Corporate Interrelationships (Banks and Bank Holding Companies) Regulations

The Corporate Interrelationships (Banks and Bank Holding Companies) Regulations, made under the Bank Act, came into force on March 8, 2008. The Regulations outline the prescribed conditions for corporate interrelationships between banks and bank holding companies, particularly in relation to the delivery of shares.

For the purpose of subsections 72.1(1) and 716.1(1) of the Act, the conditions include: (a) the consideration received by the bank or the bank holding company for the delivery shares is equal to the fair market value of those shares; (b) the class of shares is widely held and actively traded on certain stock exchanges in Canada; (c) the sole purpose of effecting the acquisition is to transfer the shares to another body corporate; (d) the parties deal at arm's length immediately before the acquisition; and (e) neither party is resident in Canada for the purposes of the Income Tax Act.

The Regulations also outline conditions for the purpose of subsections 72.1(2) and 716.1(2) of the Act, including that the particular subsidiary does not acquire a beneficial interest in the delivery shares and transfers them to shareholders of the other body corporate immediately after the acquisition.

For purposes of subsections 72.1(3) and 716.1(3) of the Act, the Regulations require that if one of the conditions is not met or ceases to be met, the bank or bank holding company shall cancel the delivery shares within 30 days, return any consideration received, and cancel the entry for the consideration in the stated capital account of the bank or bank holding company.