Bill C-86, entitled “A second Act to implement certain provisions of the budget tabled in Parliament on February 27, 2018 and other measures” (“Bill C-86”), was introduced in the House of Commons on October 29, 2018, and passed second reading with referral to committee on November 6, 2018. Bill C-86 was referred to the Standing Committee on Finance which proposed certain amendments, and the Standing Senate Committees will submit their final reports by December 4, 2018.
Once Bill C-86 comes into force, it will amend certain sections of the Insurance Companies Act (the “ICA”), as well as amend other financial institutions legislation such as the Bank Act and the Trust and Loan Companies Act. Read the text of the latest publication of Bill C-86 here.
If passed, the proposed amendments will, among other things: (i) create new thresholds below which the acquisition of control of, or the acquisition or increase of a substantial investment in, certain entities, including provincially incorporated trust, loan or insurance corporations, provincially incorporated cooperative credit societies, securities dealers, financial intermediaries, and specialized financing entities, will not require the approval of the superintendent of financial institutions (the “Superintendent”), (ii) permit minority investments in the new business growth fund, (iii) permit customers to consent electronically to the receipt of electronic documents, and (iv) clarify that disclosure of privileged information to the Superintendent will not constitute a waiver of privilege.
Control thresholds
Under the current version of the ICA, subject to certain exceptions, companies (as such term is defined in the ICA) must obtain the approval of the Superintendent in order to acquire control of, or acquire or increase a substantial investment in, the permitted entities described above.
Bill C-86 proposes to add to the existing exceptions by creating new thresholds for determining control, and the acquisition or increase of a substantial investment without taking control, of the entities described above, under which the Superintendent’s approval would no longer be required. The new thresholds for control would provide an exception for acquisitions where the target entity’s consolidated assets would constitute less than one percent of the acquiring company’s total consolidated assets in the case of an acquiring company with equity of 12 billion dollars or more, and two percent of the acquiring company’s total consolidated assets in the case of any other acquiring company.
The new thresholds for acquisition or increase of a substantial investment would provide an exception for acquisitions where the value of the shares, or ownership interests in, the target entity to be acquired, directly or indirectly, or acquired within the prior 12 months, by the acquiring company or a subsidiary of the company would constitute less than half a percent of the acquiring company’s total consolidated assets in the case of a company with equity of 12 billion dollars or more, and one percent of the acquiring company’s total consolidated assets in the case of any other company.
Business growth fund
Bill C-86 would permit a company, or a fraternal benefit society, and its subsidiaries to invest a maximum of 200 million dollars in the new Canadian Business Growth Fund (GP) Inc., a CBCA company (defined as the “business growth fund” in Bill C-86). The Advisory Council on Economic Growth recommended the creation of a private sector led growth fund in its report titled “Unlocking Innovation to Drive Scale and Growth”. Read the report here. According to the report, the business growth fund will be led and financed by financial institutions and is expected to address the gap in growth financing for small to medium-sized firms through the purchase of minority stakes or unsecured debt for approved growth and expansion projects. The proposed amendments set limits on the amount of ownership companies can acquire in the business growth fund.
Consent may be given electronically
Under the existing language of section 1037 of the ICA, receipt of an electronic notice or document is not valid unless the addressee has consented to receive documents and notices in electronic format. Bill C-86 proposes to add to section 1037 by providing that a customer may give consent electronically to the receipt of documents or notices in electronic form. If passed, we expect that this amendment would make it easier for insurance companies to comply with the consent requirements relating to the transmission of electronic documents.
No waiver of privilege
Although the ICA currently prohibits supervisory information from being used as evidence in any civil proceedings, Bill C-86 would provide greater certainty that disclosure by a company of any information that is subject to privilege would not constitute a waiver of privilege. The proposed amendment would also prohibit the Superintendent from disclosing any privileged information to any person whose functions include the investigation or prosecution of offences under any act of Parliament or of the legislature of a province. Corresponding changes have been made to section 37 of the Office of the Superintendent of Financial Institutions Act.
We will keep you informed on the progress of Bill C-86 and its effect on the ICA.
