the current financial statements of each subsidiary of the bank.

(2) Subject to this section, the shareholders of a bank and their personal representatives may, on request therefor, examine the statements referred to in subsection (1) during the usual business hours of the bank and may take extracts therefrom free of charge.

(3) A bank may refuse to permit an examination under subsection (2) by any person.

(4) Within fifteen days after a refusal under subsection (3), the bank shall apply to a court for an order barring the right of the person concerned to make an examination under subsection (2) and the court shall either order the bank to permit the examination or, if it is satisfied that the examination would be detrimental to the bank or to any other body corporate the financial statements of which would be subject to examination, bar the right and make any further order it thinks fit.

(5) A bank shall give the Superintendent and the person seeking to examine the statements referred to in subsection (1) notice of an application to a court under subsection (4), and the Superintendent and the person may appear and be heard in person or by counsel at the hearing of the application.

311. (1) A bank shall, not later than twenty-one days before the date of each annual meeting or before the signing of a resolution under paragraph 152(1)(b) in lieu of the annual meeting, send to each shareholder at the shareholder's recorded address a copy of the documents referred to in subsections 308(1) and (3), unless that time period is waived by the shareholder.

(2) A bank is not required to comply with subsection (1) with respect to a shareholder who has informed the bank, in writing, that the shareholder does not wish to receive the annual statement.

(3) Where a bank is required to comply with subsection (1) and the bank does not comply with that subsection, the annual meeting at which the documents referred to in that subsection are to be considered shall be adjourned until that subsection has been complied with.

1991, c. 46, s. 311; 1997, c. 15, s. 34.

312. (1) Subject to subsection (2), a bank shall send to the Superintendent a copy of the documents referred to in subsections 308(1) and (3) not later than twenty-one days before the date of each annual meeting of shareholders of the bank.

(2) If a bank's shareholders sign a resolution under paragraph 152(1)(b) in lieu of an annual meeting, the bank shall send a copy of the documents referred to in subsections 308(1) and (3) to the Superintendent not later than thirty days after the signing of the resolution.

1991, c. 46, s. 312; 1997, c. 15, s. 35; 2001, c. 9, s. 93.

Auditors

313. For the purposes of this section and sections 314 to 333,

"firm of accountants" means a partnership, the members of which are accountants engaged in the practice of accounting, or a body corporate that is incorporated by or under an Act of the legislature of a province and engaged in the practice of accounting;

"member", in relation to a firm of accountants, means

(a) an accountant who is a partner in a partnership, the members of which are accountants engaged in the practice of accounting, or

(b) an accountant who is an employee of a firm of accountants.

314. (1) The shareholders of a bank shall, by ordinary resolution at the first meeting of shareholders and at each succeeding annual meeting, appoint a firm of accountants to be the auditor of the bank until the close of the next annual meeting.

(2) The shareholders of a bank may, by ordinary resolution at the first meeting of shareholders and at each succeeding annual meeting, appoint two firms of accountants to be the auditors of the bank until the close of the next annual meeting.

(3) The remuneration of the auditor or auditors may be fixed by ordinary resolution of the shareholders but, if not so fixed, shall be fixed by the directors.

315. (1) A firm of accountants is qualified to be an auditor of a bank if

(a) two or more members thereof are accountants who

(i) are members in good standing of an institute or association of accountants incorporated by or under an Act of the legislature of a province,

(ii) each have at least five years experience at a senior level in performing audits of a financial institution,

(iii) are ordinarily resident in Canada, and

(iv) are independent of the bank; and

(b) the member of the firm jointly designated by the firm and the bank to conduct the audit of the bank on behalf of the firm is qualified in accordance with paragraph (a).

(2) For the purposes of subsection (1),

(a) independence is a question of fact; and

(b) a member of a firm of accountants is deemed not to be independent of a bank if that member or any other member of the firm of accountants, or if the firm of accountants

(i) is a director or an officer or employee of the bank or of any affiliate of the bank or is a business partner of any director, officer or employee of the bank or of any affiliate of the bank,

(ii) beneficially owns or controls, directly or indirectly, a material interest in the shares of the bank or of any affiliate of the bank, or

(iii) has been a liquidator, trustee in bankruptcy, receiver or receiver and manager of any affiliate of the bank within the two years immediately preceding the firm's proposed appointment as auditor of the bank, other than an affiliate that is a subsidiary of the bank acquired pursuant to section 472 or through a realization of security pursuant to section 473.

(3) Within fifteen days after appointing a firm of accountants as auditor of a bank, the bank and the firm of accountants shall jointly designate a member of the firm who has the qualifications described in subsection (1) to conduct the audit of the bank on behalf of the firm and the bank shall forthwith notify the Superintendent in writing of the designation.

(4) Where for any reason a member of a firm of accountants designated pursuant to subsection (3) ceases to conduct the audit of the bank, the bank and the firm of accountants may jointly designate another member of the same firm of accountants who has the qualifications described in subsection (1) to conduct the audit of the bank and the bank shall forthwith notify the Superintendent in writing of the designation.

(5) In any case where subsection (4) applies and a designation is not made pursuant to that subsection within thirty days after the designated member ceases to conduct the audit of the bank, there shall be deemed to be a vacancy in the office of auditor of the bank.

1991, c. 46, s. 315; 2001, c. 9, s. 94.

316. (1) An auditor that ceases to be qualified under section 315 shall resign forthwith after any member of the firm becomes aware that the firm has ceased to be so qualified.

(2) Any interested person may apply to a court for an order declaring that an auditor of a bank has ceased to be qualified under section 315 and declaring the office of auditor to be vacant.

317. (1) The shareholders of a bank may, by ordinary resolution at a special meeting, revoke the appointment of an auditor.

(2) The Superintendent may at any time revoke the appointment of an auditor made under subsection (3) or 314(1) or section 319 by notice in writing signed by the Superintendent and sent by registered mail to the auditor and to the bank addressed to the usual place of business of the auditor and the bank.

(3) A vacancy created by the revocation of the appointment of an auditor under subsection (1) may be filled at the meeting at which the appointment was revoked and, if not so filled, shall be filled by the directors under section 319.

318. (1) An auditor of a bank ceases to hold office when

(a) the auditor resigns; or

(b) the appointment of the auditor is revoked by the shareholders or the Superintendent.

(2) The resignation of an auditor becomes effective at the time a written resignation is sent to the bank or at the time specified in the resignation, whichever is later.

319. (1) Subject to subsection 317(3), where a vacancy occurs in the office of auditor of a bank, the directors shall forthwith fill the vacancy, and the auditor so appointed holds office for the unexpired term of office of the predecessor of that auditor.

(2) Where the directors fail to fill a vacancy in accordance with subsection (1), the Superintendent may fill the vacancy and the auditor so appointed holds office for the unexpired term of office of the predecessor of that auditor.

(3) Where the Superintendent has, pursuant to subsection (2), appointed a firm of accountants to fill a vacancy, the Superintendent shall designate the member of the firm who is to conduct the audit of the bank on behalf of the firm.

320. (1) The auditor or auditors of a bank are entitled to receive notice of every meeting of shareholders and, at the expense of the bank, to attend and be heard thereat on matters relating to the duties of the auditor or auditors.

(2) If a director or shareholder of a bank, whether or not the shareholder is entitled to vote at the meeting, gives written notice, not less than ten days before a meeting of shareholders, to an auditor or former auditor of the bank that the director or shareholder wishes the auditor's attendance at the meeting, the auditor or former auditor shall attend the meeting at the expense of the bank and answer questions relating to the auditor's or former auditor's duties as auditor.

(3) A director or shareholder who gives notice under subsection (2) shall send concurrently a copy of the notice to the bank and the bank shall forthwith send a copy thereof to the Superintendent.

(4) The Superintendent may attend and be heard at any meeting referred to in subsection (2).

321. (1) An auditor of a bank that

(a) resigns,

(b) receives a notice or otherwise learns of a meeting of shareholders called for the purpose of revoking the appointment of the auditor, or

(c) receives a notice or otherwise learns of a meeting of directors or shareholders at which another firm of accountants is to be appointed in its stead, whether because of the auditor's resignation or revocation of appointment or because the auditor's term of office has expired or is about to expire,

shall submit to the bank and the Superintendent a written statement giving the reasons for the resignation or the reasons why the auditor opposes any proposed action.

(2) Where a bank receives a written statement referred to in subsection (1) that relates to a resignation as a result of a disagreement with the directors or officers of the bank or that relates to a matter referred to in paragraph (1)(b) or (c), the bank shall forthwith send a copy of the statement to each shareholder who is entitled to vote at the annual meeting of shareholders.

322. (1) Where an auditor of a bank has resigned or the appointment of an auditor has been revoked, no firm of accountants shall accept an appointment as auditor of the bank or consent to be an auditor of the bank until the firm of accountants has requested and received from the other auditor a written statement of the circumstances and reasons why the other auditor resigned or why, in the other auditor's opinion, the other auditor's appointment was revoked.

(2) Notwithstanding subsection (1), a firm of accountants may accept an appointment or consent to be appointed as auditor of a bank if, within fifteen days after a request under that subsection is made, no reply from the other auditor is received.

(3) Unless subsection (2) applies, an appointment as auditor of a bank is void if subsection (1) has not been complied with.

323. (1) The auditor or auditors of a bank shall make such examination as the auditor or auditors consider necessary to enable the auditor or auditors to report on the annual statement and on other financial statements required by this Act to be placed before the shareholders, except such annual statements or parts thereof as relate to the period referred to in subparagraph 308(1)(a)(ii).

(2) The examination of the auditor or auditors referred to in subsection (1) shall, except as otherwise specified by the Superintendent, be conducted in accordance with generally accepted auditing standards, the primary source of which is the Handbook of the Canadian Institute of Chartered Accountants.

324. (1) On the request of the auditor or auditors of a bank, the present or former directors, officers, employees or agents of the bank shall, to the extent that such persons are reasonably able to do so,

(a) permit access to such records, assets and security held by the bank or any entity in which the bank has a substantial investment, and

(b) provide such information and explanations

as are, in the opinion of the auditor or auditors, necessary to enable the auditor or auditors to perform the duties of the auditor or auditors of the bank.

(2) On the request of the auditor or auditors of a bank, the directors of the bank shall, to the extent that they are reasonably able to do so,

(a) obtain from the present or former directors, officers, employees and agents of any entity in which the bank has a substantial investment the information and explanations that such persons are reasonably able to provide and that are, in the opinion of the auditor or auditors, necessary to enable them to perform the duties of the auditor or auditors of the bank; and

(b) provide the auditor or auditors with the information and explanations so obtained.

(3) A person who in good faith makes an oral or written communication under subsection (1) or (2) shall not be liable in any civil action arising from having made the communication.

325. (1) The Superintendent may, in writing, require that the auditor or auditors of a bank report to the Superintendent on the extent of the procedures of the auditor or auditors in the examination of the annual statement and may, in writing, require that the auditor or auditors enlarge or extend the scope of that examination or direct that any other particular procedure be performed in any particular case, and the auditor or auditors shall comply with any such requirement of the Superintendent and report to the Superintendent thereon.

(2) The Superintendent may, in writing, require that the auditor or auditors of a bank make a particular examination relating to the adequacy of the procedures adopted by the bank for the safety of its creditors and shareholders, or any other examination as, in the Superintendent's opinion, the public interest may require, and report to the Superintendent thereon.

(3) The Superintendent may direct that a special audit of a bank be made if, in the opinion of the Superintendent, it is so required and may appoint for that purpose a firm of accountants qualified pursuant to subsection 315(1) to be an auditor of the bank.

(4) The expenses entailed by any examination or audit referred to in any of subsections (1) to (3) are payable by the bank on being approved in writing by the Superintendent.

1991, c. 46, s. 325; 1999, c. 31, s. 13(F).

326. (1) The auditor or auditors shall, not less than twenty-one days before the date of the annual meeting of the shareholders of the bank, make a report in writing to the shareholders on the annual statement referred to in subsection 308(1).

(2) In each report required under subsection (1), the auditor or auditors shall state whether, in the opinion of the auditor or auditors, the annual statement presents fairly, in accordance with the accounting principles referred to in subsection 308(4), the financial position of the bank as at the end of the financial year to which it relates and the results of the operations and changes in the financial position of the bank for that financial year.

(3) In each report referred to in subsection (2), the auditor or auditors shall include such remarks as the auditor or auditors consider necessary when

(a) the examination has not been made in accordance with the auditing standards referred to in subsection 323(2);

(b) the annual statement has not been prepared on a basis consistent with that of the preceding financial year; or

(c) the annual statement does not present fairly, in accordance with the accounting principles referred to in subsection 308(4), the financial position of the bank as at the end of the financial year to which it relates or the results of the operations or changes in the financial position of the bank for that financial year.

327. (1) The auditor or auditors of a bank shall, if required by the shareholders, audit and report to the shareholders on any financial statement submitted by the directors to the shareholders, and the report shall state whether, in their opinion, the financial statement presents fairly the information required by the shareholders.

(2) A report of the auditor or auditors made under subsection (1) shall be attached to the financial statement to which it relates and a copy of the statement and report shall be sent by the directors to every shareholder and to the Superintendent.

328. (1) It is the duty of the auditor or auditors of a bank to report in writing to the chief executive officer and chief financial officer of the bank any transactions or conditions that have come to the attention of the auditor or auditors affecting the well-being of the bank that in the opinion of the auditor or auditors are not satisfactory and require rectification and, without restricting the generality of the foregoing, the auditor or auditors shall, as occasion requires, make a report to those officers in respect of

(a) transactions of the bank that have come to the attention of the auditor or auditors and that in the opinion of the auditor or auditors have not been within the powers of the bank, and

(b) loans owing to the bank by any person the aggregate amount of which exceeds one half of one per cent of the regulatory capital of the bank and in respect of which, in the opinion of the auditor or auditors, loss to the bank is likely to occur,

but when a report required under paragraph (b) has been made in respect of loans to any person, it is not necessary to report again in respect of loans to that person unless, in the opinion of the auditor or auditors, the amount of the loss likely to occur has increased.

(2) Where the auditor or auditors of a bank make a report under subsection (1),

(a) the auditor or auditors shall transmit the report, in writing, to the chief executive officer and chief financial officer of the bank;

(b) the report shall be presented to the first meeting of the directors following its receipt;

(c) the report shall be incorporated in the minutes of that meeting; and

(d) the auditor or auditors shall, at the time of transmitting the report to the chief executive officer and chief financial officer, provide the Superintendent with a copy of the report.

329. (1) A bank shall take all necessary steps to ensure that each of its subsidiaries has as its auditor the auditor or one of the auditors of the bank.

(2) Subsection (1) applies in the case of a subsidiary that carries on its operations in a country other than Canada unless the laws of that country do not permit the appointment of an auditor of the bank as the auditor of that subsidiary.

(3) Subsection (1) does not apply in respect of any particular subsidiary where the bank, after having consulted its auditor or auditors, is of the opinion that the total assets of the subsidiary are not a material part of the total assets of the bank.

330. (1) The auditor or auditors of a bank are entitled to receive notice of every meeting of the audit committee and the conduct review committee of the bank and, at the expense of the bank, to attend and be heard at that meeting.

(2) If so requested by a member of the audit committee, the auditor or auditors shall attend every meeting of the audit committee held during the member's term of office.

1991, c. 46, s. 330; 1993, c. 34, s. 7(F).

331. (1) The auditor or auditors of a bank or a member of the audit committee may call a meeting of the audit committee.

(2) The chief internal auditor of a bank or any officer or employee of the bank acting in a similar capacity shall, at the request of the auditor or auditors of the bank and on receipt of reasonable notice, meet with the auditor or auditors.

332. (1) A director or an officer of a bank shall forthwith notify the audit committee and the auditor or auditors of the bank of any error or misstatement of which the director or officer becomes aware in an annual statement or other financial statement on which the auditor or auditors or any former auditor or auditors have reported.

(2) If the auditor or auditors or former auditor or auditors of a bank are notified or become aware of an error or misstatement in an annual statement or other financial statement on which the auditor or auditors reported and in the opinion of the auditor or auditors the error or misstatement is material, the auditor or auditors or former auditor or auditors shall inform each director of the bank accordingly.

(3) When under subsection (2) the auditor or auditors or former auditor or auditors of a bank inform the directors of an error or misstatement in an annual statement or other financial statement, the directors shall

(a) prepare and issue a revised annual statement or financial statement; or

(b) otherwise inform the shareholders and the Superintendent of the error or misstatement.

333. Any oral or written statement or report made under this Act by the auditor or auditors or former auditor or auditors of a bank has qualified privilege.

Remedial Actions

334. (1) Subject to subsection (2), a complainant or the Superintendent may apply to a court for leave to bring an action under this Act in the name and on behalf of a bank or any of its subsidiaries, or to intervene in an action under this Act to which the bank or a subsidiary of the bank is a party, for the purpose of prosecuting, defending or discontinuing the action on behalf of the bank or the subsidiary.

(2) No action may be brought and no intervention in an action may be made under subsection (1) by a complainant unless the court is satisfied that

(a) the complainant has given reasonable notice to the directors of the bank or the subsidiary of the complainant's intention to apply to the court under that section if the directors of the bank or its subsidiary do not bring, diligently prosecute or defend, or discontinue the action;

(b) the complainant is acting in good faith; and

(c) it appears to be in the interests of the bank or the subsidiary that the action be brought, prosecuted, defended or discontinued.

(3) A complainant under subsection (1) shall give the Superintendent notice of the application and the Superintendent may appear and be heard in person or by counsel at the hearing of the application.

335. (1) In connection with an action brought or intervened in under subsection 334(1), the court may at any time make any order it thinks fit including, without limiting the generality of the foregoing,

(a) an order authorizing the Superintendent, the complainant or any other person to control the conduct of the action;

(b) an order giving directions for the conduct of the action;

(c) an order directing that any amount adjudged payable by a defendant in the action be paid, in whole or in part, directly to former and present security holders of the bank or of the subsidiary instead of to the bank or to the subsidiary; and

(d) an order requiring the bank or the subsidiary to pay reasonable legal fees incurred by the Superintendent or the complainant in connection with the action.

(2) Notwithstanding subsection (1), the court may not make any order in relation to any matter that would, under this Act, require the approval of the Minister or the Superintendent.

336. (1) An application made or an action brought or intervened in under subsection 334(1) or section 338 need not be stayed or dismissed by reason only that it is shown that an alleged breach of a right or duty owed to the bank or its subsidiary has been or might be approved by the shareholders of the bank or subsidiary or both, but evidence of approval by the shareholders may be taken into account by the court in making an order under section 335.

(2) An application made or an action brought or intervened in under subsection 334(1) or section 338 shall not be stayed, discontinued, settled or dismissed for want of prosecution without the approval of the court given on such terms as the court thinks fit and, if the court determines that the interests of any complainant might be substantially affected by any stay, discontinuance, settlement or dismissal, the court may order any party to the application or action to give notice to the complainant.

337. (1) A complainant is not required to give security for costs in any application made or any action brought or intervened in under subsection 334(1) or section 338.

(2) In an application made or an action brought or intervened in under subsection 334(1) or section 338, the court may at any time order the bank or its subsidiary to pay to the complainant interim costs, including legal fees and disbursements, but the complainant may be held accountable by the court for those interim costs on final disposition of the application or action.

338. (1) If the name of a person is alleged to be or to have been wrongly entered or retained in, or wrongly deleted or omitted from, the securities register or any other record of a bank, the bank, a security holder of the bank or any aggrieved person may apply to a court for an order that the securities register or record be rectified.

(2) An applicant under this section shall give the Superintendent notice of the application and the Superintendent may appear and be heard in person or by counsel at the hearing of the application.

(3) In connection with an application under this section, the court may make any order it thinks fit including, without limiting the generality of the foregoing,