Why Credit Unions Are Disadvantaged In Business Combinations: A Summary Of Provincial Legislative Regimes Governing Business Combinations Of Credit Unions

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Why Credit Unions Are Disadvantaged In Business Combinations: A Summary Of Provincial Legislative Regimes Governing Business Combinations Of Credit Unions

Article by Robert W. McDowell , Yvon Martineau , David H. Field Q.C. , Robert E. Elliott ,

Robert W. Quon , Stephen B. Kerr ,

Koker Christensen , Kathleen E. Yoa and A. Wojtek Baraniak

Executive Summary

Business combinations allow credit unions to combine back-office administrative work and to streamline and cross-sell financial products, resulting in significant cost savings. The following points can be inferred from a review of the current provincial legislation.

The registration of credit unions in multiple provinces, in order to carry on the normal business of deposits and loans, is not possible.

Continuance is limited to two provinces (British Columbia and Saskatchewan) and is not useful since once continued the credit union must cease to carry on business in its originating province.

Cross-border amalgamations of credit unions are not feasible.

Cross-border asset purchase transactions of credit unions are not possible since extra-provincial credit unions are precluded from carrying on business within the province.

Outsourcing agreements are a partial solution to these impediments. However, not all provinces allow credit unions to enter into outsourcing agreements with extra-provincial credit unions and other provinces require that the provincial regulatory body supervising credit unions approve the outsourcing agreement. In fact, due to gaps in provincial legislation, consultation with the appropriate provincial regulatory body should be undertaken before entering into any outsourcing agreement with an extra-provincial credit union.

The incorporation of a federal association or a retail association permits credit unions from different provinces to combine certain operational functions.

Therefore, the only feasible solutions for credit unions wishing to reduce their administrative and operational costs while expanding into other provinces is either a series of outsourcing agreements with other credits unions or the incorporation of a federal association or retail association.

Introduction

This paper describes the provincial legislative regimes governing the business combination of credit unions. In particular, this paper addresses the business combination of credit unions incorporated in different provincial jurisdictions. The paper also describes the possibility of registering a credit union in multiple provinces or continuing a credit union from one province to another. The possible business combinations explored in this pap...

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