The is part of a series of blog posts reviewing some of the key differences between the statutory regimes governing Saskatchewan credit unions and federal credit unions. This post focuses on the differences in corporate powers between Saskatchewan and federal credit unions.
While the corporate powers of a Saskatchewan credit union and federal credit union are similar, there are some differences and additional obligations associated with a federal credit union which are described below.
Generally speaking, there are many similarities in the corporate powers of both a Saskatchewan and federal credit union, including the following:
- each must carry on business on a “cooperative basis”;
- each must provide its services primarily to members;
- each has similar general corporate powers[i];
- each is subject to similar restrictions on the ability to administer and promote insurance[ii]; and
- each can provide a guarantee provided that the sum of the guarantee is fixed, and the person on whose behalf the guarantee is given has an unqualified obligation to reimburse the credit union for the full amount.
Despite the similarities in corporate powers, there are a number of differences, some of which are described below.
Operation in Multiple Provinces
- A key difference between the legislative regimes for federal credit unions and Saskatchewan credit unions, and a major benefit to a Saskatchewan credit union continuing federally, is that federal credit unions will be able to operate across Canada in multiple provinces through a single regulator, being OSFI.
- In contrast, a Saskatchewan credit union can only operate outside of the Province of Saskatchewan for very limited purposes which will be specified in the credit union legislation of such other provinces. For example, a Saskatchewan credit union can only operate in Alberta for the limited purposes of registering security, realizing security or enforcing a loan.
- A federal credit union may only engage in prescribed personal property financial leasing activities in which a financial leasing entity (as defined in the Bank Act (Canada)) is permitted to engage, including, for example, the administration of financial lease agreements and conditional sales agreements.
- As such, federal credit unions are subject to the same restrictions as financial leasing entities (for example, federal credit unions will not be permitted to enter into or accept an assignment of a motor vehicle conditional sales contract with a gross vehicle weight of less than 21 tonnes).
- A Saskatchewan credit union is subject to less specific restrictions, but may only provide financial leases to its customers.
- Saskatchewan credit unions may only grant security interests in their own property in limited circumstances – including for obligations to the Credit Union Deposit Guarantee Corporation (“CUDGC“) or Credit Union Central, where approved in writing by CUDGC, with respect to personal property reasonably required to carry on business, or where approved by the standards of sound business practice.
- Federal credit unions have less limitations with respect to the granting of security interests in their own property, but are required to implement pledging policies which are consistent with OSFI’s Pledging Guideline.
- Saskatchewan credit unions may only acquire or increase a substantial investment in certain prescribed entities with the prior approval of CUDGC. For Saskatchewan credit unions, a “substantial investment” includes more than 10% of any class of shares in a body corporate or 10% of any ownership interest in another entity.
- Although federal credit unions also have restrictions on the types of entities which they can acquire or increase a substantial investment in, such acquisitions or increases do not require regulatory approval in all cases. For federal credit unions, the definition of a “substantial investment” is narrower and includes more than 10% of the voting rights or 25% of the shares in a body corporate or more than 25% of the ownership interest in another entity.
A federal credit union has various options for amalgamating with other entities:
- Two or more federal credit unions may amalgamate and continue as one credit union.
- A federal credit union and a provincial credit union or caisse populaire that has applied to continue as a federal credit union may be continued as one federal credit union.
- Two or more provincial credit unions or caisses populaires that have applied to continue as federal credit unions may be continued as one federal credit union. This would allow for cross border combinations of credit unions.
The options of a Saskatchewan credit union to amalgamate with other entities within the provincial regime are more limited.
- Saskatchewan credit unions are limited to amalgamations between two or more Saskatchewan credit unions or other entities where the laws governing that entity permits amalgamations.
- Amalgamations between Saskatchewan credit unions are also permitted with wholly-owned subsidiaries of that credit union.
Next week’s blog post will focus on the differences in capital structure between federal and Saskatchewan credit unions.