NLR 56/09 - Credit Union Regulations, 2009 under the Credit Union Act, 2009

NEWFOUNDLAND AND LABRADOR REGULATION 56/09 Credit Union Regulations, 2009 under the Credit Union Act, 2009 Amended by: 101/10 94/12 64/13 91/15 32/20 70/21 20/22 87/22 2/24 30/25 NEWFOUNDLAND AND LABRADOR REGULATION 56/09 Credit Union Regulations, 2009 under the Credit Union Act, 2009 (Filed July 2, 2009) Under the authority of section 193 of the Credit Union Act, 2009, I make the following regulations. Dated at St. John’s , July 2, 2009. David Norman Deputy Minister of Government Services REGULATIONS Analysis 1. Short title 2. Definitions 3. Business commencement requirements 4. Arrangement for services 5. Restriction re adjacent premises 6. Authorized insurance plans 7. Subsidiaries and associate companies 8. Branch offices 9. Share capital 9.1 Other classes of shares 10. Change of name 11. Change of address 11.1 Form of records 12. Unclaimed balances 13. Deceased members and estate policy 14. Loan policies 15. Loan requirements and restrictions 16. Commercial lending 17. Mortgage loans 18. Loan approvals 19. Liquidity 20. Other investments 21. Allowance for doubtful loans 22. Equity 23. Borrowing 24. Matching 25. Insurance 26. Training 27. Associate members 28. Audit committee 29. Financial reporting 29.1 Annual return 30. Audits, examinations, etc. 31. Records removed 32. No inspection 33. By-laws 33.1 Disclosure of interest in material contract – credit union 34. Deposit insurance 35. Investments by guarantee corporation 36. Borrowing by guarantee corporation 37. Payments by guarantee corporation 38. Loans by guarantee corporation 39. Levies by guarantee corporation 40. Board of guarantee corporation 40.1 Disclosure of interest in material contract – guarantee corporation 40.2 Duty to notify superintendent 40.3 Records 41. NLR 55/99 Rep. Short title 1. These regulations may be cited as the Credit Union Regulations, 2009 . 56/09 s1 Back to Top Definitions 2. In these regulations (a) "Act" means the Credit Union Act, 2009 ; (a.1) "board" means, unless the context indicates otherwise, the board of directors of the guarantee corporation; (b) "commercial loan" means a loan made by a credit union to an individual, a partnership, a co-operative, a corporation or any other organized body where (i) the loan will be used in, or in support of, the development, production, sale or offer of goods or services, and (ii) one or both of the following apply: (A) the loan is secured by the assets of the individual, partnership, co-operative, corporation or other organized body, and (B) repayment of the loan is primarily dependent on the cash flow generated by the individual, partnership, co-operative, corporation or other organized body; (c) "document" means a paper or electronic document required to be filed with the superintendent or guarantee corporation under the Act; (c.1) "fair market value" means the amount that would be obtained in an arm's length transaction in the open market between reasonably prudent, informed and willing parties acting in good faith; (d) "family member" means a parent, child, grandchild, spouse, brother or sister or in-law not necessarily living in the same residence; (e) "financial central" means a central incorporated under the laws of a province or of Canada which is permitted to provide financial services to its members and affiliates and is a member of the Credit Union Central of Canada; (f) "officer" in respect of a credit union means (i) the president, vice-president, secretary or treasurer, (ii) a person who performs functions for the credit union normally performed by a person mentioned in subparagraph (i), or (iii) another person designated as an officer by the by-laws or by a resolution of the directors; and (g) "residential property" means a building that (i) has no more than 4 private dwelling units, and (ii) the primary use of which is residential. 56/09 s2 ; 91/15 ; 70/21 s1 ; 2/24 s1 Back to Top Business commencement requirements 3. For the purpose of subsection 10(2) of the Act, the guarantee corporation shall not approve the commencement of business of a credit union unless that credit union provides proof satisfactory to the guarantee corporation of the following: (a) a business plan that indicates that regulatory requirements with respect to liquidity and capital will be met and includes information regarding (i) membership base, (ii) economic environment, (iii) 5 year financial plan, and (iv) marketing plan; (b) paid up membership of a minimum of 500 members; (c) a minimum initial deposit of $10 million; (d) board and staff training; (e) operating policies and procedures; (f) premises satisfactory to the guarantee corporation; (g) security equipment as required by an insurance provider approved by the guarantee corporation; (h) information technology systems and related policies; ( i ) corporate governance policies; and (j) other matters determined by the guarantee corporation. 56/09 s3 ; 70/21 s2 Back to Top Arrangement for services 4. For the purpose of subsection 16(3) of the Act an arrangement entered into by a credit union with a financial institution or other corporation for the provision of a service offered by the financial institution or other corporation, other than an arrangement in the normal course of business, shall be approved in writing by the guarantee corporation prior to the credit union entering into the arrangement. 56/09 s4 Back to Top Restriction re adjacent premises 5. A credit union shall not carry on business in the province adjacent to an insurance company or a property and casualty insurance broker or agent that is a subsidiary of the credit union unless the credit union clearly indicates to its members that the credit union and its premises are separate and distinct from the office of the insurance company or a property and casualty insurance broker or agent that is a subsidiary of the credit union and there is a separate entrance and separate signage for the insurance company or a property and casualty insurance broker or agent that is a subsidiary of the credit union. 56/09 s5 Back to Top Authorized insurance plans 6. A credit union may enter into the following group plans of insurance for the security of the credit union or the benefit of members: (a) credit or charge related insurance; (b) creditors' disability insurance; (c) creditors' life insurance; (d) creditors' loss of employment insurance; (e) creditors' vehicle inventory insurance; (f) export credit insurance; (g) group accident and sickness insurance; (h) group life insurance; (i) personal accident insurance; (i.1) critical illness insurance; (j) travel insurance; or (k) other group insurance plans which may be authorized by the guarantee corporation. 56/09 s6 ; 70/21 s3 Back to Top Subsidiaries and associate companies 7. (1) In this section (a) "associate company" means a corporation where more than 10% and less than 51% of the voting shares are owned by a credit union; and (b) "subsidiary" means a corporation where 51% or more of the voting shares are owned by a credit union. (2) A credit union may, subject to any legislation or regulation relating to such services, establish or acquire as a subsidiary or associate company a corporation that is (a) a data processing or information management company; (b) a factoring company; (c) a financial leasing company; (d) a foreign financial institution; (e) an investment counselling company; (f) a mutual fund distribution company; (g) a portfolio management company; (h) a real estate or real estate brokerage company; (i) a management service company; (j) an insurance company or insurance broker or agent; (k) a securities dealer company; (l) a trust company; (m) a loan company; or (n) another corporation approved by the guarantee corporation. (3) A credit union shall not make an investment in or guarantee an obligation of a subsidiary of the credit union if, after making the investment or the giving of a guarantee, the total book value of all investments and guarantees will exceed 5% of the total assets of the credit union. (4) Subsection (3) does not apply where the subsidiary is a trust company or a loan company. 56/09 s7 ; 70/21 s4 Back to Top Branch offices 8. A credit union may establish or relocate a branch office of the credit union if it has obtained, prior to establishing or relocating the branch (a) the approval of the directors; and (b) in the case of a credit union which has not achieved the equity requirements set out in section 22, the approval of the guarantee corporation. 56/09 s8 Back to Top Share capital 9. (1) A member of a credit union shall hold not less than one member equity share purchased at par. (2) With the approval of the directors of the credit union member equity shares may be redeemable at par. (3) Where in the opinion of the guarantee corporation a credit union is in financial difficulty, the guarantee corporation may prevent the withdrawal of share capital. 56/09 s9 ; 64/13 s1 Back to Top Other classes of shares 9.1 (1) Where the articles provide for the issuing of classes of shares in addition to member equity shares, the articles shall state (a) the maximum number of shares in each class other than surplus shares that the credit union is entitled to issue; (b) the total consideration to be paid for each class of shares other than surplus shares; and (c) the rights, privileges, restrictions and conditions, including dividends, attaching to the shares of each class. (2) The guarantee corporation shall not approve a class of shares other than member equity shares or surplus shares if, in the opinion of the guarantee corporation, issuing those shares would (a) not be consistent with the purpose of a credit union generally; (b) not be in the financial interest of the credit union; or (c) increase the risk that the credit union would make a claim against the guarantee corporation. (3) Member equity shares shall rank behind all other classes of shares issued by the credit union and holders of member equity shares shall not, upon the winding-up or liquidation of a credit union, be entitled to reconsider, in whole or in part, their member equity shares until the amounts outstanding on all other classes of shares have been paid in full. 70/21 s5 ; 2/24 s2 Back to Top Change of name 10. (1) Every application by a credit union for approval of a change of name shall be in the form required by the superintendent and shall be sent to the superintendent for approval. (2) Where a change in name of a credit union is approved or where the name of the credit union has been changed by the superintendent, the substituted name shall be entered in the register in place of the name which was changed and an altered certificate of registration shall be issued to conform with the change in name. 56/09 s10 Back to Top Change of address 11. (1) Every application by a credit union for approval of a change of address shall be in the form required by the superintendent and shall be sent to the superintendent. (2) Where a change in address of a credit union is approved, the substituted address shall be entered in the register in place of the address that was changed. 56/09 s11 Back to Top Form of records 11.1 (1) All registers and records required under the Act to be prepared and maintained by a credit union shall include all the information required by the guarantee corporation and be kept in a form that allows them to be reproduced in intelligible written form within a reasonable period of time. (2) A register or record referred to in subsection (1) may include electronic signatures. 70/21 s6 Back to Top Unclaimed balances 12. (1) Where a member has a balance in deposits with a credit union and has not transacted any business with the credit union for a period of 2 years or more, the directors, after giving notice to the member by mail sent to the last known address of the member, shall, if the notice is not acknowledged, transfer the balance to a special trust fund established for the purpose of retaining unclaimed money in the records of the credit union. (2) Interest on the special trust fund may be paid at rates and for periods that the directors may determine. (3) Unclaimed balances may be subject to the fees for administration, notification and maintenance as set out in the policies of the credit union. (4) All money held to the credit of a member, less an applicable fee under subsection (3), shall upon application, be paid to that member. (5) The directors of the credit union shall establish a written policy respecting the management and monitoring of transactions in the special trust fund referred to in subsection (1). ( 6 ) Where no claims are made on an account within 10 years of the date the balance is transferred to the trust account established under subsection (1), the credit union shall remit the balance to the guarantee corporation for deposit into a trust account established for unclaimed balances. (7) The guarantee corporation shall (a) keep a separate accounting of the deposits referred to in subsection (6); and (b) maintain appropriate records regarding the deposits to facilitate payment to a person should a verifiable request be received by the guarantee corporation. (7.1) Where a person claiming to be entitled to money transferred to a trust account under subsection (6) provides evidence satisfactory to the guarantee corporation of the person's entitlement to money in the trust account, the guarantee corporation shall pay the money to the person. (8) In the event that a credit union makes an extraordinary sale, lease, or exchange under section 120 of the Act or is liquidated or dissolved, the special trust fund and all records pertaining to it shall be transferred to the guarantee corporation. 56/09 s12 ; 70/21 s7 ; 2/24 s3 Back to Top Deceased members and estate policy 13. A policy relating to deceased members and their estates required to be established by a credit union under section 37 of the Act shall (a) include a requirement that a person claiming an entitlement to an amount of money held in a deceased member's account provide (i) a signed affidavit attesting to the person's entitlement to receive the amount, and (ii) other information and documentation as required by the guarantee corporation; (b) provide that a credit union may refuse to transfer an amount held in a deceased member's account to the person who is claiming to be entitled until the person claiming entitlement to the money provides the information and documentation required by the credit union; and (c) provide that where a credit union pays, in good faith, an amount of money held in a deceased member's account to a person who claims entitlement to it, the payment discharges the credit union with respect to, and to the extent of, the amount paid but does not affect the rights of any other person claiming entitlement to the money to recover the amount from the person to whom it was paid. 56/09 s13 ; 70/21 s8 Back to Top Loan policies 14. (1) The loan policies established by a credit union under section 38 of the Act shall prudently manage the lending risk inherent in the credit union operations and shall establish (a) financial targets and limits that are within the credit union's board-approved risk tolerance; (b) processes to identify, measure, monitor, control and report on all financial risks in an accurate and timely manner; and (c) systems and controls to allow the board to monitor and ensure compliance with the Act, these regulations, credit union policies and any terms and conditions the guarantee corporation may impose. (1.1) The loan policies established by a credit union under section 38 of the Act shall provide for (a) the maximum amount of the loans that may be made to a member of the credit union and that may be outstanding; (b) the manner in which loans to directors, officers and employees of the credit union and their family members are to be administered; (c) the manner in which loans made by the credit union are to be considered and approved; (d) the extent to which, and the manner in which, loans made by the credit union are to be secured; (e) the circumstances in which unsecured loans may be made to a member of the credit union and the maximum amount of the unsecured loans that may be made to a member and that may be outstanding; (f) participating in a loan to a member of another credit union incorporated in the province, a financial central, a subsidiary of a financial central or such other credit union or organization outside of the province where it has entered into a written agreement for the purpose of participating in a loan; (g) the acquisition from another credit union incorporated in the province, a financial central, a subsidiary of a financial central or such other credit union or organization outside of the province its interest in a loan made to a member of another credit union; and (h) the terms, conditions, restrictions or limitations established by the guarantee corporation in relation to the lending activities of the credit union and other matters that may be required by the guarantee corporation. (2) The loan policies established by a credit union under subsection (1.1) may provide for matters in addition to those required under subsection (1.1) in relation to the loans that may be made by, and the lending activities of, the credit union, if the loan policies so established are not inconsistent with the Act, these regulations, generally accepted lending practices and terms, conditions, restrictions or limitations established by the guarantee corporation. (3) The loan policies established by a credit union shall, subject to the terms, conditions, restrictions or limitations established by the guarantee corporation, be in accordance with prudent lending policies, standards and procedures that a reasonable and prudent person would apply in respect to making loans to avoid undue risk of loss and to obtain a reasonable rate of return. (4) The loan policies established by a credit union shall be reviewed annually by a committee of the board or, if there is no committee, the board of the credit union. 56/09 s14 ; 70/21 s9 Back to Top Loan requirements and restrictions 15. (1) Loans made by a credit union to its members shall be classified and shown in the records of the credit union as: (a) personal loans, including personal line of credit loans; (b) loans secured by mortgages on residential and commercial property that are insured under the National Housing Act (Canada) or that are insured by an insurer that is licensed to carry on business in the province under the Insurance Companies Act ; (c) loans secured by mortgages on residential property that do not exceed 80% of the fair market value of the property mortgaged; (d) loans secured by mortgages on residential property that are not included in paragraphs (b) and (c ); (e) loans to the government of the province or a Crown corporation or agency of the province, or to a municipality, school board, hospital corporation or a university in the province, and loans the repayment of which are insured by CMHC or another financially approved institution or are guaranteed by the government of Canada or a province or territory of Canada; (f) commercial loans in accordance with section 16; (g) loans secured by mortgages on property other than residential property; and (h) loans to non-profit organizations including charitable, religious, fraternal and labour organizations provided these are not engaged in any commercial enterprise wherein income would accrue to any partner, proprietor, member or shareholder. 56/09 s15 Back to Top Commercial lending 16. (1) A credit union shall require the prior approval of the guarantee corporation to commence making commercial loans in excess of $25,000 in aggregate to a member unless the loan is fully secured by cash and assigned to the benefit of the credit union. (2) The guarantee corporation's approval to a credit union to commence commercial lending referred to in subsection (1) shall be granted subject to the following criteria being met: (a) the liquidity requirements referred to in section 19 are met; (b) the allowance for doubtful loans is calculated as required under section 21; (c) the equity requirements referred to in section 22 are met; (d) expertise in commercial lending has been identified to the satisfaction of the guarantee corporation; (e) a comprehensive commercial lending policy has been established and the policy has met with the approval of the guarantee corporation; (f) competence has been demonstrated with respect to sound consumer lending practices; and (g) other criteria the guarantee corporation may establish. (3) The guarantee corporation shall establish a limit on the amount of commercial loans that a credit union, approved under subsection (2), may grant to its members and have outstanding but the value of commercial loans granted and outstanding shall not exceed 25% of the total of the credit union's loans portfolio unless approved by the guarantee corporation. (4) Notwithstanding subsection (1), a credit union may, with the approval of the guarantee corporation, make a commercial loan to a member in excess of $25,000 that is not fully secured by cash and assigned to the benefit of the credit union where the loan is made under a commercial loan program (a) developed by the government of the province or the government of Canada; and (b) that, in the opinion of the minister, is meant to alleviate financial hardship on businesses. 56/09 s16 ; 32/20 s1 ; 70/21 s10 ; 30/25 s1 Back to Top Mortgage loans 17. (1) A credit union shall not make a real estate mortgage loan on the security of property referred to in paragraphs 15(1)(b), (c) and (d) for the purpose of purchasing, renovating or improving the property or to refinance a real estate mortgage loan on the property unless, (a) the amount of the indebtedness, together with the amount of the indebtedness under other mortgage loans on the security of the property mortgaged that rank equally with or in priority to the real estate mortgage loan (i) in the case of the purchase of the property, does not exceed 80% of the purchase price or the fair market value of the property, whichever is less, at the time the real estate mortgage loan is granted, (ii) in the case of the renovation or the improvement of the property or the refinancing of a real estate mortgage loan, does not exceed 80% of the fair market value of the property after the renovations or improvements have been made,or (iii) exceeds 80% of the amount determined under subparagraph (i) or (ii) and the excess is secured by an assignment of money on deposit with a financial institution or is guaranteed or insured by the government of Canada or of a province or territory of Canada, or agency of either, or is otherwise guaranteed or insured in a manner and to an extent approved by the guarantee corporation; and (b) the income from all sources that is available to the borrower is sufficient to repay the principal and interest of the real estate mortgage loan and fees and taxes related to it. (2) Despite subparagraph (1)(a)(iii) a credit union may take a collateral lien on property on an amount greater than 80% (a) against unsecured personal loans or lines of credit however no value for risk assessment purposes will be assigned to the amount in excess of 80%; or (b) where a loan is impaired and the nature of the impairment is documented. (3) Shares and deposits of a member pledged as security for a loan shall not be withdrawn to an amount which would reduce the security below the outstanding balance remaining on the loan. 56/09 s17 Back to Top Loan approvals 18. (1) The directors of a credit union may, in accordance with its by-laws and lending policies, establish a committee of not less than 3 persons to approve all loans to a director, committee member, management or staff and other loans as specified in the credit unions loans policies and the approval of a loan by the committee shall be unanimous. (1.1) A committee established under subsection (1) shall be comprised of not less than 3 persons who (a) have the knowledge and experience necessary to approve loans; and (b) are not directors or family members of directors of the credit union. (2) The directors of a credit union shall be responsible for (a) ensuring compliance with sections 14 to 17; and (b) loan approval, where a committee has not been established. (3) Where a member of the committee or a family member of a committee member or where a director or a family member of a director has applied for a loan, the committee member or director shall not be present during the portion of the meeting where that loan is being considered. 56/09 s18 ; 70/21 s11 ; 20/22 s1 Back to Top Liquidity 19. (1) For the purpose of section 40 of the Act, a credit union shall maintain statutory liquidity of not less than 6% of the total amount of deposits in, and borrowings of, the credit union. (2) Qualifying investments for the purpose of this section are (a) demand or unencumbered deposits with a financial central, or its subsidiary, that are redeemable without penalty as to the amount of principal invested; and (b) deposits in a financial central or its subsidiary with a maturity date of 5 years or less which are redeemable on demand and pose no risk to the original principal. (3) A credit union shall not borrow for the purpose of establishing and maintaining statutory liquidity other than from its members. (4) A credit union shall report at the end of each month to the guarantee corporation the position of its liquidity. (5) For the purpose of this section, every credit union shall be a member or an affiliate of a financial central. (6) A credit union shall participate in a liquidity pool provided by a financial central to its members and shall maintain its eligibility to participate in that liquidity pool. (7) A credit union shall not be permitted to draw on deposits maintained for the purpose of this section without the approval of the guarantee corporation of its intent to draw on these deposits. 56/09 s19 ; 101/10 s1 Back to Top Other investments 20. (1) For the purpose of section 41 of the Act, the directors of a credit union shall establish investment policies that (a) permit investments in accordance with prudent investment standards; (b) provide for the appropriate diversification of those investments; and (c) include a description of the types of investments and other financial transactions that it authorizes and the limits applicable to them. (2) For the purposes of subsection (1), prudent investment standards are those that a reasonable and prudent person would apply in respect of a portfolio of investments so as to avoid undue risk of loss and to obtain a reasonable return on investments made. (3) A credit union shall only make investments in accordance with the investment policies established under subsection (1). (4) The investment policies of a credit union established under subsection (1) are subject to the approval of the board and the board shall review the investment policies at least once each year. 56/09 s20 ; 70/21 s12 Back to Top Allowance for doubtful loans 21. (1) For the purpose of section 42 of the Act, the allowance for doubtful loans shall be an amount equal to the total balance owing less the net realizable value of security on each doubtful loan held by the credit union, of (a) a loan to a member who has (i) made an assignment into bankruptcy or has been petitioned into bankruptcy under the Bankruptcy and Insolvency Act (Canada) and has not been discharged, or (ii) made a consumer proposal under the Bankruptcy and Insolvency Act (Canada) and the consumer proposal has not been fully performed; (b) a loan that has been rewritten due to the borrower's inability to make regular payments until the member has demonstrated an ability to meet the payments, outlined in the rewritten payment schedule, for a period of 6 months; (c) a loan overdue for 90 days or more; (d) a loan to a commercial organization that has ceased operations or is in receivership or liquidation; (e) an amount which in the opinion of the guarantee corporation requires an allowance; or (f) an amount which in the opinion of the external auditor of the credit union would be necessary to comply with Canadian generally accepted accounting principles. (2) Within 30 days after the end of each quarter, every credit union shall prepare and submit to the guarantee corporation a copy of a schedule for doubtful loans for the quarter, in the form set out by the guarantee corporation. (3) Where a loan or security is a part of a government loan program, a credit union shall comply with the appropriate International Financial Reporting Standards for reporting a delinquent loan in its allowance for doubtful loans. 56/09 s21 ; 70/21 s13 Back to Top Equity 22. (1) For the purpose of section 43 of the Act, a credit union shall maintain a level of equity that is not less than 5% of its assets with not less that 3% of its assets in the form of retained earnings or another risk weighted calculation as approved by the guarantee corporation. (2) A credit union that does not meet capital adequacy in a particular year shall file for that year an updated equity plan with the guarantee corporation, not later than 60 days after the end of the credit union's fiscal year, in the form set out by the guarantee corporation. (3) Despite the requirements under subsection (1), the guarantee corporation may, under those terms and conditions that the guarantee corporation may require, permit a credit union to include in its calculation of equity, shares issued in accordance with section 28 of the Act. 56/09 s22 ; 70/21 s14 Back to Top Borrowing 23. The amount that may be borrowed by a credit union under section 44 of the Act shall not exceed 20% of the total amount of deposits of its members unless authorized by the guarantee corporation to borrow a greater amount. 56/09 s23 Back to Top Matching 24. (1) The directors of a credit union shall in accordance with guidelines established by the guarantee corporation, (a) establish policies and procedures for matching the terms and return of investments and loans made by the credit union and the terms and return of deposits in, and other interest sensitive liabilities of, the credit union; and (b) file a report with the guarantee corporation (i) semi-annually, or (ii) more frequently if required by the guarantee corporation. 56/09 s24 ; 70/21 s15 Back to Top Insurance 25. (1) For the purpose of section 46 of the Act, the guarantee corporation may establish and set guidelines for insurance programs for credit unions that provide indemnification for liability under law and for loss or destruction of property including, but not limited to (a) property and casualty; (b) bonding; (c) director's liability; (d) corporate errors and omissions; (e) privacy; (f) employment practice liability; and (d) deposit insurance. (2) Participation by all credit unions in an insurance program established under subsection (1) is compulsory. (3) All directors and employees of a credit union shall be bonded in the form required by the guarantee corporation. (4) The bond required under subsection (3) shall, in the case of employees, be a condition of employment and in the case of directors, a condition of holding office. (5) The guarantee corporation may assess premiums to cover the cost of insurance programs including the cost of administering the program. (6) A credit union shall, at least annually, complete a self-assessment to ensure adequate insurance coverage in all aspects of the credit union. 56/09 s25 ; 70/21 16 Back to Top Training 26. The guarantee corporation may set out the minimum level of training that a director of a credit union must acquire in order to hold office. 56/09 s26 Back to Top Associate members 27. (1) A credit union may not make a loan to an associate member. (2) An associate member of a credit union may be subject to those other restrictions that the superintendent may direct. 56/09 s27 Back to Top Audit committee 28. (1) An audit committee established under section 103 of the Act shall be composed of a chairperson and at least 2 other members of the credit union who are not employees or officers of the credit union. (1.1) The members of the audit committee referred to in subsection (1) shall (a) be selected in the manner determined by the directors or established in the by-laws of the credit union; and (b) serve for a term not to exceed 3 years. (2) The duties of the audit committee are to (a) review the annual audited financial statements of the credit union and its subsidiaries and make recommendations to the board as the audit committee considers appropriate for the purpose of recommending to the directors that the audited financial statements be approved under section 92 of the Act; (b) review the accounting principles and practices followed by the credit union during the fiscal year of the financial statements reviewed under paragraph (a), and all significant changes from the principles and practices followed during the preceding fiscal year; (c) [Rep. by 70/21 s17] (d) meet with the auditor of the credit union before the commencement of the audit to review the scope of the audit; (d.1) meet with the auditor of the credit union after the completion of the audit to discuss the audit findings, restrictions relating to the scope of the auditor's work and any problems the auditor may have experienced in performing the audit; (e) review the nature and extent of the auditor's evaluation of the internal control systems of the credit union; (f) review management letters, recommendations and reports made by the auditor regarding the business or financial statements of the credit union and any response made by management to the recommendations, and make recommendations to the board regarding them; (g) review the organization and assess the independence of the credit union's internal auditors, including the internal auditors' mandate and work plans and any problems that they experience or issues they raise relating to the performance of audits; (h) review the findings and recommendations of the internal auditors respecting the accounting practices and internal control practices and review the responses by the management of the credit union to any significant deficiencies; (h.1) review the effectiveness of the credit union's internal audit practices and make recommendations to the board to address any deficiencies; (i) inquire into a change in circumstance of the credit union that might reasonably be expected to materially and adversely affect the financial position of the credit union; (j) report and make recommendations to the directors of the credit union arising from its duties under paragraphs (b) to (i) that the committee considers appropriate in the circumstances; (k) report in writing to the members at the annual general meeting of the credit union on activities of the committee during the year; (l) report to the directors of the credit union a conflict between the auditor and the management of the credit union that the committee has been unable to resolve within a reasonable period of time ; and (m) review recommendations that are made to the directors of a credit union by the guarantee corporation and review the responses made by the directors to those recommendations to ensure the necessary changes are implemented. (3) The audit committee shall ensure that a full and correct record of all proceedings of the audit committee is made and kept available for examination by the guarantee corporation or a person authorized under the Act to examine the records of a credit union. 56/09 s28 ; 70/21 s17 Back to Top Financial reporting 29. (1) Each credit union shall provide to the guarantee corporation a copy of its financial statements together with the report of the auditor, and a copy of the auditor's management letter, if there is one. (2) Each credit union shall provide to the guarantee corporation periodic reports, that the guarantee corporation may require, within the time frames established by the guarantee corporation. 56/09 s29 Back to Top Annual return 29.1 A credit union shall complete and file an annual return in accordance with section 90 of the Act within 4 months after the end of each fiscal year. 70/21 s18 Back to Top Audits, examinations, etc. 30. (1) For the purpose of ensuring that a credit union is complying with the Act or following sound business and financial practices, the guarantee corporation or person that the guarantee corporation may authorize, may do the following: (a) enter and inspect commercial premises used by the credit union; (b) enter premises containing records or property required to be kept under the Act or related to the affairs of the credit union and inspect those records or property and make those copies the guarantee corporation considers necessary; (c) require the credit union, including a representative, agent, director, officer or employee of the credit union to provide the guarantee corporation, or person authorized by the guarantee corporation, with all reasonable assistance; (d) make inquiries of the credit union mentioned in paragraph (c ); (e) require the representatives of the credit union to attend a meeting at a place and time set by the guarantee corporation; (f) after giving receipt, remove records or property and retain the records or property for the period the guarantee corporation, or person authorized by the guarantee corporation considers appropriate; and (g) access credit union records electronically for the purposes of examination and monitoring of credit unions to ensure compliance with the Act, the regulations, and sound business and financial practices. (2) The guarantee corporation may serve a written demand on a person, including a trustee, or a director, officer or employee of a credit union, requiring that person to produce records or property required to be kept under the Act or these regulations or related to the affairs of the credit union. 56/09 s30 ; 70/21 s19 ; 20/22 s2 Back to Top Records removed 31. (1) Where records are removed under section 30, the guarantee corporation, or person authorized by the guarantee corporation, may make copies of those records. (2) The guarantee corporation, or a person authorized by the guarantee corporation, shall (a) make those copies within a reasonable period of time ; and (b) promptly return originals of the records to (i) the place from which they were removed, or (ii) another place that may be agreed to by the guarantee corporation, or the person authorized by the guarantee corporation, and the person who furnished them or from whom they were seized. (3) A record certified by the guarantee corporation to be a copy made under this section (a) is admissible in evidence without proof of the office or the signature of the person making the certificate; and (b) has the same probative force as the original record. 56/09 s31 ; 70/21 s20 Back to Top No inspection 32. (1) The records and information submitted or provided to the guarantee corporation or obtained under section 30 are not open to inspection except by those persons who are authorized in writing by the guarantee corporation to inspect the records and information. (2) Unless authorized by the Act or another law or with the consent of the person to whom a record or piece of information relates, no person employed by the guarantee corporation and no person engaged, appointed or retained by the guarantee corporation shall (a) communicate or allow to be communicated a record or information obtained under the Act to a person who is not legally entitled to the record or information; or (b) allow a person who is not legally entitled to the record or information obtained under the Act to inspect or have access to it. (3) Despite subsections (1) and (2), the guarantee corporation may authorize the release of, or allow the inspection of or access to, records or information mentioned in those subsections to or by a person employed by the government or regulatory authority of a jurisdiction inside or outside Canada where, (a) the record or information will be used solely for the purpose of administering or enforcing a law of that jurisdiction that is similar to the Act; and (b) the guarantee corporation believes that it is in the public interest to allow the release, inspection or access. (4) Despite subsections (1) and (2), the guarantee corporation may authorize the release of, inspection of or access to, records or information mentioned in those subsections to or by a law enforcement agency or jurisdiction inside or outside Canada. 56/09 s32 ; 70/21 s21 Back to Top By-laws 33. (1) Subject to the articles of a credit union, the members of a credit union may at an annual general meeting or special meeting called for that purpose by special resolution of the members enact, amend or repeal by-laws in relation to those matters authorized or required by the Act to be dealt with in the by-laws of the credit union. (2) A proposed by-law or an amendment or a repeal of a by-law may be sent to the guarantee corporation for approval before its adoption by the members of the credit union. (3) Where a by-law, an amendment or a repeal of a by-law is approved by the guarantee corporation before its adoption by the members of a credit union, (a) the by-law, amendment or repeal of the by-law shall be adopted by the members of the credit union within 30 days after receipt of the approval of the guarantee corporation; and (b) a certified copy of the adopted by-law or the amendment or repeal of the by-law shall be filed with the guarantee corporation within 30 days after its adoption by the members of the credit union or a later time that may be authorized by the guarantee corporation. (4) Where a credit union fails to comply with subsection (3), the by-law, amendment or repeal is void. (5) The by-laws of a credit union shall provide for a matter required by the Act and these regulations to be included in those by-laws and shall provide for (a) the qualifications for, conditions of and method of applying for, refusing and terminating membership in a credit union; (b) the location of meetings, quorum at meetings and the procedure at meetings including participating in meetings by means of the telephone or other telecommunication device that permits all persons participating in the meeting to hear each other and communicate with each other; (c) rights in relation to voting including the right of members to vote by telephone, electronic means or other means of communication provided that the voting process maintains anonymity and the voting outcome is verifiable; (d) the election, term of office, removal of and filling of vacancies among directors, committee members and officers, their powers, duties and remuneration, and the procedure and quorum at meetings of the directors; (e) the number of shares a member shall hold if greater than the number of shares prescribed by these regulations; (f) associate membership in the credit union; (g) retention of membership in the credit union and all the rights and privileges of a member if the member of the credit union leaves the area in which the bond of the credit union authorizes the credit union to operate; (h) joint memberships in a credit union that allows 2 or more persons to jointly hold a membership in a credit union but only entitles the joint membership to one vote; and (i) other matters the Act requires be dealt with in the by-laws. 56/09 s33 ; 70/21 s22 Back to Top Disclosure of interest in material contract – credit union 33.1 (1) A director or an officer of a credit union shall disclose to the credit union, in writing or by requesting to have it entered in the minutes of meetings of directors, the nature and extent of the director’s interest in a material contract or proposed material contract with a credit union . (2) T he disclosure required by subsection (1) shall be made, in the case of a director, (a) at the meeting at which a proposed material contract is first considered; (b) at the first meeting after the director becomes interested in the proposed material contract where the director was not interested in the proposed material contract at the meeting at which the proposed material contract was first considered; (c) at the first meeting after the director becomes interested in the material contract where the director becomes interested after a material contract is made; or (d) at the first meeting after the person becomes a director where a person who is interested in a material contract later becomes a director. (3) The disclosure required by subsection (1) shall be made, in the case of an officer who is not a director, (a) immediately after the officer becomes aware that the material contract or proposed material contract is to be considered or has been considered at a meeting of directors; (b) immediately after the officer becomes interested in the material contract where the officer becomes interested after a material contract is made; or (c) immediately after a person becomes an officer where the person who is interested in a material contract later becomes an officer. (4) Where a material contract or proposed material contract is one that, in the ordinary course of the credit union’s business, would not require approval by the directors or members, a director or an officer shall, immediately after the director or officer becomes aware of the material contract or proposed material contract, disclose to the credit union, in writing or by requesting to have it entered in the minutes of meetings of directors, the nature and extent of the director’s or officer’s interest. (5) A director referred to in subsection (1) shall not be counted in the quorum, shall not be present and shall not vote at a meeting on a resolution to approve the material contract. (6) For the purposes of this section, general notice to the directors of a credit union by a director or officer of the credit union declaring that the director or officer has an interest in a material contract or proposed material contract and is to be regarded as having an interest in the material contract or proposed material contract is a sufficient declaration of interest. 70/21 s23 Back to Top Deposit insurance 34. (1) The maximum amount that may be paid by the guarantee corporation in respect of deposits of a member or associate member shall be $250,000 for each insured deposit of that member. (2) For the purpose of this section, an insured deposit is a deposit covered under the insurance protection provided by the Canada Deposit Insurance Corporation (CDIC). 56/09 s34 Back to Top Investments by guarantee corporation 35. (1) The guarantee corporation may make investments only in accordance with the investment policy established by its directors. (2) The guarantee corporation may not make an investment in a credit union incorporated under the Act except for the purpose of providing assistance for stabilization of credit unions in financial difficulty. 56/09 s35 Back to Top Borrowing by guarantee corporation 36. The guarantee corporation may (a) borrow sums of money for its purposes that it considers necessary and may pledge security for the sums borrowed; and (b) draw, make, accept, endorse, execute, and issue promissory notes, bills of exchange, warrants, and other negotiable or transferable instruments. 56/09 s36 Back to Top Payments by guarantee corporation 37. The guarantee corporation may pay or direct the payment from the fund of all expenses necessarily incurred in performing its functions. 56/09 s37 Back to Top Loans by guarantee corporation 38.

The guarantee corporation may (a) make loans, advances, grants and guarantees it considers necessary in performing its functions; and (b) charge interest on loans and advances. 56/09 s38 Back to Top Levies by guarantee corporation 39. (1) The guarantee corporation shall annually assess and levy upon every credit union an amount not less than (a) 1/6 of 1% of total insured deposits if the credit union has met the equity requirements under subsection 22(1); and (b) 1/5 of 1% of total insured deposits where the credit union has not met the equity requirements under subsection 22(1). (2) The amount assessed upon each credit union shall be determined on the basis of the financial statements prepared under section 91 of the Act. (3) Each credit union shall pay to the guarantee corporation the full amount of the assessment within 30 days from the date of the invoice or within an extended time that may be permitted and the guarantee corporation may levy interest on an overdue assessment at rates that may be determined by the board. (4) An assessment required to be paid by a credit union under this section shall be charged and reported as an expense of the credit union. 56/09 s39 ; 70/21 s24 Back to Top Board of guarantee corporation 40. (1) For the purposes of section 137 of the Act, the board of directors of the guarantee corporation shall consist of the following: (a) 5 members appointed by the minister from a list of nominees provided by credit unions; (b) an employee of the Department of Digital Government and Service Newfoundland and Labrador; (c) an employee of the Department of Finance; and (d) one member appointed by the minister to represent the public interest. (2) A member appointed under paragraphs (1)(a) or (d) shall be appointed for a term of 3 years and may be reappointed for an additional consecutive 3 year term. (3) Notwithstanding subsection (2), at least 3 of the members first appointed under paragraph (1)(a) after this section comes into force shall be appointed for a term of 2 years. (4) A member appointed under paragraphs (1)(a) or (d) may be removed by the minister before the expiration of the member's term. (5) In addition to the circumstances referred to in paragraph 140(c) of the Act, a member of the board ceases to hold office where the minister removes the member from office following receipt of a written request from the board based on a board resolution signed by all members of the board who voted in favour of the resolution. (6) The minister shall appoint a chairperson from the members appointed under paragraph (1)(a) and (d). (6.1) The members appointed under subsection (1) shall elect a vice-chairperson from the members appointed under paragraph (1)(a) and (d). (7) The chairperson may vote as a director at a meeting of the board of the guarantee corporation. (7.1) A majority of the members of the board constitutes a quorum. (8) Where the term of a member of the board expires, the member continues to be a member of the board until reappointed or replaced. (9) The minister shall appoint a chief executive officer to direct the operations of the guarantee corporation and who shall report to the chairperson of the board. (9.1) Notwithstanding subsection (9), the individual holding the position of chief executive officer at the time of the coming into force of subsection (9) shall continue as chief executive officer until reappointed or replaced in accordance with subsection (9). (10) The chief executive officer shall serve as secretary and treasurer of the board but is not a member of the board. (11) The board shall (a) appoint committees it considers necessary for the purposes of the board; (b) do all things necessary and fiscally prudent for the attainment of the purposes of the board; (c) pay to members of the board remuneration that may be approved by the minister; (d) pay to the members of the board all reasonable travelling, living and out of pocket expenses, including lost salary and obligatory loss of annual leave incurred in the course of their duties as members; (e) determine the duties of the chief executive officer and employees of the guarantee corporation; and (f) when developing its budget, consider the effect of expenditures on the capacity of the deposit guarantee fund to protect the deposits of members should there be a closure of one or more credit unions. (12) On the coming into force of this section and until the first board is appointed under this section, (a) the board shall consist of the persons who were members of the board immediately before the coming into force of this section with the exception of (i) th e superintendent who shall cease to be a member on the coming into force of this section, and (ii) the assistant deputy minister who shall cease to be a member on the coming into force of this section and shall be replaced by an employee of the Department of Digital Government and Service Newfoundland and Labrador; (b) the chairperson shall be the person who was the vice chairperson immediately before the coming into force of this section; and (c) the vice-chairperson shall be a member appointed by the members referred to paragraph (a) after the coming into force of this section. 56/09 s40 ; 94/12 s1 ; 70/21 s25 ; 20/22 s3 ; 87/22 s1 Back to Top Disclosure of interest in material contract – guarantee corporation 40.1 (1) A director or an officer of the guarantee corporation shall disclose to the guarantee corporation, in writing or by requesting to have it entered in the minutes of meetings of directors, the nature and extent of the director’s interest in a material contract or proposed material contract with the guarantee corporation. (2) T he disclosure required by subsection (1) shall be made, in the case of a director, (a) at the meeting at which a proposed material contract is first considered; (b) at the first meeting after the director becomes interested in the proposed material contract where the director was not interested in the proposed material contract at the meeting at which the proposed material contract was first considered; (c) at the first meeting after the director becomes interested in the material contract where the director becomes interested after a material contract is made; or (d) at the first meeting after the person becomes a director where a person who is interested in a material contract later becomes a director. (3) The disclosure required by subsection (1) shall be made, in the case of an officer who is not a director, (a) immediately after the officer becomes aware that the material contract or proposed material contract is to be considered or has been considered at a meeting of directors; (b) immediately after the officer becomes interested in the material contract where the officer becomes interested after a material contract is made; or (c) immediately after a person becomes an officer where the person who is interested in a material contract later becomes an officer. (4) Where a material contract or proposed material contract is one that, in the ordinary course of the guarantee corporation's business, would not require approval by the directors, a director or an officer shall, immediately after the director or officer becomes aware of the material contract or proposed material contract, disclose to the guarantee corporation, in writing or by requesting to have it entered in the minutes of meetings of directors, the nature and extent of the director’s or officer’s interest. (5) A director referred to in subsection (1) shall not be counted in the quorum, shall not be present and shall not vote at a meeting on a resolution to approve the material contract. (6) For the purposes of this section, general notice to the directors of the guarantee corporation by a director or officer of the guarantee corporation declaring that the director or officer has an interest in a material contract or proposed material contract and is to be regarded as having an interest in the material contract or proposed material contract is a sufficient declaration of interest. 70/21 s26 Back to Top Duty to notify superintendent 40.2 (1) The guarantee corporation shall notify the superintendent of the following: (a) an occurrence with a credit union that may weaken the credit union’s stability; (b) an occurrence that may weaken the stability of the deposit guarantee fund; (c) issues of conflict of interest within a credit union or the guarantee corporation; (d) an incident of fraudulent activity within a credit union or the guarantee corporation; (e) any money levied and collected from a credit union for the purposes of section 147, 148 and 154 of the Act; (f) any money borrowed on the credit of the guarantee corporation or on bills of exchange or promissory notes drawn, made, accepted or endorsed by or on behalf of the guarantee corporation and pledged as security assets of the guarantee corporation; (g) any agreements or arrangements entered into with a person relating to matters referred to in paragraph 136(c) of the Act; (h) any guarantee loans made by third parties to a credit union and security taken for those guarantees; (i) any liabilities or assets assumed or purchased by the guarantee corporation on the liquidation or dissolution of a credit union; (j) any terms, conditions, restrictions and limitations established by the guarantee corporation in relation to the lending activities of credit unions and the loan policies to be established by credit union; (k) any assistance, including financial assistance made available to credit unions for the purpose of stabilization and the terms and conditions relating to that assistance; (l) any assumption of the costs of the winding up of credit unions where the assets of a credit union were insufficient to cover the costs; (m) any orders issued under section 168 of the Act; (n) any amounts paid in accordance with section 34; (o) any investments made in accordance with section 35; (p) any borrowings or activities in accordance with section 36; (q) any amounts paid in accordance with section 37; (r) any loans, advances, grants and guarantees made or interest charged in accordance with section 38; and (s) any late payments or interest levied in accordance with section 39. (2) Where the superintendent requests additional information from the guarantee corporation in relation to a matter referred to in subsection (1), the guarantee corporation shall provide the additional information requested by the superintendent at a time determined by the superintendent. 70/21 s26 Back to Top Records 40.3 The superintendent is not required to produce a document, other than a certificate and attached articles or statement filed under section 186 of the Act, after 6 years have elapsed since the credit union was removed from the register. 70/21 s26 Back to Top NLR 55/99 Rep. 41. The Credit Union Regulations , Newfoundland and Labrador Regulation 55/99, are repealed. 56/09 s41