1988 BILL 56 Third Session, 21st Legislature, 37 Elizabeth II THE LEGISLATIVE ASSEMBLY OF ALBERTA BILL 56 CREDIT UNION ACT THE PROVINCIAL TREASURER First Reading Second Reading Committee of the Whole Third Reading Royal Assent Title: 1988 (21st, 3rd) Bill 56, Credit Union Act

Bill 56 BILL 56 1988 CREDIT UNION ACT (Assented to , 1988) Table of Contents

Part 1

Interpretation and Application

Interpretation 1

Interpretation respecting related parties 2 Application generally 3 Application respecting related parties 4 Generally accepted accounting principles and auditing standards 5

Part 2 Administration Administration of Act 6 Continuance and composition of Corporation 7 Corporation’s board and terms of office 8 Register 9 Registration and effective date of certificates 10 Ministerial or Corporation orders, directions and approvals 11 Form of documents 12 Extension of time 13 Circulation and minuting of letters 14 Retention of documents 15 Confidentiality of information 16 Service on Minister 17

Part 3 Continuance, Incorporation and Commencement of Business Division 1 Continuance of Existing Credit Unions Continuance 18 Division 2 Incorporation of New Credit Unions

Interpretation and application 19 Entitlement to incorporate 20 Application for incorporation 21 Approval or refusal of application 22 Incorporation and registration of articles, etc. 23 Division 3 Commencement of Business Requirements for commencing business 24 Revocation of certificate of incorporation 25 1

Part 4 Organization and Structure Essential Features of a Credit Union Purposes and mode of operation 26 Amendment and Restatement of Articles Amendment or replacement of articles 27 Amendment of articles reflecting change in bond 28 Articles and certificate of amendment 29 Restatement of articles 30 Names Name of credit union 31 Change of name 32 Use of name 33 Addresses, Service and Records Registered office and addresses 34 Service on credit union 35 Record-keeping 36 Examination of documents 37 Form of documents 38 Seal, Fiscal Year and Annual Return Seal 39 Fiscal year 40 Annual return 41 Corporate Incidents Capacity and powers 42 Absence of constructive notice 43 Reliance by persons dealing with credit union 44 By-laws 45 General Business Restrictions Restrictions on business activities 46 Disposal and acquisition of assets 47 Branches and automated machines 48 General Related Party Provisions Related party and associated transactions generally 49 Disclosure and use of confidential information by related parties 50 General exceptions to related party provision prohibitions 51 Related party exemptions by Corporation 52 Professional advisers and related party transactions 53 Related party transaction procedures 54

Part 5 General Meetings and Membership Division 1 General Meetings Annual general meetings 55 Special general meetings 56 Regionalization of meetings 57 Notice of general meetings 58 Quorum 59 Voting at general meetings 60 2

Division 2 Membership Qualifications and restrictions 61 Service of notices and documents on members 62

Part 6 Directors, Officers, Employees and Committees Division 1 Constitutional Affairs Number of directors 63 Election of directors 64 Qualifications of directors 65 Board meetings 66 Duties of board 67 Validity of acts 68 Notice of change of directors 69 Service of notices and documents on directors 70 Remuneration of directors and non-employee officers 71 Division 2 Duties and Liabilities of Directors, Officers and Employees Application 72 Duty of care of directors and officers 73 Liability of directors 74 Reporting by directors and officers to Minister 75 Disclosure of related party and similar transactions 76 Dissent 77 Indemnification 78 Division 3 Committees Appointment, composition and meetings of committees 79 Functions of finance committee 80 General committee provisions 81

Part 7 Financial Disclosure, Audit and Examination Division 1 Financial Disclosure Provision of financial statements, etc., to annual general meeting 82 Issue and publication of financial statements 83 Reporting to Minister and Corporation 84 Division 2 Audit Application 85 Functions of the audit committee 86 Auditor 87 Appointment and termination of office of auditor 88 Auditor’s rights re meetings 89 Audit for fiscal year 90 Release of information for audit 91 Audit details 92 Reporting of discrepancies 93 3

Division 3 Examination, Special Examination and Review Examination of credit unions and subsidiaries by Minister 94 Special examination 95 Financial review by Corporation 96 Powers for examination or review purposes 97

Part 8 Investments Division 1 Land Acquisition, holding and disposal of land 98 Division 2 Non-liquidity Investments Investments in securities 99 Prudent investment standards 100 Authorized investments 101 Investment transactions with related parties generally 102 Investment in subsidiaries 103 Investment in affiliates and other non-subsidiary corporations 104 Division 3 Liquidity Investments Deemed borrowing of liquidity shortfall 105

Part 9 Equity and Deposits Division 1 Equity Common shares 106 Other share provisions 107 Members’ equity requirement 108 Transfer of common shares 109 Redemption of common shares 110 Retained earnings and patronage rebates 111 Division 2 Deposit and Common Share Accounts and Shareholdings Acceptance of deposits from individuals 112 Minor members’ deposits and shareholdings 113 Deposits from related parties and on preferential basis 114 Repayment of deposit and share redemption on death 115 Treatment of larger unclaimed balances by credit unions 116 Treatment of small unclaimed balances by credit unions 117 Transfer to Corporation prior to dissolution 118 Treatment of unclaimed balances by Corporation 119 Restrictions on methods of withdrawal 120 Restrictions on amount of withdrawal 121 Responsibility as to trust money 12 2 Participatory savings accounts 123 Advertising of deposits, etc. 124 4

Part 10 Borrowings Requirement for resolution 125 Supervision in event of heavy borrowings 126 Terms of borrowing 127 Notification of borrowings 128

Part 11 Loans and Guarantees

Interpretation and application 129 General loan procedures 130 Loan mixture 131 Loan maximums 132 Special loans by credit unions 133 Loans to individuals 134 Loans and guarantees to related parties, employees, etc. generally 135 Reporting of loans to directors 136 Interest on loans 137 Acquisition of existing loans 138 Lien and set-off 139

Part 12 The Credit Union Deposit Guarantee Corporation

Interpretation 140 Head office, addresses and service 141 Use of name, seal and corporate incidents 142 Board, chairman and vice-chairman 143 Duties and liabilities of Corporation directors, officers, etc. 144 Corporation’s committees and special loans committee 145 Corporation’s purposes and business activities 146 Financial assistance by Government to Corporation 147 Corporation’s investments 148 Corporation’s subsidiaries 149 Periodic assessments 150 Special assessments 151 Prescribed assessments 152 Assessments generally 153 Guarantee of deposits 154 Corporation’s fiscal year 155 Corporation’s accounting, audit and reporting 156 Liquidation, dissolution and dividends 157

Part 13 Credit Union Central Alberta Limited Continuance of Central 158 Composition of Central 159 Central’s purposes 160 Corporation’s role re Central 161 Name, addresses, service, records, seal, annual return and corporate incidents 162 Central’s by-laws 163 General meetings and service of notices, etc. 164 Board and directors 165 Central directors, officers, employees and committees 166 Restriction on business activities 167 Financial disclosure, accounting and audit 168 Examination, special audit and review 169 Central’s investments 170 Central’s subsidiaries 171 Central’s shares 172 5

Acceptance of deposits and borrowings 173 Loans and guarantees by Central 174 Supervision of Central 175 Administration of Central 176 Responsibility as to trust money 177

Part 14 Financial Unsoundness

Interpretation 178 Declaration of supervision by Minister or Corporation 179 Functions, duties and powers of supervisor 180 Duties and liabilities of credit union under supervision 181 Administration of credit union 182 Functions, duties and powers of administrator 183

Part 15 Amalgamations Voluntary amalgamation 184 Amalgamation agreement under voluntary amalgamation 185 Articles of amalgamation 186 Compulsory amalgamation 187 Certificate and effect of amalgamation 188

Part 16 Dissolution and Liquidation and Dissolution

Interpretation and application 189 Voluntary dissolution or liquidation and dissolution 190 Court supervision of voluntary liquidation and dissolution 191 Involuntary dissolution 192 Dissolution on cancellation of incorporation 193 Dissolution or liquidation and dissolution by Court order 194 Powers of the Court 195 Effect of order or appointment 196 Notice of appointment and liquidation 197 Duties of liquidator 198 Powers of liquidator 199 Limitation on liability 200 Costs of liquidation 201 Distribution of property 202 Ranking of claims 203 Final accounts and end of liquidation 204 Dissolution and effect of dissolution 205 Revival 206

Part 17 Reviews and Appeals

Definitions 207 Rights with respect to review 208 Request for review of decision 209 Appeal without review 210 Appeal to the Court 211 Stay 212

Part 18 Enforcement Demand for information 213 Cease and desist orders 214 Injunction 215 Remedies for contravention of related party provisions 216 General offence provisions 217 6

Specific offences by bodies corporate and subsidiaries 218 Offences by persons generally 219 Penalties 220 Limitation period 221 Order to comply 222

Part 19 Miscellaneous Extra-provincial institutions 223 Valuation of property 224 Lieutenant Governor in Council regulations 225 Ministerial regulations 226 Regulations — treatment of subject-matter 227 Consequential amendments 228 Transitional Transfer of documents to Minister 229 Articles of continuance and by-laws 230 Membership 231 Divestment and retention of land and investments 232 Equity program 233 Guarantee reserve fund 234 Equity accounts 235 Conversion of former membership shares 236 Conversions generally 237 Supervision, administration, liquidation and dissolution 238 Agreements 239 Miscellaneous transitional provisions 240 Repeal, Commencement and “Sunset” Provisions Repeals 241 Coming into force 242 “Sunset” provisions 243 HER MAJESTY, by and with the advice and consent of the Legislative Assembly of Alberta, enacts as follows:

PART 1

INTERPRETATION AND APPLICATION

Interpretation 1(1) In this Act, (a) “affairs” means matters of internal concern to a corporation, including the relationships among the corporation and its mem­ bers, directors, officers, employees, committees and subsidiaries, or any of them, and matters relating to related party transactions, but does not include any business, other than as aforementioned, carried on by the corporation with any of those other persons; (b) “affiliate” means an affiliate, if any, of a credit union or Cen­ tral within the meaning of

section 2(6); (c) “articles” means a credit union’s articles of continuance, in­ corporation or amalgamation, whether in their original or res­ tated form and whether amended or not, and includes articles of amendment, dissolution and revival; 7

(d) “at fair market rate”, subject to

section 49(6), means (

i) in respect of the acquisition, disposition or provision of property or services, including a lease or rental of property, at a consideration that might reasonably be expected to be obtained or given for the property or services in question in an arm’s length transaction in an open market between will­ ing parties to a transaction of that nature and on terms that, having regard to open market conditions, are competitive and not unreasonable, and (ii) in respect of the provision of services that are provided generally to customers of the corporation in question, at the rate and on terms that are offered in respect of those services to customers generally in the ordinary course of that corpo­ ration’s business; (e) “audit committee”, subject to

section 79, means the audit committee or the audit and finance committee of a body corpo­ rate; (f) “auditor” means the external auditor of a corporation and includes any individual who is responsible for conducting an ex­ ternal audit of the corporation’s financial statements on behalf of its external auditor; (g) “board” means the directors of the corporation in question; (h) “body corporate” means a credit union, the Corporation or Central or all or any of them, as the case may be; (i) “bond of association” means the community of interests, if any, between members or proposed members of a credit union deriving from (

i) a common occupation, employer, association, religious af­ filiation or membership of an organization, that exists gen­ erally in Alberta or in a particular area of Alberta, (ii) residence in a particular area of Alberta, other than wholly or predominantly in a city, town, new town, village, summer village or municipal district with a population of more than 5000, or (iii) any other similar relationship, other than one arising generally from residence in Alberta; (j) “borrow” does not include the taking of deposits; (k) “Central” means the Credit Union Central Alberta Limited continued by

section 158; (l) “committee” means the audit, finance or credit committee of a body corporate; (m) “Corporation” means the Credit Union Deposit Guarantee Corporation continued by

section 7, and includes a special loans committee; (n) “corporation” means an incorporated body of persons, wher­ ever or however incorporated; (o) “Court” means the Court of Queen’s Bench; 8

(p) “credit union” means an existing credit union or a body of persons incorporated under Division 2 of

Part 3 or continued as an incorporated credit union or incorporated under

Part 15; (q) “deposit” means money held or to be held by a corporation in a debtor and creditor relationship in the ordinary course of the business of raising money by the acceptance of deposits generally from persons from whom that corporation is legally permitted to receive deposits, that is repayable on demand, after notice, at a fixed date or on the expiry of a fixed term, and includes (

i) any earnings on that money, (ii) the act of paying any such money to or the taking of such money by that corporation, and (iii) any document evidencing the holding of any such money; (r) “designated representative” means an individual, whether a member or not, acting in his representative capacity, who has been designated by a member that is a corporation, partnership or other unincorporated association to represent its membership interests in a credit union; (s) “director” means (

i) in relation to the Corporation, a member of its board, and (ii) in relation to any other corporation, a person occupying the position of director of the corporation, by whatever name called; (t) “earnings” means interest, dividends, patronage rebates and any other distributions credited or paid in relation to deposits or shares, and includes any such distributions accrued but not yet credited or paid; (u) “eligible financial institution” means a treasury branch or a member institution of the Canada Deposit Insurance Corpora­ tion or of any other deposit insurance or guarantee plan pre­ scribed by the Minister; (v) “existing credit union” means a body that was incorporated as a credit union under the former Act and in existence imme­ diately before November 1, 1988; (w) “finance committee”, subject to

section 79, means the fi­ nance committee or the audit and finance committee of a body corporate; (x) “financial institution”, subject to clause (u), means (

i) a securities dealer, or (ii) a member institution of the Canada Deposit Insurance Corporation or of any other deposit insurance or guarantee plan prescribed by the Minister; (y) “fiscal year” means the fiscal year of the body corporate in question; (z) “former Act” means the Credit Union Act,

chapter C-31 of the Revised Statutes of Alberta 1980; 9

(aa) “gazette” (

i) used as a noun, means The Alberta Gazette, and (ii) used as a verb, means publish in an issue of the gazette a notice of the information in question; (bb) “general meeting” means (

i) in relation to a credit union or Central, an annual or spe­ cial general meeting of its members, and (ii) in relation to the Corporation, a meeting of its board, and includes all the regional meetings of a credit union referred to in

section 57; (cc) “individual” means a natural person; (dd) “insolvent” means, in relation to a corporation, in a situa­ tion where (

i) it is unable to meet its obligations as they generally be­ come due, (ii) it has ceased to pay its current obligations in the ordinary course of its business as they generally become due, or (iii) the realizable value of its assets is less than the aggregate of its obligations due and accruing due; (ee) “investment” includes the making of a deposit, but does not include the making of a loan; (ff) “land” means any estate or interest in land, including im­ provements to physical land, except an estate or interest (

i) held by way of security only, or (ii) acquired on or after November 1, 1988 on the realization of any security so held; (gg) “large credit union” means a credit union that, at the end of the fiscal year preceding the relevant time, had assets of a value equal to or in excess of the prescribed amount; (hh) “loan” includes the interest on, and the expenses of, a loan for which the borrower is legally liable to the lender and includes interest that is accrued but not yet payable, but does not include the making of a deposit; (ii) “member”, where used in relation to a credit union, means a person, including a minor, who, whether alone or jointly with others, complies with

section 61 and otherwise qualifies for mem­ bership in it under its by-laws, and includes any person having any rights or obligations relative to the credit union that derive through a member; (jj) “members’ equity” means, in relation to a credit union or Central and subject to any modifications prescribed generally or with respect to specific applications of the expression, (

i) its retained earnings, 10

(ii) the stated capital of shares issued by it, and (iii) the amount in any other prescribed equity account; (kk) Minister” means the member of the Executive Council charged by the Lieutenant Governor in Council with the admin­ istration of this Act; (ll) “officer” means, in relation to a corporation, (

i) its chief executive officer, president, chairman, vice-pres­ ident, vice-chairman, treasurer, secretary, general manager or assistant general manager or any combination of those posi­ tions, (ii) an individual who performs functions for the corporation normally performed by a person mentioned in subclause (i), or (iii) any other person designated an officer by the by-laws or by the board of the corporation; (mm) “ordinary resolution” means a resolution of a body cor­ porate passed by a majority of the votes cast by or on behalf of its members who cast valid votes on that resolution at a general meeting; (nn) “person” means an individual, a corporation, a govern­ ment, a partnership or other firm or unincorporated association of persons, or a trustee or personal representative of a person; (oo) “prescribed”, (

i) in the expression “prescribed by the Minister”, means pre­ scribed or otherwise provided for by regulations made by the Minister, and (ii) otherwise, means prescribed or otherwise provided for by regulations made by the Lieutenant Governor in Council; (pp) “professional adviser” means (

i) an auditor, accountant, appraiser, engineer or lawyer, or (ii) any other person membership in whose profession would tend to lend credibility to a statement made or opinion given by him, and includes an individual who is a member of or works in a professional capacity for a firm that is a professional adviser; (qq) “register”, (

i) where used as a noun, means the register established and maintained under

section 9, and (ii) where used as a verb, means enter into the register pur­ suant to this Act; (rr) “registered mail” includes certified mail; (ss) “related party” means, with respect to a credit union or Cen­ tral, a person referred to in

section 2(4) who is not exempted from the status of related party pursuant to

section 52(2), and “party related to” shall be construed accordingly; 11

(tt) “related party provision” means a provision of this Act or the regulations that relates specifically to a related party transac­ tion and does not relate generally to other business; (uu) “related party transaction” means a transaction to which a credit union or Central or its subsidiary and a party related to that body corporate are or would be parties, whether or not any other persons are or would be parties to the transaction; (vv) “remuneration” includes any perquisite, benefit or advan­ tage provided or to be provided to a person directly or indirectly in respect of or purportedly in respect of services rendered or to be rendered in the capacity in question; (ww) “securities”, subject to clause (xx) and

section 3(3), means shares of capital stock, bonds, mortgages, debentures, trust cer­ tificates, guaranteed investment certificates or receipts, certifi­ cates of deposit, deposit receipts, bills, notes and other evidences of indebtedness or deposits, and includes any other forms of se­ curity prescribed by the Minister to be securities and documents evidencing securities but does not include any items hereinbefore described that are prescribed by the Minister not to be securities; (xx) “securities dealer” means a person who trades in securities within the meaning ascribed to that phrase by the Securities Act or within the meaning ascribed to any equivalent phrase by any equivalent statute of another province; (yy) “small credit union” means a credit union that, at the end of the fiscal year preceding the relevant time, had assets of a value amounting to less than the amount prescribed in relation to clause (gg); (zz) “special loans committee” means an agency of the Corpo­ ration established under

section 145(5); (aaa) “special resolution” means, (

i) where the reference is to a resolution of a board, a reso­ lution passed at a board meeting by a majority of at least % of the votes validly cast by the directors present at that meet­ ing, and (ii) otherwise, a resolution of a body corporate passed by a majority of at least % of the votes cast by or on behalf of its members who cast valid votes on that resolution at a general meeting; (bbb) “special shares” means shares, if any, issued by a credit union or Central under regulations made under

section 225(

c) or, in relation to an existing credit union, continued by

section 107(2); (ccc) “subsidiary” means a subsidiary, if any, of a corporation within the meaning of

section 2(1); (ddd) “supervisor” means a person under whose supervision a credit union or Central, as the case may be, is placed under this Act; (eee) "voting shares” means shares of any class carrying voting rights under all circumstances or carrying voting rights by reason 12

of the occurrence of a contingency that has occurred and is con­ tinuing; (fff) “withdrawal demand” means a cheque or other bill of ex­ change, a withdrawal slip, a receipt or any written demand or direction drawn or made on a credit union for the withdrawal, transfer or repayment of a deposit.

(2) The Lieutenant Governor in Council may, for the purposes of this Act or specified provisions of this Act, by regulation define any expression used in this Act but not defined, and the expression has the meaning so defined.

(3) References in this Act to the acquisition of land include the mak­ ing of improvements to physical land held under any estate or inter­ est.

(4) References in this Act to the repayment of a loan are deemed to include payment of the interest and expenses referred to in subsec­ tion (1)(hh), and references to the making of a loan are deemed to include any renewal of it.

(5) Subject to this Act, the regulations, the articles of a credit union and the by-laws of a body corporate, (

a) section 16(

a) to (

c) of the

Interpretation Act apply to bodies corporate as if they were established by this Act, and (b)

section 17(2) of that Act applies to the Corporation, including its special loans committees, and to the committees of a body corporate as if they were a board established by this Act.

(6) Where this Act requires or permits something to be done by resolution of (

a) the board of a credit union or of Central, or (

b) a specified committee of a credit union or of Central, then that thing must or may, as the case may be, be done by special resolution, ordinary resolution or resolution of the board or, in the case of clause (b), by resolution of that committee.

(7) Where any provision of this Act requires or permits something to be done by ordinary resolution, then, if the by-laws require that it be done by special resolution and notwithstanding that provision of this Act, that thing must be done by special resolution.

(8) Existing credit unions, amalgamated credit unions resulting from amalgamations under this Act, the Corporation and Central shall be treated, for the purposes of any other enactment that refers generally to corporations incorporated by or under

an Act of the Legislature, as incorporated by or under this Act, as the case may be.

(9) In this Act, references to performing an activity are deemed to include omitting to act.

(10) For the purposes of any enactment, other than

Part 3 of this Act, that refers to the articles or certificate of incorporation of a corporation, (

a) articles of continuance or amalgamation, as restated or amended, are deemed to be the articles of incorporation of a credit union that has such articles, and 13

(

b) a certificate of continuance or amalgamation is deemed to be the certificate of incorporation of an existing or amalgamated credit union.

Interpretation respecting related parties 2(1) For the purposes of this Act, a corporation is a subsidiary of another corporation if (

a) it is controlled by (

i) that other corporation, (ii) that other corporation and 1 or more corporations each of which is controlled by that other corporation, or (iii) 2 or more corporations each of which is controlled by that other corporation or (

b) it is a subsidiary of a corporation that is that other corpora­ tion’s subsidiary.

(2) For the purposes of this Act, a corporation is controlled by a person or a group of persons if (

a) securities issued by the corporation carrying more than 50% of the votes that may be cast to elect its directors are held, other than by way of security only, by or for the benefit of that person or the persons comprising that group, and the votes carried by those securities are sufficient, if exercised, to elect a majority of its directors, or (

b) that person has or the persons comprising that group have, in relation to the corporation, any direct or indirect influence which, if exercised, would result in control in fact of the corpo­ ration.

(3) For the purposes of this Act, a corporation is the holding corpo­ ration of another corporation if that other corporation is its subsidi­ ary.

(4) For the purposes of this Act, a person is a related party with respect to a credit union or Central if that person (

a) is a director or officer of that body corporate, (

b) is the spouse of such a director or officer, (

c) is a relative of or a relative of the spouse of, and has the same home as, such a director or officer, (

d) is the auditor of that body corporate, (

e) is an employee of that body corporate who falls within a prescribed class of employees, (

f) is a corporation more than 10% of whose voting shares are beneficially owned, directly or indirectly, by a director or officer of that body corporate, (

g) is a corporation controlled by a person referred to in any of clauses (

a) to (e), (

h) is a subsidiary or an affiliate of that body corporate, 14

(

i) is a director or officer of a subsidiary of that body corporate, or (

j) is designated as a related party under subsection (8).

(5) In subsection (4), (a) “officer” includes a person who has been appointed or elected, or selected for employment, as an officer but who has not yet assumed the office; (b) “relative” means a relative by blood, marriage or adoption; (c) “spouse” includes an individual of the opposite gender who is held out by the director or officer in the community in which they live as his consort.

(6) For the purposes of this Act, a person is an affiliate of a credit union or of Central if that person is not a subsidiary of that body corporate and (

a) is a corporation more than 10% of whose voting shares are beneficially owned, directly or indirectly, by that body corporate, or (

b) has entered into a partnership or joint venture with that body corporate or any of its subsidiaries, but a credit union and Central are not affiliates of each other.

(7) For the purposes of this Act, shares beneficially owned, directly or indirectly, by a subsidiary of a body corporate are deemed to be so owned by that holding body corporate as well.

(8) The Minister may by order designate any person to be a party related to a credit union or Central if the Minister considers that (

a) the person is acting or has acted in concert with a party re­ lated to that body corporate to participate in or enter into a transaction with the body corporate that would be prohibited or restricted by a related party provision if entered into with the body corporate by the related party, or (

b) there exists or has existed between the person and that body corporate an interest or relationship that might reasonably be expected to affect or has affected the exercise of the best judgment of the body corporate with respect to a transaction, and any such designation applies generally, except to the extent, if any, that the designation specifically limits its applicability to speci­ fied transactions or other circumstances. Application generally 3(1) Parts 3 to 11 and 14 to 16 apply only to credit unions and, where so specifically stated, their subsidiaries and affiliates, and do not apply, except where specifically stated, to the Corporation or Central.

(2) Notwithstanding anything in the Securities Act, that Act, except to the extent, if any, prescribed, (

a) applies to credit unions and to securities issued by them, except that it does not apply to shares issued by a credit union, 15

(

b) does not apply to the Corporation or to securities issued by the Corporation, and (

c) applies to Central and to securities issued by Central.

(3) In subsection (2), “securities” means securities within the mean­ ing of the Securities Act.

(4) The Trust Companies Act does not apply to a credit union to the extent that the credit union is lawfully acting as a trustee pursuant to

section 46(7). Application respecting related parties 4(1) To the extent that there is a conflict between the Business Cor­ porations Act and this Act or the regulations in their application to a party related to a credit union or Central, this Act or the regulations prevail.

(2) Where a provision of (

a) the Trust Companies Act, (

b) the Securities Act, (

c) a statute of any other province or of Canada equivalent to

an Act referred to in clause (

a) or (b), (

d) any other prescribed statute, or (

e) the regulations under any such statute applies to a subsidiary of a body corporate and a similar or corre­ sponding provision of this Act or the regulations under it would, but for this subsection, also apply to that subsidiary, that other enact­ ment applies, and the provision of this Act or the regulations does not apply, to the subsidiary.

(3) To the extent that there is any inconsistency in their application to a given situation between a related party provision that prohibits or restricts any activity and any other provision of this Act or the regulations, that related party provision prevails.

(4) To the extent that there is any inconsistency in their application to a given situation between a general provision that is not a related party provision but that prohibits or restricts any activity and a re­ lated party provision that would permit that activity, that general provision prevails. Generally accepted accounting principles and auditing standards 5(1) Subject to this Act, the regulations and any order of the Minister under subsection (3), (

a) with respect to the preparation of the financial statements of a body corporate, the body corporate and any other person re­ sponsible for the preparation shall apply generally accepted ac­ counting principles, including the accounting recommendations of the Canadian Institute of Chartered Accountants set out in the Handbook published by that Institute, as amended from time to time, and (

b) with respect to the examination by a body corporate’s auditor of its financial statements for the purposes of the auditor’s report and with respect to the report itself, the auditor shall apply gen- 16

erally accepted auditing standards, including the auditing rec­ ommendations of that Handbook, as amended from time to time.

(2) Notwithstanding subsection (1)(a), the Minister may prescribe policies or rules that are to apply with respect to the preparation of the financial statements of a credit union or of Central, and a person referred to in subsection (1) shall apply those policies or rules ac­ cordingly.

(3) The Minister may order a credit union or Central to apply or ensure that there are applied any accounting principles, policies or rules that are specified or referred to in the order instead of generally accepted accounting principles or of policies or rules contained in regulations made with reference to subsection (2).

(4) The Minister may order a credit union or Central to ensure that its auditor (

a) applies any auditing procedures, additional to those con­ tained in generally accepted auditing standards, or (

b) prepares any audit reports, additional to the reports required by subsection (1)(b), that are specified or referred to in the order.

(5) The Regulations Act does not apply to generally accepted ac­ counting principles or auditing standards, or to policies, rules or pro­ cedures specified or referred to in an order under subsection (3) or (4).

PART 2 ADMINISTRATION Administration of Act 6(1) Subject to subsection (2) and except to the extent that this Act or the regulations give the Corporation powers, duties or functions relating to the administration or enforcement of this Act, the Min­ ister shall administer and enforce this Act.

(2) Without limiting his delegation powers under any other law, the Minister may in writing delegate any of his powers, duties and func­ tions under this Act or the regulations to the Corporation, other than his powers to make regulations and to administer or enforce this Act as it relates to Central. Continuance and composition of Corporation 7(1) The Credit Union Stabilization Corporation is continued as a corporation under the name “Credit Union Deposit Guarantee Cor­ poration”.

(2) The Corporation consists of its members, and the members of the Corporation are those persons who comprise its board of direc­ tors. Corporation’s board and terms of office 8(1) The Lieutenant Governor in Council shall appoint a board of directors for the Corporation consisting of (a) 1 individual appointed a director on the nomination of Cen­ tral, and (b) 6 other individuals, none of whom is a director, officer or employee of a credit union that is under supervision or administration. 17

(2) Where a director of the Corporation is a director, officer or em­ ployee of a credit union that becomes subject to supervision or administration, he shall forthwith tender his resignation as a director of the Corporation to the Lieutenant Governor in Council, through the Minister, and the Lieutenant Governor in Council shall forthwith revoke his appointment.

(3) The term of office of a director of the Corporation is not to exceed 3 years, except that where a new appointment or his reap­ pointment has not taken place before the expiration of his term of office, the director may continue in office under the expired appoint­ ment until (

a) a new appointment is made or he is reappointed, or (

b) a period of 6 months has elapsed since the expiration of his original term of office, whichever occurs first. Register 9(1) The Minister shall establish and maintain a register into which he shall enter the information and documents respecting bodies cor­ porate that are required to be entered in it by this Act and the regu­ lations.

(2) The Minister shall maintain separate parts of the register relating to credit unions, the Corporation and Central, respectively.

(3) Instead of maintaining the register in written documentary form, the Minister may have the contents of the register entered or re­ corded by any photographic system, any system of mechanical or electronic data processing or any other information storage system that is capable of reproducing the required information in intelligible written form within a reasonable time.

(4) On the request of any person, the Minister shall (

a) permit him to inspect, and (

b) provide him with a certified copy of, any part of the register. Registration and effective date of certificates 10 The Minister shall register all certificates issued by him under this Act at the time that they are issued and such a certificate be­ comes effective on the date it is registered. Ministerial or Corporation orders, directions and approvals 11(1) Subject to subsection (2), where the Minister or the Corpora­ tion is empowered or required to make an order or to give a direction or approval under this Act or the regulations, it must be made or given in writing.

(2) An approval by a special loans committee of the Corporation may be given orally, but that committee shall provide written confir­ mation of an oral approval to the person to whom the approval was given forthwith after giving the approval.

(3) An order made or a direction given by the Minister or the Cor­ poration under this Act or the regulations is effective immediately on its being served or on such later date as is specified in it as the effective date. 18

(4) An order, direction or approval of the Minister or the Corpora­ tion, including an approval of a special loans committee, may be made subject to such terms and conditions as the Minister, the Cor­ poration or the special loans committee, as the case may be, imposes in it.

(5) No right of action lies against the Corporation by reason of its approval of the viability of a business plan, or of changes to a busi­ ness plan, under

Part 3. Form of documents 12(1) The Minister may direct that any document that is to be pro­ vided to him or to the Corporation under this Act or the regulations, other than one whose form is to be prescribed by him, is to be in the form stipulated in the direction, and may similarly direct the number of originals or copies, or both, to be provided.

(2) All certificates issued by the Minister under this Act and all ar­ ticles are to be in the form prescribed by the Minister. Extension of time 13 Where a person is required to provide the Minister or the Cor­ poration with any document or information under this Act or the regulations, the Minister or the Corporation, as the case may be, may, on written application made before the expiration of the last day for providing it, extend the time for its provision for such period as he or it considers appropriate.

Circulation and minuting of letters 14 The Minister may direct a body corporate to provide a copy of any letter addressed to it by the Minister and any answer to that letter to each of its directors, and the body corporate, in addition to complying with the direction, shall include a copy of the Minister’s letter in the minutes of the first board meeting following the direction and of the answer in the minutes of the first board meeting following the answer.

Retention of documents 15(1) Subject to this Act, the Minister or a body corporate shall retain a prescribed document for at least the period of time pre­ scribed in relation to that document.

(2) Where a credit union or Central is dissolved and was in liqui­ dation, the liquidator shall retain the records and other documents of the body corporate and his final accounts for a period of 2 years following the dissolution, and shall, on the expiration of that period, provide them to the Corporation.

(3) Where a credit union or Central is imminently about to be dis­ solved and is not in liquidation, it shall provide all its records and other documents to the Corporation.

(4) The Corporation shall retain a document provided to it under subsection (2) or (3) for at least the prescribed period following the dissolution and may destroy it after that period has elapsed. Confidentiality of information 16(1) Subject to this section, where the Minister or the Corporation obtains information or documents, other than registered or registra­ ble information or documents, regarding the business or affairs of a body corporate or persons dealing with a body corporate as a result of administering or enforcing this Act, the Minister or the Corpora­ tion shall not disclose that information or provide those documents 19

or a copy of them or disclose any information contained in, or allow access to, those documents, to any person.

(2) The Minister or the Corporation may in any manner communi­ cate or provide information, documents or copies referred to in sub­ section (1) whose disclosure he or it considers to be required (

a) for the proper administration or enforcement of this Act, to (

i) the Corporation or the Minister, as the case may be, or (ii) persons acting under his or its direction or authority in the administration or enforcement of this Act, (

b) to enable Central to comply with this Act or the regulations, to Central, (

c) for the purpose of enabling the auditor of a body corporate to fulfil his functions as such, to that auditor, or (

d) for regular law enforcement purposes, to a law enforcement authority.

(3) The Minister may in any manner communicate information, and provide copies of documents, referred to in subsection (1), or allow inspection of or access to any such document, (

a) to the government of any other province or of Canada, (

b) for the purposes of the administration or enforcement of (

i) the Securities Act, to the Chairman of the Alberta Securi­ ties Commission, or (ii) the Trust Companies Act, to the Director of Trust Com­ panies, or (

c) for any prescribed purpose, to any other prescribed person.

(4) The Corporation may provide statistical information compiled for reasons consistent with its purposes about a class of credit unions on an aggregated basis to credit unions within that class and to cor­ porations in other jurisdictions performing deposit insurance or de­ posit guarantee functions.

(5) Subject to subsection (6), a person to whom information or a document or copy is communicated or provided under subsection (2) or (3)(

b) or (

c) shall comply with subsection (1) in respect of it. (6) Subsection (5) does not apply to any disclosure made by the recipient referred to in that subsection (

a) for the relevant purpose, and to the relevant person, referred to in subsection (2)(

c) or (

d) or (3)(

b) or (c), or (

b) to another person acting under that recipient’s direction or authority or otherwise associated with him in securing that pur­ pose.

(7) Where, for the purposes of the administration or enforcement of this Act, the Minister receives information communicated to him, or is allowed inspection of or access to any document provided, by the government or a public body of Canada or of any other province, 20

the Minister shall not disclose the information or the contents of the document other than with the consent of that government or public body.

(8) Subject to subsections (5) and (6), duties under this

section apply, as well as to the person referred to in this section, also to any other person acting under that person’s direction or authority or to whose notice information or a document comes as a result of any relation­ ship with that person. Service on M inister 17 A person may serve a notice or other document on the Minister by (

a) delivering the document or sending it by registered mail to the government office responsible for the day-to-day administra­ tion of credit unions, or (

b) personally serving it on the public officer in charge of that office or his deputy.

PART 3 CONTINUANCE, INCORPORATION AND COMMENCEMENT OF BUSINESS Division 1 Continuance of Existing Credit Unions Continuance 18 Existing credit unions continue to be incorporated credit unions under and subject to this Act, with articles and under a certificate of continuance. Division 2 Incorporation of New Credit Unions

Interpretation and application 19(1) In this Division, “incorporators” means the individuals sub­ scribing the articles of incorporation.

(2) This Division does not apply to a credit union that is to result from an amalgamation. Entitlement to incorporate 20 Twenty or more adult individuals, each of whom is a Canadian citizen or has been lawfully admitted into Canada for permanent residence and is ordinarily resident in Alberta, may, subject to this Division, become incorporated as a credit union under this Division. Application for incorporation 21(1) An application for the incorporation of a credit union under this Division is made by providing to the Minister the articles of incorporation of the proposed credit union.

(2) The articles of incorporation must set out, in respect of the pro­ posed credit union, (

a) its name, (

b) the full name and residential address of each incorporator, (

c) in the case of a credit union that is to have a bond of associ­ ation, a statement of that bond, 21

(

d) in the case of a credit union that is not to have a bond of association, a statement that there is no bond of association, and (

e) a statement of any restrictions or prohibitions, other than those imposed by law, on the businesses that the credit union may carry on.

(3) The articles of incorporation must be subscribed by at least 20 individuals who qualify under

section 20 and who desire to be as­ sociated together as members of the proposed credit union.

(4) The articles of incorporation must be accompanied by (

a) a copy, subscribed by all the incorporators, of the proposed by-laws, (

b) an affidavit verifying the signatures of all persons subscribing the articles of incorporation and by-laws and the fact that all those persons satisfy the qualifications specified in

section 20, (

c) a notice that contains the full name and residential address of each of the proposed first directors, (

d) a name search report in the form prescribed by the Minister respecting the name proposed for the credit union, dated not more than 90 days before the provision of the report to the Min­ ister, (

e) a notice containing the address of the proposed registered office, and (

f) a business plan, and the credit union shall also provide the Corporation with a copy of the business plan. Approval or refusal of application 22 The Minister shall approve the application for incorporation (

a) if he is satisfied that (

i) sections 12 and 21 have been complied with, (ii) the proposed by-laws comply with this Act and the reg­ ulations, (iii) the proposed first directors are qualified to become di­ rectors under

section 65, and (iv) the name proposed for the credit union complies with

section 31, (

b) if the Corporation has notified him in writing that it is satis­ fied that the business plan is viable, and (

c) unless he considers that the application is contrary to the public interest. Incorporation and registration of articles, etc. 23(1) If the Minister approves the application, he shall issue a cer­ tificate of the incorporation of the incorporators as a credit union under this Act stating that they are so incorporated under the name stated in the certificate of incorporation and shall assign to the credit union a registration number. 22

(2) When the Minister issues the certificate of incorporation, he shall enter into the register, in addition to the certificate of incorporation, (

a) the articles of incorporation, (

b) the by-laws, (

c) the affidavit referred to in

section 2l(4)(b), (

d) notice of the registration number of the credit union, (

e) the notice of directors referred to in

section 21(4)(c), and (

f) the notice of registered office referred to in

section 21(4)(e).

(3) On the registration of the certificate of incorporation, the incor­ porators become incorporated as a credit union on the basis set out in the certificate.

(4) Except in proceedings under

section 194, a certificate of incor­ poration is conclusive proof of the facts set out in it and that the provisions of this Act and the regulations in respect of incorporation and all requirements precedent to incorporation have been complied with. Division 3 Commencement of Business Requirements for commencing business 24(1) Subject to subsection (3), a credit union incorporated under Division 2 shall not commence business until the Minister has ap­ proved the commencement of business by it.

(2) The Minister shall not approve the commencement of business unless (

a) the credit union has submitted to him any changes made by it to its business plan, (

b) the Corporation has notified him in writing that it is satisfied that any changes made to the business plan do not affect its viability, and (

c) he is satisfied that (

i) the credit union has at least 50 members, if it has a bond of association, and 250 members if it does not, (ii) the members collectively have subscribed and paid in full for at least the prescribed number of common shares on the condition that they may not be redeemed under any circum­ stances within 1 year after the date of the approval, (iii) the members collectively have deposited at least the pre­ scribed amount and agreed to maintain the deposits with the credit union until at least 6 months after the date of the ap­ proval, (iv) the credit union has demonstrated evidence of its capac­ ity for effective management and direction of its business and affairs, (

v) the certificate of incorporation has not been procured by the fraud or misrepresentation of any person, 23

(vi) the credit union will not be used for an illegal purpose, and (vii) the credit union will fulfil the purposes and mode of operation of a credit union generally under

section 26. (3) Subsection (1) does not prohibit the carrying on of such business as is necessary to enable the credit union to meet the requirements of subsection (2).

(4) The credit union shall pay to Central all deposits and share sub­ scriptions taken before the credit union is permitted to commence business, and Central shall hold them on the prescribed conditions for the members by whom or on whose behalf they were paid, pend­ ing the commencement of business. Revocation of certificate of incorporation 25(1) The Minister, on giving a credit union at least 3 months’ writ­ ten notice of his intention to do so, may revoke its certificate of incorporation if the requirements of

section 24(2) have not been met within 2 years after its incorporation.

(2) Where the Minister receives the written request of the board of a credit union that has not issued any shares and has no property or liabilities, he may revoke the credit union’s certificate of incorpora­ tion.

PART 4 ORGANIZATION AND STRUCTURE Essential Features of a Credit Union Purposes and mode of operation 26(1) The purposes of a credit union are, subject to the restrictions set out in this Act and the regulations, to provide on a co-operative basis financial services wholly or primarily for its members, and its principal purposes are to receive deposits from, and to make loans to, its members.

(2) A credit union shall operate on a co-operative basis such that (

a) subject to

section 60, a member has no more than 1 vote at its general meetings or in respect of elections of its directors and officers, (

b) there is no provision for proxy voting, (

c) membership in it is (

i) voluntary, and (ii) open to individuals resident in Alberta, except to the ex­ tent that, in the case of a credit union with a bond of associ­ ation, it is restricted by that bond, (

d) its business is carried on wholly or primarily for the benefit of its members, and (

e) net income accruing from its business is (

i) distributed to members, (ii) used to develop its business, 24

(iii) used to provide services for its customers, (iv) used for the enhancement of its reserves or retained earn­ ings, or (

v) used for another purpose approved by the members. Amendment and Restatement of Articles Amendment or replacement of articles 27(1) Subject to this Part, a credit union may by special resolution amend any part of its articles so long as the amended articles set out the matters referred to in

section 21(2)(a), (c), (

d) and (

e) and other­ wise comply with this Act and the regulations.

(2) A clerical error in the articles may be amended by the board.

(3) For the purposes of this

section and

section 29, the repeal and replacement of articles shall be deemed to be an amendment of them. Amendment of articles reflecting change in bond 28(1) A credit union may not change from being one with a bond of association to being one without a bond of association unless it sat­ isfies the Minister that (

a) it has at least 250 members, (b)

section 24(2)(c)(ii), (iii) and (iv) have been complied with, with references in those subclauses to the approval to commence business being replaced by references to the date of registration of the amendment of the articles effecting the change, and (

c) the change is not contrary to the public interest.

(2) A credit union may not change from being one without a bond of association to one with a bond of association unless the prescribed conditions, if any, are met. Articles and certificate of amendment 29(1) The credit union must, to enable the amendment to become effective, send the Minister articles of amendment respecting the amendment.

(2) The Minister, on receiving the articles of amendment, shall reg­ ister them and issue a certificate of amendment, unless he considers that the amendment does not comply with this Act or the regulations.

(3) On the registration of the certificate of amendment, the articles are amended in accordance with the certificate.

(4) The amendment does not affect any existing cause of action, claim or liability to prosecution in favour of or against any person or any action or proceeding with respect thereto. Restatement of articles 30(1) A credit union (

a) may, at any time, and (

b) shall, when so directed by the Minister and within the period specified in the direction, restate articles that have previously been amended by providing the restated articles to the Minister.

(2) Restated articles may not contain any amendments to the articles other than amendments that have previously been registered. 25

(3) On his receipt of restated articles that comply with this section, the Minister shall issue a certificate of restated articles.

(4) On the registration of the certificate of restated articles, the res­ tated articles supersede the original articles and all amendments to them. Names Name of credit union 31(1) Subject to this section, a credit union may not have a name (

a) that is the subject of any prohibitions, or that does not meet the requirements, prescribed by the Minister, (

b) that is identical to the name of a corporation or other orga­ nization appearing on an applicable name search report referred to in

section 2l(4)(d), (

c) that so nearly resembles the name of any such corporation or organization that, in the opinion of the Minister, the use of that name would or might be deceiving or misleading to persons deal­ ing with the credit union or the other entity, or (

d) that is otherwise objectionable on grounds of public policy.

(2) A credit union must have the phrase “Credit Union” or “Caisse Populaire” as part of its name.

(3) An existing credit union is not required to change the name that it had on May 13, 1987 to comply with this section. Change of name 32(1) Where a credit union wishes to change its name pursuant to

section 27 it must, unless it has approval to the contrary from the Minister, provide to the Minister a name search report referred to in

section 21(4)(d).

(2) The change of name is subject to the approval of the Minister, who shall determine whether or not the proposed new name complies with this Part and the regulations.

(3) If the Minister approves the change of name, the Minister shall, in addition to complying with

section 29, gazette notice of the change of name unless he considers that the change is so minor that no person will have reason to be confused or misled as to the identity of the credit union following the change. Use of name 33(1) A credit union shall ensure that its name is set out in legible characters on all its contracts, invoices, negotiable instruments and orders for services and all publications and signs advertising its ser­ vices that are provided to any person by it or on its behalf.

(2) Where the name of the credit union ends in “Limited”, “Limi- tée”, “Ltd.” or “Ltée”, the credit union may use and may be legally designated by use of either the full or the abbreviated form. 26

Addresses, Service and Records Registered office and addresses 34(1) A credit union shall have a registered office in Alberta.

(2) A credit union may at any time, by giving written notice to the Minister, designate either or both (

a) a separate records office in Alberta for itself, and (

b) an address in Alberta for service by mail of it.

(3) The credit union may at any time, by giving written notice to the Minister, change the address of its registered office or revoke or change a designation under subsection (2).

(4) The credit union shall not designate a post office box as its reg­ istered office or separate records office.

(5) The Minister, on receiving notice under subsection (2) or (3), shall register it, and a change thereunder is not effective until notice of the change is registered.

(6) Unless a designation of a separate records office is in force, the credit union’s registered office is also its records office. Service on credit union 35 A person may serve a document on a credit union by (

a) delivering the document to the credit union’s registered office during its usual business hours, (

b) personally serving it on any director or officer or, where ap­ plicable, the administrator or liquidator, of the credit union, or (

c) sending it by registered mail to (

i) its registered office, or (ii) the address for service by mail designated in the latest registered notice thereof under

section 34. Record-keeping 36(1) A credit union shall keep at its records office (

a) its articles and by-laws, including all amendments to them, (

b) the minutes of its general meetings, including resolutions passed, (

c) the minutes of its board and committee meetings, including resolutions passed, (

d) a current list of the names and latest known residential ad­ dresses of all persons who are or have within the past year been directors or officers, with the dates on which each directorship or office commenced and, where applicable, ended, (

e) a current list of the names and latest known residential ad­ dresses of all members, and (

f) its financial statements, including any auditor’s reports.

(2) For the purposes of subsection (1), a list is current if it accurately reflects the situation existing at any given date within the 3-month period immediately preceding the time in question. 27

(3) A credit union shall take such precautions to (

a) prevent loss or destruction of, (

b) prevent falsification of, and (

c) facilitate detection and correction of inaccuracies in, the documentary information that this Act or the regulations require it to keep as are appropriate to the means used to record that infor­ mation. Examination of documents 37(1) A credit union shall permit its members or their agents to examine its documents described in

section 36(1)(a), (

b) and (

d) and, subject to

section 83,

section 36(l)(f).

(2) A credit union shall permit any customer or his agent to examine a statement of his transactions with the credit union.

(3) A credit union shall, by by-law, (

a) provide conditional or unconditional rights to its members or their agents to examine the list of members referred to in

section 36(1)(e), and (

b) where those rights are conditional, specify the conditions under which those persons may do so.

(4) A person entitled to examine the list of members pursuant to a by-law under subsection (3) shall not use the list of members for any purpose not legitimately related to the affairs of the credit union.

(5) A person entitled to make an examination under this

section is entitled to make the examination only during the usual business hours of the credit union and on giving the credit union reasonable notice.

(6) The credit union shall permit the person referred to in subsection (5) to make copies, or shall provide him with copies, of the docu­ ments in question.

(7) Notwithstanding anything in this

section but subject to

section 83(2), the credit union may make the provision of any of its services under this

section and

section 38(2) subject to the payment of a reasonable fee for the services. Form of documents 38(1) Documentary information that a credit union is required to keep under this Act or the regulations may be maintained in writing or entered or recorded by a system referred to in

section 9(3).

(2) Where a person is entitled to examine a document that is kept by a credit union in a form other than in writing and makes a request of the credit union to that effect, the credit union shall make the information available to that person in an accurate and intelligible form within a reasonable time and shall, on request, produce to him a written copy of the information. 28

Seal, Fiscal Year and Annual Return Seal 39(1) Subject to

section 33(2), a credit union’s seal, if any, must contain the full name of the credit union in legible characters.

(2) A document executed by or on behalf of a credit union is not invalid by reason only that the seal is not affixed to it. Fiscal year 40 The fiscal year of a credit union ends on October 31 of each year. Annual return 41(1) A credit union shall, within 30 days after its annual general meeting, provide to the Minister and the Corporation, in the form prescribed by the Minister, a return showing (

a) the name of the credit union, (

b) the date of that annual general meeting, (

c) the name and residential address of each director and of each officer who is not a director, (

d) the address of the credit union’s registered office, (

e) the address of its separate records office, if any, (

f) the address designated for service of it by mail, if any, and (

g) the names of the credit union’s subsidiaries.

(2) On receiving the annual return, the Minister shall register it. Corporate Incidents Capacity and powers 42(1) A credit union has the capacity and, subject to this Act and the regulations, the rights, powers and privileges of an individual.

(2) Subject to this Act, a credit union may carry on its business, conduct its affairs and exercise its powers in any jurisdiction outside Alberta to the extent that the laws of that jurisdiction permit.

(3) A credit union shall not do anything that is prohibited by, or do anything in a manner that contravenes, its articles.

(4) An act of a credit union, including the transfer or receipt of property by it, is not invalid by reason only that the act is contrary to this Act, the regulations or its articles or by-laws or is inconsistent with its purposes or the mode of operation referred to in

section 26(2). Absence of constructive notice 43(1) Subject to subsection (2), a person is not affected by or deemed to have notice or knowledge of the contents of a document concern­ ing a credit union by reason only that the document is registered or is available for inspection at an office of a body corporate or of the Minister.

(2) A member, in his capacity as such, is bound by, and shall be treated as having notice and knowledge of the contents of, the articles and by-laws of the credit union. Reliance by persons dealing with credit union 44 Without limiting a person’s rights or obligations under any other law, a credit union or a guarantor of an obligation of a credit union may not assert against a person dealing with the credit union or 29

dealing with any person who has acquired rights from the credit union that (

a) the articles, by-laws or any resolution of the credit union has not been complied with, (

b) the persons named as directors in the most recently registered return or notice under

section 21(4)(c), 41 or 69 are not the di­ rectors, (

c) the place named as its registered office in the most recently registered return or notice under

section 21(4)(e), 34 or 41 is not its registered office, (

d) the address designated for service by mail in the most re­ cently registered return or notice under

section 34 or 41 is not its address for service by mail, (

e) a person held out by the credit union as a director, officer or agent of the credit union (

i) has not been duly appointed, or (ii) has no authority to exercise a power or perform a duty that the director, officer or agent might reasonably be ex­ pected to exercise or perform, (

f) a document issued by a director, officer or agent of the credit union with actual or usual authority to issue the document is not valid or not genuine, or (

g) a sale, lease or exchange of property referred to in

section 47(1) was not authorized, except where that person has, or by virtue of his position with or relationship to the credit union ought to have, knowledge of those facts at the relevant time. By-laws 45(1) In this section, “by-laws” includes any amendment, repeal or repeal and replacement of the by-laws.

(2) A credit union shall by ordinary resolution make by-laws in ac­ cordance with this section.

(3) Notwithstanding anything in this Act except subsection (4), by­ laws are to govern only the administration, management and regu­ lation of the credit union’s affairs.

(4) The by-laws must provide, subject to this Act, for such of the following matters as are applicable to the credit union but are not provided for by this Act or the regulations or set out in the articles: (

a) membership, including qualifications and applications for, approval, continuation, termination and suspension of, and ex­ pulsion from, membership, and the rights and obligations of holders of joint membership; (

b) the calling and holding of, notice for, and the procedure and quorums and the business that must or may be conducted at, general, board and committee meetings, including the agenda at annual general meetings; 30

(

c) voting in respect of general, board and committee meetings, including the manner and form of voting; (

d) the minimum number of board meetings that must be held in any specified 1-year period; (

e) the actual number or any restrictions on the number of direc­ tors; (

f) in respect of directors and officers, their election or appoint­ ment, qualifications, terms of office, suspension and removal and the cessation of their office and the filling of vacancies among their number; (

g) any restrictions on powers that the credit union, or the board, committees, officers or individual directors, would otherwise have, and any requirement that a specified matter may be dealt with only by special or ordinary resolution; (

h) transfers of, and redemption rights for, shares; (

i) the restrictions, if any, on the formation or acquisition of subsidiaries; (

j) all other matters that are required by this Act or the regula­ tions to be dealt with in the by-laws.

(5) The credit union may, by ordinary resolution, (

a) make by-laws providing for any matter that this Act or the regulations provide may be dealt with by by-law, and (

b) amend and repeal its by-laws.

(6) Where this Act or the regulations impose a restriction on a credit union or on its board or any of its committees, the by-laws may provide for still more restrictive requirements, but in no case may they diminish the requirements of this Act or the regulations.

(7) The credit union shall provide the Minister and the Corporation with a certified copy of each by-law within 30 days after the ordinary resolution making it, and the Minister shall register the by-law.

(8) The articles may contain any provision that may be contained in the by-laws and where the articles contain any such provision, ref­ erences in this Act to the by-laws shall be construed accordingly. General Business Restrictions Restrictions on business activities 46(1) A credit union or its subsidiary or affiliate shall not carry on any business unless the carrying on of that business is authorized by or under this

section and is otherwise consistent with this section. (2) Subsections (3) to (5) and (7) are subject to

section 42(3) and any related party provision or other law that prohibits, restricts or other­ wise regulates any activity that would otherwise be permitted by or under those subsections.

(3) A credit union may carry on any business that (

a) is entailed in the fulfilment of any of the purposes of a credit union, or (

b) is prescribed. 31

(4) Subject to subsection (5) and any prescribed terms and condi­ tions, a subsidiary or affiliate may carry on (

a) any business that is entailed in the fulfilment of any of the purposes of a credit union, (

b) the business of (

i) a trust company within the meaning of the Trust Compa­ nies Act or within the meaning ascribed to any equivalent expression by any equivalent statute of another province or of Canada, or (ii) a securities dealer, or (

c) any other prescribed business.

(5) A subsidiary or affiliate shall not engage generally in the business of accepting deposits or lending money unless it is (

a) a financial institution that is legally permitted to do so, or (

b) prescribed as being entitled to do so.

(6) A credit union or a person acting in his capacity as a director, officer or employee of a credit union shall not act as an insurer, agent, broker or adjuster, within the meanings respectively ascribed to those expressions by the Insurance Act.

(7) A credit union may act as trustee for a trust in respect of a prescribed class of transaction if under the terms of the trust the trust investments are in the discretion of the beneficiary or the settlor and not in the discretion of the trustee. Disposal and acquisition of assets 47(1) A credit union shall not sell, lease or exchange all or substan­ tially all of its assets other than in the ordinary course of its business unless the disposal is approved by a special resolution.

(2) A credit union may dispose of assets to a related party that is a financial institution at fair market rate so long as the consideration is fully paid in money, but, without the prior approval of the Cor­ poration, it shall not, in any fiscal year, dispose of assets under this subsection having an aggregate value in excess of 10% of the book value of its assets as at the end of the previous fiscal year.

(3) A credit union may, if its board has previously authorized and the Corporation has previously approved the transaction, enter into a transaction with a related party that is a financial institution if the transaction involves the acquisition or disposal of assets as part of a restructuring of the credit union or an amalgamation. Branches and automated machines 48 A credit union shall not, without the prior approval of the Cor­ poration, (

a) establish an additional branch of its business, (

b) relocate a branch, or (

c) establish an automated banking machine. 32

General Related Party Provisions Related party and associated transactions generally 49(1) Except to the extent, if any, permitted by or under a related party provision, a credit union or its subsidiary shall not directly or indirectly enter into any transaction with a party related to that credit union.

(2) Except to the extent, if any, permitted by or under a related party provision, a party related to a credit union shall not directly or in­ directly enter into any transaction with the credit union or any of its subsidiaries.

(3) A credit union or its subsidiary shall not directly or indirectly enter into any transaction with any person who ceased to be a party related to that credit union during the previous 12 months which, if that person were still a related party, would require the prior author­ ization of the credit union’s board, and such a former related party shall not directly or indirectly enter into such a transaction with the credit union or a subsidiary, unless the transaction (

a) has been authorized by the board of the credit union, and (

b) is at fair market rate.

(4) For the purposes of subsections (1) to (3), a transaction is entered into if an existing transaction, including one entered into before No­ vember 1, 1988, is modified, added to, extended or renewed.

(5) Where a credit union or a subsidiary is permitted by or under a related party provision to enter into a transaction with a related party, that related party may enter into that transaction with that corporation.

(6) Where a transaction is required by or under a related party pro­ vision or subsection (3) to be at fair market rate, that requirement is satisfied, except where the transaction is between a credit union and a subsidiary or between subsidiaries of a credit union, if the trans­ action is at a rate and on terms that exceed or do not exceed fair market rate, as the case may be, if that rate and those terms are more financially advantageous to the credit union or subsidiary than actual fair market rate.

(7) The onus is on a related party or former related party and the credit union or subsidiary to prove, with reference to any related party provision that requires proof of fair market rate or to subsec­ tion (3), that the transaction in question is at or exceeds or does not exceed, as the case may be, fair market rate. Disclosure and use of confidential information by related parties 50(1) A party related to a credit union shall not enter into a trans­ action in which that person would make use of information that is confidential to the credit union or any subsidiary in order directly or indirectly to obtain a benefit or advantage for himself or any other person.

(2) Subject to

section 76, a related party who is or is about to be a party to a related party transaction for which the authorization of the credit union’s board is or will be required shall disclose in writing to the credit union the nature of his interest in that transaction or pro­ posed transaction forthwith after becoming aware of the facts that bring him within the application of this subsection. 33

(3) A former related party referred to in

section 49(3) who is or is about to be a party to any transaction with the credit union or its subsidiary referred to in that subsection shall disclose in writing to the credit union the nature of his interest in that transaction or pro­ posed transaction forthwith after becoming aware of the facts that bring him within the application of this subsection.

(4) The credit union’s board shall ensure that a disclosure under subsection (2) or (3) is entered in the minutes of the first board meeting occurring after the making of the disclosure. General exceptions to related party provision prohibitions 51(1) A credit union or its subsidiary may, if the board of the credit union has previously authorized the transaction, (

a) enter into a written contract with a related party for the pro­ vision of management services to or by the credit union or sub­ sidiary if it is reasonable that the credit union or the subsidiary obtain or supply the services, and so long as the consideration is at fair market rate, (

b) enter into a written lease of personal property with a related party for the use of the credit union or subsidiary in carrying on its business or affairs at fair market rate, so long as the term of the lease and of any potential renewals of it thereunder does not exceed 5 years, (

c) enter into a written contract with a related party for pension and benefit plans and other reasonable commitments incidental to the employment of officers and employees of the credit union or subsidiary, (

d) subject to

section 65, enter into a contract of employment with a director, officer or prospective officer of the credit union or of any of its subsidiaries, (

e) enter into a written contract with a related party for the pur­ chase at fair market rate of goods or services, other than man­ agement services, required by the credit union or subsidiary in carrying on its business or affairs, so long as there is appropriate documentation evidencing the consideration and the term of the contract and of any potential renewals of it thereunder does not exceed 5 years, and (

f) enter into any other related party transaction, not otherwise specified in this Act, that is prescribed as requiring prior board authorization.

(2) Notwithstanding anything in subsection (1), a credit union or a subsidiary may, without the prior authorization of the board of the credit union unless the by-laws require it, (

a) enter into a contract of employment with a related party who is not a director, officer or prospective officer of the credit union or of any of its subsidiaries, (

b) enter into a transaction with a related party that involves minor general expenditures by that corporation that do not ex­ ceed the amount prescribed, 34

(

c) enter into a transaction with a related party at fair market rate for the sale of goods or the provision of services that are not otherwise provided for by a related party provision, and (

d) enter into any other related party transaction, not otherwise specified in this Act, that is prescribed as not requiring prior board authorization.

(3) In this section, “prospective officer” means a person referred to in

section 2(5)(a). Related party exemptions by Corporation 52(1) On written application being made to the Corporation before a transaction, with a copy being contemporaneously provided to the Minister, the Corporation may give its prior approval to a credit union’s or its subsidiary’s entering into a related party transaction or to a class of related party transactions that would otherwise be pro­ hibited or restricted by this Act or the regulations if in the Corpora­ tion’s opinion the transaction or class of transactions is necessary or beneficial to the well-being of the credit union and is not prejudicial to the interests of its members or customers.

(2) Where the Corporation is satisfied that a subsidiary or affiliate of a credit union functions wholly or primarily for the purpose of pro­ viding a service, other than a financial service, to the credit union or its subsidiary, the Corporation may approve an application by that credit union for the exemption of the subsidiary or affiliate from the status of related party.

Professional advisers and related party transactions 53(1) A professional adviser of a credit union who in his capacity as such becomes aware of a contravention of a related party provision or of the terms and conditions of an approval given in relation to a related party provision shall forthwith ensure that the credit union’s board and auditor are or become aware of the contravention.

(2) The auditor of a credit union shall forthwith report to the board of the credit union and to the Minister any contravention of a related party provision of which he is notified or otherwise becomes aware.

(3) Nothing in this

section abrogates any privilege existing between a solicitor and client.

(4) A person who in good faith makes a report under this

section is not liable in any civil action arising from the report. Related party transaction procedures 54 Unless otherwise prescribed, a credit union shall have written procedures, approved by resolution of the board, to be followed by the credit union and its directors, officers and employees to ensure compliance with related party provisions. 35

PART 5 GENERAL MEETINGS AND MEMBERSHIP Division 1 General Meetings Annual general meetings 55 The board shall call the annual general meeting of a credit union, to be held within 5 months after the end of each fiscal year. Special general meetings 56(1) The board may at any time call a special general meeting of the credit union, and shall do so on receiving a written request to that effect signed (

a) by or on behalf of the audit committee, or (

b) by at least (i) 100 members, or (ii) 10% of the total membership as at the date the request is received, whichever is less.

(2) A request referred to in subsection (1) must state the business to be transacted at the proposed meeting.

(3) If the board does not, within 30 days after receiving the request, call a special general meeting, any member who signed the request or the audit committee, as the case may be, may call the meeting.

(4) The only business that may be discussed at a meeting called on the request or under subsection (3) is (

a) business specified in the request, and (

b) business that is required by this Act to be dealt with at the general meeting occurring next after the occurrence of a specific event.

(5) The credit union may by ordinary resolution reimburse members for the expenses reasonably incurred by them in requesting, calling and holding the meeting. Regionalization of meetings 57(1) A credit union may by by-law divide the territory in Alberta in which it carries on business and has members into regions for the purpose of holding separate general meetings in each region for the members who reside or have accounts in that region instead of hold­ ing 1 general meeting for all its members.

(2) Subject to this section, where a by-law under subsection (1) is in force, the provisions of this Part and any other law applicable to general meetings apply to regional meetings held under this section.

(3) A resolution presented at regional meetings is passed by the credit union only if the resolution (

a) is presented at regional meetings covering all the territory referred to in subsection (1), and (

b) receives the approval, over all the regional meetings taken as a whole, of such aggregate majority of the aggregate votes validly 36

cast at all the regional meetings as would suffice to carry the resolution at a single general meeting of the whole credit union.

(4) The by-laws must provide for the procedures, if any, specific to regional meetings that must be followed. Notice of general meetings 58(1) Subject to this

section and

section 62, a credit union shall give at least 10 and not more than 40 days’ notice of a general meeting to every member, specifying the place, date and time at which it is to be held and, where applicable, specifying the intention to propose a special resolution.

(2) Notice of a general meeting at which there is to be transacted any business other than business that this Act requires to be transacted at an annual general meeting or the reappointment of the incumbent auditor, must state (

a) the nature of that business in sufficient detail to enable the members to form a reasoned judgment on the business, (

b) where a special resolution is to be submitted to the meeting, the text of it, and (

c) where the voluntary dissolution or liquidation and dissolu­ tion of the credit union is to be proposed, the full terms and conditions on which it is proposed to take place.

(3) Notice of a meeting to be held pursuant to the adjournment of a general meeting must be given under this

section except where (

a) the general meeting is adjourned by 1 or more adjournments for an aggregate of 40 days or less, (

b) notice of the place, date and time of the reassembled meeting is given by announcement at the time of the adjournment, and (

c) the by-laws do not require notice to be given under this sec­ tion.

(4) The proceedings and the business transacted at a general meeting are not invalidated by reason only that a member did not receive notice of the meeting. Quorum 59(1) The quorum at a general meeting is the lesser of (a) 50 members, and (b) 10% of the number of members entitled to vote at that meet­ ing, with a minimum of 10, or such higher number or percentage or combination of number and percentage as is specified in the credit union’s by-laws.

(2) Unless the by-laws otherwise provide, where a quorum is present at the opening of a general meeting, the members present may pro­ ceed with the business of the meeting notwithstanding that a quorum is not present throughout the meeting.

(3) Where a quorum is not present at the opening of a general meet­ ing, the members present may adjourn the meeting but may not transact any other business. 37

Voting at general meetings 60(1) This

section applies to voting at general meetings and voting with respect to elections referred to in subsection (7).

(2) Subject to subsection (6), only members are entitled to vote.

(3) Subject to this

section and the by-laws referred to in subsection (4), each member has 1 vote on any question that may be voted on.

(4) The by-laws must (

a) specify what constitutes a spoiled or invalid vote, (

b) specify the number of votes that may be cast, and the basis for voting, by holders of joint membership, (

c) set out the basis for and the manner of voting by designated representatives, and (

d) contain a prohibition against or restrictions on voting by all or some of the members who are minors.

(5) A member may not vote by proxy.

(6) The rights of a member entitled to have a designated represent­ ative may be exercised by that representative, and a designated rep­ resentative who is a member may cast, in addition to his own mem­ bership vote and in accordance with the by-laws, a representative vote.

(7) Subject to subsection (6), a member may cast his vote only if he attends the general meeting, except that a credit union may by by­ law provide for voting by members with respect to elections of di­ rectors and officers other than by personal attendance at general meetings.

(8) A member at a general meeting may demand a vote by ballot before or on the declaration of the result of a vote by show of hands, and the result of the vote by ballot is the decision of the members. Division 2 Membership Qualifications and restrictions 61(1) A person is not qualified to be a member unless he holds at least 25 common shares issued by the credit union or, in the case of a minor or a person who has attained the age of 65 years, such lower number of common shares, being not less than 1, as is provided in the by-laws.

(2) For the purposes of determining all matters respecting member­ ship, a partnership or other unincorporated association of persons shall be deemed to be a corporation.

(3) A credit union may not be a member of another credit union.

(4) The membership of a credit union must consist wholly or sub­ stantially of individuals.

(5) Subject to this Act, a related party may be a member so long as he is given no rights or privileges arising from membership that are not held by the general membership, but no subsidiary or affiliate may be a member. 38

Service of notices and documents on members 62(1) A notice or other document required by this Act or the regu­ lations or the by-laws of a credit union to be provided to a member is sufficiently served, for the purposes of this Act, only if and to the extent that this

section is complied with.

(2) The document may be (

a) served personally on the member or, if the member is a cor­ poration, partnership or other firm or unincorporated association of persons, on a director, partner, officer or designated represent­ ative thereof or any other member of the governing body thereof, however called, (

b) sent by mail addressed to the member at his latest address as shown in the records of the credit union, (

c) delivered, addressed to the member, to that address, or (

d) in the case of a credit union with a bond of association that has or has the use of a receptacle for the purpose of providing documents to the member and whose by-laws so permit, depos­ ited in that receptacle.

(3) If a credit union’s by-laws so permit, a notice may be (

a) advertised in prominent display notices in newspapers circu­ lated in all the territory served by the credit union, and (

b) posted in places that are prominent and accessible to mem­ bers and are designated in the by-laws.

(4) A credit union that has a bond of association such that a notice posted on notice boards in specific premises is likely to be seen by all or a substantial majority of the members may, if its by-laws so permit, post the notice on those notice boards, whereupon the credit union shall keep it there for the duration of its currency.

(5) Compliance with subsection (4) is sufficient service in respect of members who might reasonably be expected by the credit union to have adequate opportunity to examine the notice, but the credit union shall serve the notice by another method on all other members.

(6) If a credit union sends a notice to a member in accordance with subsection (2)(

b) or sends it for delivery in accordance with subsec­ tion (2)(

c) and the notice is returned because the member cannot be found, the credit union shall make reasonable efforts to locate the member and, if thereafter the member still cannot be found, the credit union is not required to provide any further notices to the member until he informs the credit union in writing of his new ad­ dress.

(7) Where a credit union is required to provide a document to its members with a notice of a general meeting and it inserts the notice of the meeting in a newspaper under subsection (3), it may effect service of the document (

a) by giving information about the document in the notices given under subsection (3)(

a) and (b), including an adequate description of the nature of the document, and (

b) by providing a copy of the document free of charge to any member who requests it. 39

PART 6 DIRECTORS, OFFICERS, EMPLOYEES AND COMMITTEES Division 1 Constitutional Affairs Number of directors 63 A credit union shall have a board of directors consisting of at least 5 directors. Election of directors 64(1) Subject to by-laws under

section 60(7), the election of directors of a credit union must take place at its annual general meeting unless, in a particular case, a director is appointed or elected to fill a vacancy in another manner provided for by the by-laws.

(2) Subject to this Act, a credit union may by by-law divide the membership of the credit union into divisions for the purpose of enabling all or a specified number of the directors to be elected only by members comprising those divisions, and any such by-law must provide for (

a) the description of each division, (

b) the number of the directors to be elected by each division, and (

c) any procedures that must be followed in the election of direc­ tors under the by-law. Qualifications of directors 65(1) A person is not qualified to become, and shall not act or con­ tinue to act as, nor permit himself to be elected or appointed as, a director of a credit union, and the credit union shall not knowingly permit any of those acts, unless he satisfies the qualifications speci­ fied and referred to in this section.

(2) A person is not qualified to be a director of a credit union (

a) unless he is (

i) an individual of adult age, (ii) a member or a designated representative, and (iii) a Canadian citizen or a person who has been lawfully admitted into Canada for permanent residence; (

b) if he has the status of a bankrupt; (

c) subject to subsection (5), if he is, or within the 3-year period immediately preceding his election or appointment to the board was, an employee of any body corporate; (

d) subject to subsection (5), if he is a director or officer of the Corporation or of another credit union; (

e) if he is a professional adviser to a credit union; (

f) if he is a person employed in the public service of Alberta or by a Provincial agency within the meaning of the Financial Administration Act and to which that Act applies, whether under a contract of service or a contract for services, whose substantive duties are directly concerned with the business or affairs of credit unions or of Central; 40

(

g) if, within the immediately preceding 5 years, he has been convicted of (

i) an indictable offence that is of a kind that is related to the qualifications, functions or duties of a corporate director, or (ii) an offence against this Act, and either the time for making an appeal has expired without the appeal’s having been made or the appeal has been finally dis­ posed of by the courts or abandoned; (

h) if he has a loan from that credit union in respect of which the repayment of principal or interest is in arrears for a period of 60 days; (

i) if he is a dependent adult as defined in the Dependent Adults Act or is the subject of a certificate of incapacity under that Act; (

j) if he is a formal patient as defined in the Mental Health Act; (

k) if he is the subject of an order under The Mentally Incapa­ citated Persons Act appointing a committee of his person or estate or both; (

l) if he has been found to be a person of unsound mind by a court elsewhere than in Alberta; (

m) if he is disqualified by, or unless he satisfies any other qual­ ification requirements of, the by-laws.

(3) A person is not qualified to remain a director if he fails without good cause to attend the minimum number of board meetings that he is required by the by-laws to attend.

(4) Three-quarters of the directors must at all times be ordinarily resident in Alberta.

(5) The Minister may approve an exemption from the application of subsection (2)(

c) and (

d) in respect of a person’s employment with, or his service as a director or officer of, the Corporation. Board meetings 66(1) A credit union shall ensure that a meeting of the board is held within 30 days after each annual general meeting.

(2) A credit union shall, on a written request signed (

a) by at least ¼ of the directors, or (

b) by or on behalf of the audit committee, ensure that a meeting of the board is held within 10 days of the request.

(3) Notwithstanding any other law, the by-laws may provide that (

a) a director may participate in a board meeting, or (

b) a board meeting may be held, by means of telephone or other communication facilities that permit all persons participating in the meeting to hear each other, and, for the purposes of this Act, the directors participating by those means are deemed to be present at a board meeting. 41

Duties of board 67(1) Subject to this Act and the regulations and the by-laws of a credit union, the board is responsible for the general management of the business and affairs of the credit union.

(2) Subject to this Act, the board may delegate any of its powers, duties or functions under this Act or the regulations in accordance with a prescribed authorization. Validity of acts 68(1)

An act of a director or officer of a credit union is valid not­ withstanding an irregularity in his election or appointment or a defect in his qualification.

(2) An act of the credit union’s board is valid notwithstanding non- compliance with

section 65(4). Notice of change of directors 69(1) Within 10 days after a change in the composition of the board of a credit union occurs, the credit union shall provide to the Min­ ister and the Corporation a notice setting out the change in directors.

(2) The Minister shall register the notice of the change. (3) Subsection (1) does not apply to the extent that the change in directors is reflected in the annual return registered under

section 41. Service of notices and documents on directors 70 A notice or other document required by this Act or the regula­ tions or the by-laws of a credit union to be provided to a director of a credit union in his capacity as such is sufficiently served, for the purposes of this Act, only if and to the extent that the mode of service referred to in

section 62(2) or (4) is complied with, for which purpose

section 62(5) applies. Remuneration of directors and non-employee officers 71(1) In this section, “officers” means officers of a corporation who are not employees of it.

(2) A credit union shall make by-laws with respect to the provision of remuneration by it to its directors and officers, including the pro­ cedures for fixing the amount of that remuneration.

(3) Subject to the by-laws, a credit union may provide remuneration to its directors and officers.

(4) A credit union shall not provide any perquisite, benefit or advan­ tage to a director or officer of another credit union or its subsidiary that is not enjoyed by or available to the members of the first-men­ tioned credit union generally or a substantial proportion of its mem­ bership. Division 2 Duties and Liabilities of Directors, Officers and Employees Application72(1) This Division does not operate so as to limit the duties and liabilities that a director, officer or employee of a corporation may have under any other law.

(2) No provision in a contract or the articles or by-laws or a resolu­ tion of a credit union relieves a director or officer from the duty to act in accordance with this Act and the regulations or relieves him from liability for a breach thereof. 42

Duty of care of directors and officers 73(1) A director or officer of a credit union, in exercising his powers and performing his duties, shall (

a) act honestly, in good faith and with a view to the best inter­ ests of the credit union as a whole, (

b) exercise the care, diligence and skill that a reasonably prudent person would exercise in comparable circumstances, and (

c) comply with the articles and by-laws.

(2) In considering whether a particular transaction or course of ac­ tion is in the best interests of the credit union as a whole, a director or officer shall also have due regard to the interests of all customers who have deposits with it. Liability of directors 74(1) Where the board of a credit union passes a resolution author­ izing (

a) the provision of any remuneration in contravention of

section 71 or the by-laws made under that section, (

b) the payment of an indemnity described in

section 78 in con­ travention of that section, (

c) an acquisition or redemption of common shares in contra­ vention of

section 110, (

d) any use of retained earnings that contravenes

section 111 or a payment of a dividend or patronage rebate contrary to

section 111(3), (

e) any illegal act with respect to the payment of compensation to a member, director or officer the effect of which is to reduce the aggregate or any part of its members’ equity, or (

f) any related party transaction that contravenes this Act and involves any payment or the provision or distribution of property by the credit union, the directors who voted for or consented to the resolution are jointly and severally liable to restore to the credit union any amount so paid and the value of any property so provided or distributed and not otherwise recovered by the credit union, with interest at the rate prescribed by the Minister.

(2) A director who has satisfied a judgment rendered under this sec­ tion is entitled to contribution from all other directors who by virtue of subsection (1) are also liable.

(3) On an application by the credit union, by a director who is liable under subsection (1), by a member or by any person who was a customer or creditor of the credit union at the time of the action complained of, the Court may make an order, if it considers it equitable to do so, (

a) to compel a recipient to restore to the credit union any money or other property that was improperly paid, provided or distrib­ uted to him in connection with any of the circumstances specified in subsection (1)(

a) to (f), (

b) to compel the credit union to return common shares to a person from whom it has improperly acquired them or to issue 43

common shares to a person whose shares it has improperly re­ deemed and cancelled, or (

c) to make such other provision as it considers fit.

(4) A director is not liable under this

section if (

a) he proves that he did not know and could not reasonably have known that the facts underlying the act authorized by the resolution were such as to occasion a contravention of the rele­ vant enactment, or (

b) he relies in good faith on (

i) financial statements of the credit union represented by any of its officers qualified to make such a representation or in a written report of its auditor as reflecting fairly the financial condition of the credit union, or (ii) the written opinion or report of any of its professional advisers or officers qualified to give such an opinion or to make such a report.

(5) An action to enforce any liability imposed by this

section may not be commenced after 2 years from the date of the resolution authorizing the action complained of. Reporting by directors and officers to Minister 75(1) When a director or officer of a credit union first becomes aware that the credit union has engaged in any illegal activity, he shall, within 7 days after first becoming so aware, report that fact in writing to the Minister.

(2) A person does not contravene subsection (1) if he establishes that the fact to be reported has already been reported in writing to the Minister, or that the Minister is already aware or should reasonably be aware of the fact. Disclosure of related party and similar transactions 76(1) This

section applies to a director or officer of a credit union who (

a) is required to make a disclosure under

section 50(2), or (

b) in relation to a corporation that is or is to be a party to a transaction to which the credit union or its subsidiary is or will also be a party, whether or not any other persons are or will be parties to the transaction, (

i) is a director or officer, or (ii) holds 10% or more of the shares issued by it.

(2) A director or officer described in subsection (1) shall, forthwith after becoming aware of the facts that bring him within the applica­ tion of subsection (1), disclose in writing to the credit union in detail, and request to have entered in the minutes of a credit union board meeting, the nature of the transaction or the proposed transaction, the nature and extent of his relationship with it or with any corpo­ ration referred to in subsection (1)(

b) and the interest of any such corporation in the transaction or proposed transaction. 44

(3) The director or officer shall not (

a) vote or attempt in any way to influence the voting on any resolution to approve the transaction or proposed transaction, or (

b) be present while the subject-matter of the resolution is being discussed or the vote is being conducted.

(4) Where the director or officer complied with subsection (2) and the transaction or proposed transaction was approved by resolution of the board, was reasonable and fair to the credit union or the subsidiary at the time it was so approved and does not contravene a related party provision, (

a) the contract is neither void nor voidable by reason only of the circumstances bringing him within the application of subsec­ tion (1), or by reason only that he was present at or was counted to determine the presence of a quorum at any meeting that au­ thorized the contract, and (

b) if a profit accrues to him as a result of the making of the contract, he is not liable to account to the credit union or the subsidiary for that profit by reason only of the circumstances bringing him within the application of subsection (1).

(5) If a person required to comply with this

section fails to do so, the Court may, on the application of the credit union or a member, customer or creditor, set aside the transaction on any terms it thinks fit.

(6) Nothing in this

section entitles any person to enter into any trans­ action into which he is not otherwise legally entitled to enter. Dissent 77(1) A director or committee member of a credit union who was present at a board or committee meeting, as the case may be, is deemed for the purposes of this Act to have consented to any reso­ lution passed or action taken at the meeting, unless (

a) he requested that his abstention or dissent be, or his absten­ tion or dissent is, entered in the minutes of the meeting, (

b) he provided his written dissent to the secretary of the meeting before the meeting was adjourned, (

c) he sent his dissent by registered mail or delivered it to the registered office of the credit union within 14 days after the meet­ ing was adjourned, or (

d) he otherwise proves that he did not consent to the resolution or action.

(2) A director or committee member who voted for a resolution is not entitled to dissent under subsection (1).

(3) On receipt of a written dissent, the credit union shall (

a) have the date, time and place it was received certified on it, and (

b) have it placed and kept with the minutes of the meeting at which the resolution was passed or the action taken. 45

Indemnification78(1) Except in respect of an action by or on behalf of the credit union to procure a judgment in its favour, a credit union may, by resolution of the board, indemnify a present or former director or officer or a person who acts or acted at the credit union’s request as a director or officer of a corporation of which the credit union is or was a shareholder or creditor (in this

section referred to as the “other corporation”) against costs, charges and expenses, including any amount paid to settle an action or satisfy a judgment, reasonably incurred by him with respect to a civil, criminal or administrative action or proceeding to which he is made a party by reason of his being or having been such a director or officer, but only in accordance with this section.

(2) Notwithstanding anything in this section, the credit union may indemnify the person only if (

a) he acted honestly, in good faith and, subject to

section 73(2), with a view to the best interests (

i) where applicable, of the other corporation, and (ii) subject to subclause (i), of the credit union as a whole and (

b) in the case of a criminal or administrative action or proceed­ ing, he had reasonable grounds for believing that the conduct was lawful.

(3) Notwithstanding anything in this

section except subsection (2), the person is entitled to indemnity from the credit union in respect of all costs, charges and expenses reasonably incurred by him with respect to the defence of any civil, criminal or administrative action or proceeding to which he is made a party by reason of his being or having been a director or officer referred to in subsection (1) if he was substantially successful on the merits in his defence of the action or proceeding and he is fairly and reasonably entitled to indemnity.

(4) A credit union shall not purchase or maintain insurance for the benefit of any person acting in the capacity referred to in subsection (1) against any liability incurred by him in that capacity if the insur­ ance would cover liability relating to his failure to comply with sub­ section (2)(a).

(5) A credit union or a person referred to in subsection (1) may apply to the Court for an order approving an indemnity under this

section and the Court may so order and make any further order it thinks fit.

(6) An applicant under subsection (5) shall give the Minister and the Corporation notice of the application, and the Minister and the Cor­ poration are entitled to appear and be heard. 46

Division 3 Committees Appointment, composition and meetings of committees 79(1) Subject to subsection (2), the board of a credit union shall by resolution appoint for the credit union (

a) one or more credit committees, and (

b) either (

i) an audit committee and a finance committee, or (ii) an audit and finance committee.

(2) The board of a small credit union need not appoint an audit committee, a finance committee or an audit and finance committee but, if it does not do so, the board itself, without delegation, shall perform the functions and duties, and has the powers, that that com­ mittee would have had if appointed.

(3) A finance committee, an audit committee or an audit and finance committee must (

a) consist exclusively of members, and (

b) include at least 3 directors.

(4) A credit committee must consist of at least 3 members.

(5) The auditor and the internal auditor are entitled to receive notice of and to attend any meeting of the audit or audit and finance com­ mittee.

(6) The audit or audit and finance committee shall meet at least as often as reports have to be submitted under

section 84(1), and in any case at least once in each quarter of the fiscal year.

(7) The finance committee shall meet at least once in each quarter of the fiscal year.

(8) Section 66(3) applies in respect of the relationship between com­ mittee members and committee meetings. Functions of finance committee 80 The finance committee of a credit union shall perform the fol­ lowing functions: (

a) recommend to the board the annual budget for the following fiscal year; (

b) consider the credit union’s business performance for each quarter of the fiscal year with respect to its annual budget, and report thereon to the board; (

c) make recommendations to the board on the investment pro­ cedures referred to in

section 100(3) and the loan mixture referred to in

section 131; (

d) recommend, for approval by the board, financial policies re­ lating to the credit union’s investments and lending; (

e) perform such other duties as are prescribed by the Minister or assigned to it by a board resolution. 47

General committee provisions 81(1) Each of the committees is a committee of, and is responsible to, the board, and shall provide a written report of matters falling within its functions and duties (

a) to the annual general meeting, in respect of the previous fiscal year’s business and affairs, and (

b) to the board, (

i) at least once a month, in the case of the credit committee, and (ii) at least once a quarter, in the case of the audit and finance committees, in respect of the business and affairs of the previous period.

(2) Notwithstanding anything in this Part, the board itself is, without delegation, responsible for ensuring that the committees perform their respective functions and duties and may assume to itself any of those functions or duties and exercise any of the committees’ powers.

(3) The by-laws may provide for the delegation by a committee to a committee member or officer of any of its powers, duties or func­ tions, other than those prescribed, but no such delegation relieves a committee or the board from any duty that it has under this Act or the regulations.

(4) The requirements of subsection (1) for a written report are met, in the case of reporting to the board, if the minutes of the relevant committee meetings are provided.

PART 7 FINANCIAL DISCLOSURE, AUDIT AND EXAMINATION Division 1 Financial Disclosure Provision of financial statements, etc., to annual general meeting 82(1) At each annual general meeting, the board of a credit union shall place before the members, in addition to any other information required by this Act or prescribed to be required, (

a) except in the case of a small credit union that does not have an auditor, the annual financial statements for the previous fiscal year of the credit union with the auditor’s report thereon, and (

b) in the case of a small credit union that does not have an auditor, the unaudited annual financial statements for the pre­ vious fiscal year of the credit union.

(2) Where, as a result of the application of

section 5, the financial statements required by subsection (1) would be on a basis that con­ solidates the financial statements with those of the credit union’s subsidiaries, subsection (1) shall be treated as also requiring separate financial statements for the credit union.

(3) The annual financial statements must show, as notations to them, (

a) separately in respect of each corporation, the aggregate amount provided during the previous fiscal year to all the directors, and 48

all the officers who are not employees, of the credit union and its subsidiaries (

i) as remuneration, and (ii) separately, as reimbursement or allowance for expenses incurred on the business and affairs of the credit union and subsidiaries, (

b) the aggregate amounts of loans referred to in

section 136 in respect of which the repayment of principal or interest, as of the end of the previous fiscal year, is overdue by 45 days or more, (

c) the amount of loans outstanding to each subsidiary and affil­ iate at the end of the previous fiscal year, (

d) the amount of guarantees outstanding in favour of each sub­ sidiary and affiliate at that date, and (

e) any other information that is prescribed. Issue and publication of financial statements 83(1) Subject to sections 82 and 84(2), a credit union shall not issue, publish or circulate copies of the annual financial statements referred to in

section 82 unless those financial statements (

a) have previously been approved specifically by the board and the board’s approval is evidenced by the signatures of 2 or more directors on the statements, and (

b) except in the case of a small credit union that does not have an auditor, are accompanied by the auditor’s report on them.

(2) Subject to subsection (1), where a member so requests, a credit union shall provide to him a

summary or, if he specifically so re­ quests or if the credit union so desires, a copy (

a) free of charge, of its most recent annual financial statements, and (

b) on the payment of a reasonable fee, of previous annual finan­ cial statements of the credit union, with the accompanying auditor’s report where applicable. Reporting to Minister and Corporation 84(1) A credit union shall provide to the Minister, the Corporation and Central periodic financial reports containing the information, and on or before the dates, prescribed by the Minister.

(2) A credit union shall, within 90 days after the end of each fiscal year, provide to the Minister and to the Corporation, with respect to that year, (

a) a copy of all annual financial statements, with auditors’ re­ ports, required by

section 82, (

b) copies of the separate annual financial statements for each of the credit union’s subsidiaries, with the auditors’ reports, if any, on them, and (

c) in the case of a large credit union, the management letter referred to in

section 92(1)(b). 49

(3) The Minister shall register the copies of the financial statements with auditors’ reports on receiving them under subsection (2).

(4) Where an auditor at any time prepares a management letter other than that required by

section 92(1), he shall forthwith provide a copy of it to the Minister and to the Corporation.

(5) A credit union shall provide to the Corporation such documents and information as the Corporation requires to enable it to perform its functions under

section 131 and as it so directs, and shall provide them at the times specified in the direction. Division 2 Audit Application 85 Except where otherwise specifically stated, this Division applies in relation to large credit unions and also to small credit unions that have or are to have an auditor. Functions of the audit committee 86 A credit union’s audit committee shall perform the following functions: (

a) review the annual audited financial statements before they are approved by the board and make such recommendations on them to the board as the committee considers appropriate; (

b) review and make recommendations to the board on (

i) the appointment and remuneration of the auditor and the internal auditor, and (ii) the methods and scope of conducting audits to be adopted by the internal auditor; (

c) review with the auditor the scope of an audit before he com­ mences the audit; (

d) review any management letters, recommendations and re­ ports prepared by the auditor or the internal auditor respecting the credit union’s business or financial statements, and make rec­ ommendations to the board thereon; (

e) review all financial reports that are to be provided under sec­ tion 84(1) before they are provided, to ensure that they are com­ plete and accurate; (

f) recommend, for approval by the board, arrangements to safe­ guard the credit union’s assets, to ensure the timeliness, accuracy and reliability of accounting data, to promote operational effi­ ciency and maintain adherence to the board’s policies and to provide for any other matters relating to the credit union’s finan­ cial policies; (

g) report to the board any significant changes in the accounting principles and practices followed by the credit union; (

h) ensure that any recommendations of the auditor receive the attention of the board; (

i) perform such other duties as are provided for in this Division or prescribed by the Minister or assigned to it by a board reso­ lution. 50

Auditor 87(1) A person is not qualified to become, and shall not act or con­ tinue to act as, and shall not permit himself to be appointed as, the auditor of a credit union, and the credit union shall not knowingly permit any of those acts, unless that person is (

a) an individual permitted by law to engage, not under the direct supervision of any other person, in an audit intended to be relied on by third parties, or (

b) a firm on whose behalf individuals referred to in clause (

a) engage in such audits, and unless that person is independent within the meaning prescribed by the Minister.

(2) A subsidiary of a credit union must have an auditor, but, unless the Minister otherwise approves, the auditor of a credit union is also the auditor of its subsidiaries, except that where another person was appointed auditor by a corporation before it became a subsidiary, that auditor may complete the term for which he was appointed.

(3) An auditor or former auditor who in good faith makes an oral or written statement or report in accordance with a duty or power con­ tained in this Act is not liable in any civil action arising from it, but this subsection does not apply to the auditor’s report on annual fi­ nancial statements. Appointment and termination of office of auditor 88(1) A large credit union shall have an auditor.

(2) A small credit union shall have an auditor unless there is in force an ordinary resolution of the credit union specifying that it is not to have an auditor.

(3) Where a vacancy in the office of auditor exists, the board shall, after taking into account the recommendations of the audit commit­ tee under

section 86(b), by resolution appoint an auditor for the credit union.

(4) The credit union shall forthwith give the Minister written notice of the removal, resignation or other termination of office of the aud­ itor, with the reason therefor.

(5) The Corporation may, with the prior approval of the Minister, remove the auditor of a credit union that is under supervision or administration on giving written notice to the credit union, the su­ pervisor or administrator and that auditor, and may appoint a person qualified under

section 87 to act as auditor.

(6) The board of a credit union that has an auditor appointed under subsection (5) shall not appoint an auditor with effect from any date falling within the term of the appointment under subsection (5). Auditor’s rights re meetings 89(1) A credit union shall provide its auditor with the same notice of each general and audit committee