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Consolidated Newfoundland Regulation 1996


CONSOLIDATED NEWFOUNDLAND REGULATION 956/96

CONSOLIDATED NEWFOUNDLAND REGULATION 956/96

Co‑operative Societies Regulations
under the
Co‑operative Societies Act
(O.C. 96‑288)

Under the authority of section 72 of the Co‑operative Societies Act and the Subordinate Legislation Revision and Consolidation Act, the Lieutenant‑Governor in Council makes the following regulations.

REGULATIONS

Analysis


        1.   Short title

        2.   Applications to register societies

        3.   Area of operation

        4.   Registration refused

        5.   Certificate of registration

        6.   Certification and sealing

        7.   Amendments of constitutions

        8.   Amendment refused

        9.   Certification and sealing

      10.   True copy

      11.   Credit Union Central

      12.   Change of address

      13.   Secretary's duty

      14.   Change of name

      15.   Substituted name

      16.   Cancellation of registry

      17.   Cancellation of registration

      18.   Inspection of societies

      19.   Direction for inquiry

      20.   Inspection of books

      21.   Authorization for inspection

      22.   Apportionment of costs

      23.   Winding‑up order

      24.   Resolution to wind‑up

      25.   Instrument of dissolution

      26.   Statutory declaration

      27.   Appointment of liquidator

      28.   Amalgamation resolution

      29.   Transfer of registration to Co‑operatives Societies Act

      30.   Registrar may accept transfer

      31.   Certificate of registration

      32.   Classes of societies

      33.   Form of constitution

      34.   Form of constitution

      35.   Form of constitution

      36.   Form of constitution

      37.   Form of constitution

      38.   Accounts and forms

      39.   Annual return

      40.   Reserves

      41.   Allowance for doubtful loans

      42.   Liquidity reserve

      43.   Loans

      44.   Investments

      45.   Debentures

      46.   Share capital

      47.   Capital adequacy reserve

      48.   Liquidity

      49.   Disciplinary actions

      50.   Disposal of surplus

      51.   Repeal


Short title

        1. These regulations may be cited as the Co‑operative Societies Regulations.

133/91 s1

Applications to register societies

        2. (1) For the purpose of these regulations, "registrar" means the appropriate registrar as defined by paragraph 2(1)(g) of the Act.

             (2)  Every application to register a society under the Co‑operative Societies Act, in these regulations called the Act, shall be made to the registrar in writing and shall contain the particulars required and be accompanied by the documents required by the registrar.

             (3)  Applications to register a society under the Act must be accompanied by a business plan prepared in a manner prescribed by the registrar.

             (4)  In the case of credit unions, the application must be supported in writing by the Credit Union Central of Newfoundland and Labrador and have the approval of the Credit Union Deposit Guarantee Corporation.

133/91 s2

Area of operation

        3. The constitution of a society which applies for registration shall state the area within which the society is to operate and any limitations imposed on membership.

133/91 s3

Registration refused

        4. Where the registrar refuses to register a society he or she shall, within 2 months of the date of receipt of the request for registration, communicate to the applicants in writing his or her reason for so refusing.

133/91 s4

Certificate of registration

        5. The registrar shall issue a certificate of registration.

133/91 s5

Certification and sealing

        6. The certification and sealing of the constitution of a registered society by the registrar shall be in the form approved by the minister.

133/91 s6

Amendments of constitutions

        7. Every application to register an amendment of the registered constitution of a society shall be in the appropriate form and shall be sent to the registrar, and shall contain the particulars required and be accompanied by the documents required by the registrar.

133/91 s7

Amendment refused

        8. Where the registrar refuses to register an amendment he or she shall, within 2 months of the date of receipt of the request for registration, communicate to the applicants in writing his or her reason for refusing.

133/91 s8

Certification and sealing

        9. The certification and sealing of the copy of the amendment shall be in the form approved by the minister.

133/91 s9

True copy

     10. The certification and sealing of a true copy of the constitution of a registered society shall be in the form required by the minister.

133/91 s10

Credit Union Central

     11. Every credit union shall be a member of the Credit Union Central of Newfoundland and Labrador.

133/91 s1

Change of address

     12. (1) Every society registered under the Act shall forward to the registrar notice of every change in the address of the society, within 14 days of the change.

             (2)  The notice under subsection (1) shall be in duplicate and shall be signed, and when received by the registrar the word "Registered" shall be written at the foot of each copy, and each copy shall be signed and sealed by the registrar and one copy shall be issued to the society.

133/91 s12

Secretary's duty

     13. It shall be the duty of the secretary of the society, when forwarding a notice of change of address, to notify the registrar whether the change will also involve an alteration in the nature of the society's business, or in the geographic area served by the society.

133/91 s13

Change of name

     14. Every application by a registered society for approval of a change of name shall be made in duplicate and shall be sent to the registrar.

133/91 s14

Substituted name

     15. Where a change of the name of a society is approved or where the name of a society has been changed by the registrar, the substituted name shall be entered on the register in place of the name which was changed and an altered certification of registration shall be issued to conform with the change of name.

133/91 s15

Cancellation of registry

     16. Notice of intended cancellation of the registry of a society shall be in the form approved by the minister.

133/91 s16

Cancellation of registration

     17. The cancellation of the registry of a society shall be in the form approved by the minister.

133/91 s17

Inspection of societies

     18. Every application of a majority of the board, or of not less than one‑third of the members of a registered society for an inquiry into the constitution, method of operation or the financial condition of a registered society shall be made to the registrar.

133/91 s18

Direction for inquiry

     19. The direction and authorization which the registrar may issue for an inquiry under subsection 53(1) of the Act shall be in the form approved by the minister.

133/91 s19

Inspection of books

     20. Every application of a creditor for an inspection of the books of a registered society shall be made to the registrar.

133/91 s20

Authorization for inspection

     21. The direction and authorization which the registrar may issue for an inspection of books under subsection 55(1) of the Act shall be in the form approved by the minister.

133/91 s21

Apportionment of costs

     22. The certificate by which the registrar may apportion the costs of an inquiry or inspection shall be in the form approved by the minister.

133/91 s22

Winding‑up order

     23. The order for winding up a society, which may be issued by the minister following upon a cancellation of registry shall be in the form approved by the minister and shall be addressed to the registrar.

133/91 s23

Resolution to wind‑up

     24. (1) The resolution to wind up a society under paragraph 60(1)(c) of the Act shall be in the form approved by the minister and shall be signed in duplicate and sent to the registrar, and shall be accompanied by the documents required by the registrar.

             (2)  The registrar shall return one copy to the society with an acknowledgement of registry.

133/91 s24

Instrument of dissolution

     25. (1) The instrument of dissolution shall be in the form approved by the minister and shall be signed in duplicate and sent to the registrar and shall be accompanied by the documents required by the minister.

             (2)  The registrar shall return one copy to the society with an acknowledgement of registry.

133/91 s25

Statutory declaration

     26. The statutory declaration which shall accompany the instrument of dissolution shall be in the form approved by the minister.

133/91 s26

Appointment of liquidator

     27. (1) The appointment of a liquidator by the registrar shall be in the form approved by the minister.

             (2)  The statutory declaration which shall accompany the liquidator's report shall be in the form approved by the minister.

133/91 s27

Amalgamation resolution

     28. A resolution of a society made under subsection 58(2) of the Act approving amalgamation with another society shall be in the form approved by the minister.

133/91 s28

Transfer of registration to Co‑operative Societies Act

     29. Every corporation or society registered under the Corporations Act or the Agricultural Societies Act, wishing to convert itself into a society registered under the Act shall make application to the registrar.

133/91 s29

Registrar may accept transfer

     30. Where the registrar is satisfied that the objects of the corporation or society applying for that conversion are within the provisions of section 3 of the Act and that the corporation or society otherwise conforms with all the requirements of the Act and these regulations, he or she may register the corporation or society as a society under the Act.

133/91 s30

Certificate of registration

     31. Upon registration of the corporation or society as a society under the Act, the registrar shall issue to the society a certificate of registration and a registered copy of its constitution, and shall forward to the registrar of companies or the minister a copy of the certificate together with duplicates of the application and all other documents forwarded by the society to the registrar under section 29 of these regulations.

133/91 s31

Classes of societies

     32. There shall be the following classes of societies:

             (a)  societies whose members are as defined under paragraph 2(1)(c) of the Act, including

                      (i)  a credit union,

                     (ii)  a consumers society,

                    (iii)  a producer society, and

                    (iv)  a housing society; and

             (b)  societies registered under the Act, whose members are registered societies.

133/91 s32

Form of constitution

     33. The constitution of a credit union shall be substantially the same as in the form approved by the minister.

133/91 s33

Form of constitution

     34. The constitution of a consumer society shall be substantially the same as in the form approved by the minister.

133/91 s34

Form of constitution

     35. The constitution of a producer society shall be substantially the same as in the form approved by the minister.

133/91 s35

Form of constitution

     36. The constitution of a housing society shall be substantially the same as in the form approved by the minister but there may be variation in or departure from the form as the registrar may sanction with the approval of the minister in order to give effect to the intentions of the society.

133/91 s36

Form of constitution

     37. The constitution of the classes of societies provided under paragraph 32(b) shall be the same as the presently registered constitutions of the societies.

133/91 s37

Accounts and forms

     38. The keeping of accounts by or on behalf of a registered society shall be as approved by the minister.

133/91 s38

Annual return

     39. Annual returns required to be submitted by registered societies shall be as required by the minister and shall be accompanied by the annual financial statements of the society, together with copies of any auditor's management letters.

133/91 s39

Reserves

     40. Every society, other than a credit union, shall transfer to a reserve fund in each year not less than 5% of the net surplus for that year.

133/91 s40

Allowance for doubtful loans

     41. (1) In these regulations

             (a)  "overdue loan" means a loan, mortgage or sum borrowed by a member from a credit union on which the member is in default on a payment of principal or interest for more than 30 days after it becomes due by virtue of the terms of the agreement pertaining to the advance made between the member and the credit union; and

             (b)  "doubtful loan" for the purpose of determining the allowance for doubtful loans is a loan for which collection is doubtful, either in whole or in part, and is to include, but is not limited to

                      (i)  a loan to a member who has filed for bankruptcy,

                     (ii)  a loan that has been rewritten due to the borrower's inability to meet regular payments, and

                    (iii)  a loan that is overdue 90 days or more.

             (2)  At the end of each month every credit union shall prepare a report on all overdue loans and other loans that are considered doubtful.

             (3)  The report required in subsection (2) shall be prepared following the fiscal year of the credit union as approved by the minister and approved by the board of directors of the credit union and the report, together with an opinion expressed by the credit union's auditors as to the reasonableness of the calculation of the allowance for doubtful loans, based upon information contained in the report and shall be forwarded to the registrar with the annual financial statements.

             (4)  At the end of each quarter of its financial year every credit union shall prepare and submit to the Credit Union Deposit Guarantee Corporation a copy of their reserve calculation for the quarter, showing the increase or decrease in bad debt expense.

133/91 s41

Liquidity reserve

     42. A society, whose constitution permits the lending of money, shall at all times have on deposit with a central, or with a financial institution approved for that purpose by the registrar, the liquidity reserve as required by section 48.

133/91 s42

Loans

     43. (1) A credit union may make loans to its members provided that proper lending policies and procedures have been approved and implemented by its board.

             (2)  For commercial loans, credit unions are required to comply with the requirements of subsections (3) and (4).

             (3)  A credit union shall not make commercial loans to its members without prior approval of the minister.

             (4)  Prior to the introduction of commercial lending each credit union shall meet the following criteria:

             (a)  liquidity requirements as set out in section 48;

             (b)  adequate allowance for doubtful loans as calculated in the report required under subsection 41(3);

             (c)  compliance with the equity standard as set out in subsections 47(1) and (2) but during the transition period, as provided for in subsection 47(3), a credit union may make commercial loans, provided that the total amount of those loans does not exceed the capital adequacy reserve achieved;

             (d)  identified expertise in commercial lending to the satisfaction of the registrar and the Credit Union Deposit Guarantee Corporation;

             (e)  approval of a comprehensive commercial lending policy by the registrar and the Credit Union Deposit Guarantee Corporation;

              (f)  the credit union has demonstrated that it has adhered to sound consumer lending practices;

             (g)  the total commercial loans shall not exceed 10% of the total loans portfolio;

             (h)  a commercial loan to one member shall not exceed 2% of the total loans portfolio; and

              (i)  other criteria as the minister may direct.

             (5)  Failure of a credit union to comply with the conditions in subsection (4) may lead to immediate suspension of its commercial lending privileges.

             (6)  Loans shall not be made by a society, whose constitution permits the lending of money, to a member who

             (a)  has failed to repay a previous loan;

             (b)  is in arrears in the payment of a current loan; or

             (c)  has failed to make a payment to the society in respect of membership as prescribed by the constitution.

             (7)  A loan shall not be made except on written application, which contains all the information required by the application and loan agreement prescribed by the regulations, and is signed by the member or members desiring the loan and properly executed.

             (8)  All shares and deposits of borrowing members pledged as security shall not be withdrawn while loans remain unpaid but may, if approved by the board of directors of a credit union, and exclusive of the equity share, be transferred as final payment on loans.

             (9)  Interest rates on loans shall be those approved by the credit union board.

           (10)  A loan shall not be made to a staff member or director of a credit union without the approval of the credit union's credit committee.

           (11)  Limits for lending or overdrafts for credit unions will automatically be reviewed by the registrar on discovery of an non‑compliance with policy or legislation

             (a)  following one recorded warning, loan limits may be reduced by the registrar, and overdraft authorization may be terminated by the registrar;

             (b)  repeated non‑compliance will result in supervision by the Credit Union Deposit Guarantee Corporation; and

             (c)  lending shall be automatically suspended when a credit union is not in compliance with liquidity requirements as set out in section 48.

           (12)  Persons approving unauthorized loans may be personally liable to the credit union for losses which may result.

133/91 s43

Investments

     44. Subject to its constitution, these regulations and the Act, a registered society may invest or deposit its funds

             (a)  in a Credit Union Central;

             (b)  in a registered credit union or chartered bank carrying on business in the province;

             (c)  in a security in which trustees under section 3 of the Trustee Act are authorized by law to invest;

             (d)  in the shares of another registered society having limited liability; and

             (e)  in the shares of an incorporated co‑operative society anywhere in Canada and not being a society registered under the Act, or in the bonds, debentures or other securities, subject to the prior approval in writing of the registrar, who may, when giving his or her approval, limit the amount of money to be invested or deposited and prescribe the terms and conditions.

133/91 s44

Debentures

     45. Subject to its constitution and to the Act, a registered society may raise money by the issue of debentures for sale to its members or to other incorporated co‑operative societies, or to both its members and societies with the prior approval in writing of the minister, upon the recommendation of the registrar, of

             (a)  the amount of money to be raised;

             (b)  the other incorporated co‑operative societies to whom debentures may be sold, which societies may be societies incorporated and existing in any part of Canada; and

             (c)  all other agreements, provisions, terms and conditions under which money is to be raised.

133/91 s45

Share capital

     46. (1) The par value of each share shall be $5 which shall never be withdrawn, transferred, repaid or otherwise disposed of at more than par value.

             (2)  Each credit union shall require each member to purchase at least 20 equity shares at par value and these equity shares will not be insured by the Credit Union Deposit Guarantee Corporation.

             (3)  The membership share, other than that of a credit union, and payment on all other shares whether or not subscribed for, may be paid either in full or in instalments as the society may determine.

             (4)  The equity shares for a credit union will be redeemable at par value in the event a member wishes to withdraw from the credit union, however, if the credit union is in financial difficulties the registrar, in consultation with the Credit Union Deposit Guarantee Corporation, will have the authority to prevent the withdrawal of the equity share capital.

             (5)  The society shall have a lien on the shares or other interest of a member for a sum due the society from the member or for a loan endorsed by him or her as co‑maker and may set off a sum credited or payable to a member in or towards payment of a sum due the society by the member.

             (6)  The society shall cause to be kept and maintained a register of its members setting out the name, address, share capital and other interest of each member.

             (7)  Shares may be transferred from one member to another member but only in writing, subject to the approval of the board of directors of the registered society and in the form prescribed by the regulations.

             (8)  Interest paid on share capital to a society other than a credit union shall be approved by the board subject to compliance with the Act.

             (9)  Money paid on share deposits or instalments of share deposits may be withdrawn with the approval of the board of directors provided that the provisions of their constitution governing membership withdrawals shall apply.

           (10)  A society other than a credit union shall at all times have on deposit with a bank or person carrying on the business of banking approved for this purpose by the registrar at least 5% of its share capital.

           (11)  The share capital of a credit union will be non‑interest bearing, however, the board of directors of the credit union may approve the payment of dividends subject to section 48 of the Act.

133/91 s46

Capital adequacy reserve

     47. (1) A credit union shall maintain a capital adequacy reserve of 5% of total assets consisting of share capital in accordance with subsection 46(2) and retained earnings with a minimum of 3% of the reserve in retained earnings.

             (2)  A credit union has the option to reduce the 3% retained earnings proportion of share capital included in the capital adequacy reserve, however, in instances where the level of retained earnings is below the 3% limit, set under this section, the members' equity share capital cannot be withdrawn and a credit union exercising this option must advise the registrar in writing.

             (3)  The attainment of the capital adequacy reserve as set out in subsections (1) and (2) will be spread over a 10 year period and plans for attainment of this goal must be approved by the Credit Union Deposit Guarantee Corporation and these plans must be filed with the corporation no later than 60 days after the proclamation of these regulations.

133/91 s47

Liquidity

     48. (1) Each credit union shall maintain as liquidity at least 10% of its liabilities in qualifying investments.

             (2)  Qualifying investments for the purpose of this section are

             (a)  cash;

             (b)  unencumbered deposits in a central or other financial institution, other than a credit union, with a maturity date of 90 days or less;

             (c)  common shares issued by a central, maximum 2% of liquidity requirement; and

             (d)  provincial or federal government guaranteed bonds with a maturity of less than one year.

             (3)  The liquidity calculation will be completed monthly by all credit unions in the form prescribed by the Credit Union Deposit Guarantee Corporation.

133/91 s48

Disciplinary actions

     49. Where the board of directors of a credit union or its management fails to comply with these regulations and a loss occurs, the registrar may take legal action to recoup these losses from either the directors or the management or both.

133/91 s49

Disposal of surplus

     50. Except with the approval of the registrar a society whose constitution permits the lending of money shall not declare any interest, dividend or patronage refund if its delinquent loans amount to more than 10% of outstanding loans and minimum equity standards as outlined in section 47 are not achieved.

133/91 s50

Repeal

      51. The Co‑operative Societies Regulations, 1991, Newfoundland Regulation 133/91, are repealed.