Vol. 149, No. 9 — February 28, 2015

Mutual Property and Casualty Insurance Company with Non-mutual Policyholders Conversion Regulations

Statutory authority

Insurance Companies Act

Sponsoring department

Department of Finance

REGULATORY IMPACT ANALYSIS STATEMENT

For the Regulatory Impact Analysis Statement, see Mutual Property and Casualty Insurance Company Having Only Mutual Policyholders Conversion Regulations.

PROPOSED REGULATORY TEXT

Notice is given that the Governor in Council, pursuant to subsections 237(2) to (3) (see footnote a) and section 1021 (see footnote b) of the Insurance Companies Act (see footnote c), proposes to make the annexed Mutual Property and Casualty Insurance Company with Non-mutual Policyholders Conversion Regulations.

Interested persons may make representations concerning the proposed Regulations within 30 days after the date of publication of this notice. All such representations must cite the Canada Gazette, Part I, and the date of publication of this notice, and be addressed to Glenn Campbell, Director, Financial Institutions Division, Department of Finance, 90 Elgin Street, 13th Floor, Ottawa, Ontario K1A 0G5 (tel.: 613-369-3945; fax: 613-369-3894; email: finlegis@fin.gc.ca).

Ottawa, February 19, 2015

JURICA ČAPKUN
Assistant Clerk of the Privy Council

MUTUAL PROPERTY AND CASUALTY INSURANCE COMPANY WITH NON-MUTUAL POLICYHOLDERS CONVERSION REGULATIONS

INTERPRETATION

Definitions

1. The following definitions apply in these Regulations.

“Act”
« Loi »

“Act” means the Insurance Companies Act.

“conversion”
« transformation »

“conversion” means the conversion of a mutual property and casualty insurance company into a company with common shares.

“converted company”
« société transformée »

“converted company” means a property and casualty insurance company that was a mutual company and has been converted into a company with common shares and, except for the purpose of paragraphs 12(1)(f), 13(2)(n) and 15(2)(i), includes a holding corporation of that company.

“converting company”
« société en transformation »

“converting company” means a mutual property and casualty insurance company whose directors have passed a resolution under section 3 recommending conversion of the company.

“eligibility date”
« date d’admissibilité »

“eligibility date” means the date on which the directors of a mutual property and casualty insurance company pass a resolution under section 3 recommending conversion of the company.

“eligible mutual policyholder”
« souscripteur admissible d’une police mutuelle »

“eligible mutual policyholder” means a person who holds a mutual policy if

“eligible non-mutual policyholder”
« souscripteur admissible d’une police non mutuelle »

“eligible non-mutual policyholder” means a person who

“eligible policyholder”
« souscripteur admissible »

“eligible policyholder” means

“holding corporation”
« société mère »

“holding corporation” means a body corporate that is incorporated as a company under the Act and that holds all of the voting shares of the converted company.

“independent”
« indépendant »

“independent” means, in respect of an actuary, financial market expert or valuation expert, that the actuary, financial market expert or valuation expert

“mutual policy”
« police mutuelle »

“mutual policy” means a policy the holding of which entitles its holder to vote at all policyholder meetings of a converting company, but does not include a policy issued or assumed by a company with common shares that amalgamated with a mutual company after the eligibility date.

“mutual property and casualty insurance company”
« société mutuelle d’assurances multirisques »

“mutual property and casualty insurance company” means a mutual company that is also a property and casualty company.

“non-mutual policy”
« police non mutuelle »

“non-mutual policy” means a policy, other than a mutual policy, that is issued by a mutual property and casualty insurance company.

“related party”
« personne apparentée »

“related party” has the meaning assigned by section 518 of the Act.

“value of the converting company”
« valeur de la société en transformation »

“value of the converting company” means the estimated market value or range of market values of the converting company, excluding

APPLICATION

Companies with non-mutual policyholders

2. These Regulations apply to mutual property and casualty insurance companies in which some of the policyholders hold non-mutual policies.

INITIATION OF CONVERSION PROCESS

Resolution of directors

3. If the directors of a mutual property and casualty insurance company wish to pursue its conversion, they must pass a resolution recommending conversion and setting out

DEVELOPMENT OF CONVERSION PROPOSAL

Before special meeting of eligible policyholders

4. Before seeking authorization from the Superintendent to send a notice referred to in paragraph 237(1.2)(a) of the Act, a converting company must ensure that a conversion proposal has been developed in accordance with sections 5 to 12 and that the right to vote on that conversion proposal and on the authorization referred to in paragraph 237(1.1)(c) of the Act has been extended to all eligible non-mutual policyholders at a special meeting referred to in section 13.

Vote to negotiate

5. Not less than 30 days after the eligibility date, the eligible mutual policyholders must vote by special resolution on whether to negotiate the terms of a conversion proposal with the eligible non-mutual policyholders.

Authorization to send notice of intent to negotiate

6. (1) Within 30 days of an affirmative vote under section 5, the converting company must, for the purpose of obtaining the Superintendent’s authorization to send to its eligible policyholders a notice of intent to negotiate, submit to the Superintendent the notice, which must

Sending and publication of notice

(2) On receipt of the Superintendent’s authorization, the converting company must send the notice to all of its eligible policyholders and publish it on its website.

Application for initial court order

7. (1) Not less than 30 days and not more than 45 days after the day on which a notice is sent under subsection 6(2), the converting company must file with the court an application for an initial order.

Content of initial order

(2) Within 60 days after the filing of the application, the court must make an initial order setting out

Subsequent orders

(3) The court may make any subsequent order that it considers necessary to ensure the efficiency, transparency and fairness of the process of negotiating the conversion proposal.

Publication on website

(4) The converting company must publish on its website all orders made by the court for the purpose of these Regulations.

Application by counsel

8. (1) A member in good standing of the bar — or of the Chambre des notaires du Québec — of the province in which the application for the initial order is made may apply to the court, in the time and manner set out in the initial order, to be appointed as counsel for either the converting company’s eligible mutual policyholders or its eligible non-mutual policyholders in respect of the negotiation of the conversion proposal.

Restrictions

(2) Counsel must not have any interest that is in conflict with that of the category of policyholders they seek to represent and must not be an officer, employee or related party of the converting company.

Service

(3) Counsel who submit an application under subsection (1) must serve a copy of it on the converting company.

Publication

(4) The converting company must publish on its website the names of all counsel who have submitted applications under subsection (1) for each category of policyholders, as well as the content of their applications or a summary of their experience.

Objections

(5) Eligible policyholders may file, in the time and manner set out by the court in the initial order, an objection to the candidacy of any counsel who has submitted an application.

Appointment

(6) The court must appoint counsel for each of the two categories of policyholders and must notify the converting company of its decision following a hearing at which the court assesses the ability of each applicant to fairly and adequately represent the interests of the category of policyholders they seek to represent, including by taking into account their experience in financial law, corporate law, securities law or mediation and arbitration and by having regard to any objections filed under subsection (5).

Publication

(7) The converting company must publish on its website the name and contact information of the selected counsel for each category of policyholders.

Communication

(8) All communication with the policyholder committees is to be done through counsel for the category of policyholders that the committee represents.

Duration of appointment

(9) Counsel’s appointment ends on the day on which the notice referred to in subsection 13(1) is sent or the day on which the conversion process is terminated, whichever is earlier.

Committee membership

9. (1) An eligible policyholder may submit to counsel for the category of policyholders to which they belong, in the time and manner set out in the initial order, an application for membership on the policyholder committee for that category.

Restrictions

(2) Applicants must not have any interest that is in conflict with that of the eligible policyholders they seek to represent and must not be an officer, employee or related party of the converting company.

Filing and service

(3) Counsel must file with the court all applications received under subsection (1) and must serve on counsel for the other category of policyholders and on the converting company the names of the applicants from the category of policyholders they represent.

Publication

(4) The converting company must publish on its website the names of all applicants for membership on each policyholder committee.

Objections

(5) Any eligible policyholder or counsel for a category of policyholders may file, in the time and manner set out by the court in the initial order, an objection to the candidacy of a policyholder who has submitted an application for membership on a policyholder committee.

Appointment

(6) The court must appoint an odd number of eligible policyholders, between three and nine, to be members of each policyholder committee and must notify the converting company and counsel for the category of policyholders represented by that committee of its decision following a hearing at which the court assesses the ability of each applicant to fairly and adequately represent the interests of the category of policyholders they seek to represent, including by taking into account their experience in negotiations and business and financial affairs and by having regard to any objections filed under subsection (5).

Publication

(7) The converting company must publish on its website the names of the members of each policyholder committee.

No liability

(8) No action lies against a member of a policyholder committee for anything done or omitted to be done in good faith in the performance of their functions.

Duration of representation

(9) The policyholder committees are disbanded on the day on which the notice referred to in subsection 13(1) is sent or the day on which the conversion process is terminated, whichever is earlier.

Provision of information

10. (1) The converting company must, subject to the Supervisory Information (Insurance Companies) Regulations and the Supervisory Information (Insurance Holding Companies) Regulations, provide to counsel for each category of policyholders whatever information or documents they reasonably require to facilitate the development of a conversion proposal.

Access to information and documents

(2) Any information or document that the converting company provides to counsel for one category of policyholders must be provided to counsel for the other category.

Confidentiality

(3) The court may make orders respecting the confidentiality of information provided by the converting company.

Costs payable by converting company

11. (1) The court must determine, having regard to their reasonableness, the amounts payable by the converting company in relation to the development of the conversion proposal, including the costs of counsel and any experts retained by the policyholder committees, remuneration for policyholder committee members and reimbursement of their expenses for travel, accommodation and meals in respect of attendance at policyholder committee meetings.

Payment

(2) All amounts determined by the court must be paid by the converting company no later than the day on which it seeks the Superintendent’s authorization to send the notice referred to in paragraph 237(1.2)(a) of the Act or the day on which the conversion process is terminated under section 20, whichever comes first, or on any other day that the court may set.

CONVERSION PROPOSAL

Contents of conversion proposal

12. (1) The two policyholder committees must negotiate, with the assistance of their counsel, a conversion proposal that includes

Valuation day

(2) The Superintendent is authorized to specify the day at which the value of a converting company must be estimated by the converting company.

Calculation of variable amount

(3) The variable amount of benefits referred to in subparagraph (1)(d)(i) must, in respect of each eligible policyholder, be calculated having regard to at least the following factors:

Approval of policyholder committees

(4) The conversion proposal is considered approved by the two policyholder committees once at least two thirds of the members of each committee agree to its terms.

SPECIAL MEETING OF ELIGIBLE MUTUAL POLICYHOLDERS

Superintendent’s authorization

13. (1) Once the conversion proposal has been approved by the two policyholder committees, the converting company must obtain the Superintendent’s authorization to send to the eligible mutual policyholders a notice of a special meeting at which the eligible mutual policyholders may vote by special resolution on whether to amend the company’s by-laws to permit all eligible non-mutual policyholders to vote on the conversion proposal and on the authorization referred to in paragraph 237(1.1)(c) of the Act.

Information and documents to Superintendent

(2) To obtain the Superintendent’s authorization, the converting company must submit to the Superintendent

Financial statement requirements

(3) The financial statements referred to in paragraphs (2)(g) and (h) must be

Decision to authorize

(4) In deciding whether to authorize the sending of the notice, the Superintendent must consider the information and documents submitted under subsection (2) and may consider any additional information or documents relating to the converting company or any aspect of the conversion proposal.

Deadline

(5) The conversion proposal and the opinions referred to in paragraph (2)(b) must be submitted no later than one year after the day on which the court appoints the members of the policyholder committees.

Conditions of authorization

(6) As a condition of authorizing the sending of the notice, the Superintendent may require

Information and documents to eligible mutual policyholders

14. The notice referred to in subsection 13(1) must be sent with

SPECIAL MEETING OF ELIGIBLE POLICYHOLDERS

Superintendent’s authorization

15. (1) Once the converting company’s by-laws are amended to permit the eligible non-mutual policyholders to vote on the conversion proposal and on the authorization referred to in paragraph 237(1.1)(c) of the Act, the converting company must obtain the Superintendent’s authorization to send the notice referred to in paragraph 237(1.2)(a) of the Act.

Information and documents to Superintendent

(2) To obtain the Superintendent’s authorization, the converting company must submit to the Superintendent

Information and documents already submitted

(3) The converting company is not required to resubmit to the Superintendent any information or document referred to in subsection (2) that is unchanged from that submitted to the Superintendent under subsection 13(2).

Financial statement requirements

(4) The financial statements referred to in paragraphs (2)(a) and (b) must be

Decision to authorize

(5) In deciding whether to authorize the sending of the notice, the Superintendent must consider the information and documents submitted under subsection (2) and may consider any additional information or documents relating to the converting company or any aspect of the conversion proposal.

Conditions of authorization

(6) As a condition of authorizing the sending of the notice, the Superintendent may require

Information and documents to eligible policyholders

16. The notice referred to in paragraph 237(1.2)(a) of the Act must be sent with

Notice to policyholders

17. Within 30 days after the approval of a conversion proposal by the eligible policyholders, the directors of a converting company must send a notice to all of its policyholders informing them of the approval and indicating the company’s intention to make an application under section 18.

MINISTERIAL APPROVAL

Application to Minister

18. Within three months after the approval of a conversion proposal by the eligible policyholders, the directors of a converting company must make an application referred to in subsection 237(1) of the Act.

Contents of application

19. (1) An application referred to in subsection 237(1) of the Act must be submitted to the Superintendent and must include

Information and documents already submitted

(2) The converting company is not required to resubmit to the Superintendent any information or document referred to in subsection (1) that is unchanged from that submitted to the Superintendent under subsection 13(2) or 15(2).

Additional information

(3) The Superintendent may request any additional information that he or she considers necessary to make a recommendation to the Minister for the purpose of subsection 237(1) of the Act.

TERMINATION OF CONVERSION PROCESS

Resolution

20. (1) The directors of a converting company may pass a resolution terminating the conversion process at any time before the letters patent of conversion are issued.

Failure to meet deadlines

(2) The conversion process is terminated if the required documents are not submitted to the Superintendent within the time limit set out in subsection 13(5) or if no notice referred to in paragraph 237(1.2)(a) of the Act is sent within one year after the day on which the Superintendent authorizes its sending.

EXEMPTION BY SUPERINTENDENT

Exemption

21. The Superintendent may exempt a converting company from any of the requirements of paragraphs 13(2)(d) to (i), subsection 13(5) and paragraphs 14(g), (l) and (r), 15(2)(a) to (c) and 16(g), (l) and (r), on such terms and conditions as he or she considers appropriate.

RESTRICTIONS

Consideration to officers, employees and related parties

22. (1) Subject to subsection (2), a converting company or converted company must not pay to any officer, employee or related party of the company any fee, compensation or other consideration in relation to the conversion of the company, other than

Contracts for services

(2) A converting company or converted company may pay fees, compensation or other consideration to an entity with which an officer, employee or related party of the company is associated under a contract for services in relation to the conversion that is entered into by the company with the entity on terms and conditions that are at least as favourable to the converting company as market terms and conditions, as defined in subsection 534(2) of the Act.

Issuance of shares

23. A converted company must not, prior to the listing of its shares on a recognized stock exchange in Canada and for a period of one year after that listing, issue or provide shares, share options or rights to acquire shares to the following persons, other than shares issued to them as a result of being an eligible policyholder:

Acquisition

24. During a company’s first two years as a converted company, the Minister may only give an approval under subsection 407(1) of the Act in respect of the company if

COMING INTO FORCE

Publication

25. These Regulations come into force on the day on which they are published in the Canada Gazette, Part II.

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