ONTARIO BUSINESS CORPORATIONS ACT
Important Notice: The following statute is subject to amendment and legislative changes, so particular attention should be directed to the date of the statute, with reference being made to the official government website for the most current version of a statute at www.e-laws.gov.on.ca.
46. (1) In this Part,
“event of default” means an event specified in a trust indenture on the occurrence of which,
(a) a security interest constituted by the trust indenture becomes enforceable, or
(b) the principal, interest and other money payable thereunder become or may be declared to be payable before the date of maturity,
but the event is not an event of default until all conditions prescribed by the trust indenture in connection with such event for the giving of notice or the lapse of time or otherwise have been satisfied; (“cas de défaut”)
“trust indenture” means any deed, indenture or other instrument, including any supplement or amendment thereto, made by a body corporate under which the body corporate issues or guarantees debt obligations and in which a person is appointed as trustee for the holders of the debt obligations issued or guaranteed thereunder; (“acte de fiducie”)
“trustee” means any person appointed as trustee under the terms of a trust indenture to which a body corporate is a party and includes any successor trustee, whether or not the person is a trust corporation authorized to carry on business in Ontario. (“fiduciaire”) R.S.O. 1990, c. B.16, s. 46 (1).
Application of this Part
(2) This Part applies to a trust indenture, whether entered into before or after the 29th day of July, 1983, if, in respect of any debt obligations outstanding or guaranteed thereunder or to be issued or guaranteed thereunder, a prospectus or securities exchange issuer or take-over bid circular has been filed under the Securities Act or any predecessor thereof or in respect of which a prospectus has been filed under The Corporations Information Act, being chapter 72 of the Revised Statutes of Ontario, 1960, or any predecessor thereof. R.S.O. 1990, c. B.16, s. 46 (2).
(3) The person appointed as trustee under a trust indenture, or at least one of such persons if more than one is so appointed, shall be resident or authorized to do business in Ontario. R.S.O. 1990, c. B.16, s. 46 (3).
Exemption by Commission
(4) Where, upon the application of a body corporate incorporated otherwise than under the laws of Canada, a province or a territory, the Commission is satisfied that to do so would not be prejudicial to the public interest, the Commission may exempt, subject to such terms and conditions as the Commission may impose, a trust indenture from this Part. R.S.O. 1990, c. B.16, s. 46 (4).
Duty of trustee
47. (1) A trustee in exercising the trustee’s powers and discharging the trustee’s duties shall,
(a) act honestly and in good faith with a view to the best interests of the holders of the debt obligations issued under the trust indenture; and
(b) exercise the care, diligence and skill of a reasonably prudent trustee. R.S.O. 1990, c. B.16, s. 47 (1).
(2) No term of a trust indenture or of any agreement between a trustee and the holders of debt obligations issued thereunder or between the trustee and the issuer or guarantor shall operate so as to relieve a trustee from the duties imposed upon the trustee in subsection (1). R.S.O. 1990, c. B.16, s. 47 (2).
Conflict of interest
48. (1) No person shall be appointed as trustee if there is a material conflict of interest between the person’s role as trustee and the person’s role in any other capacity. R.S.O. 1990, c. B.16, s. 48 (1).
(2) A trustee shall, within ninety days after becoming aware that a material conflict of interest exists,
(a) eliminate such conflict of interest; or
(b) resign from office. R.S.O. 1990, c. B.16, s. 48 (2).
Validity not affected
(3) If, despite this section, a trustee has a material conflict of interest, the validity and enforceability of the trust indenture under which the trustee has been appointed, of the security interest constituted by or under such trust indenture and of the securities issued under such trust indenture are not affected in any manner whatsoever by reason only of the existence of such material conflict of interest. R.S.O. 1990, c. B.16, s. 48 (3).
(4) If a trustee contravenes subsection (1) or (2), any interested person may apply to the court for an order that the trustee be replaced, and the court may make an order on such terms as it thinks fit. R.S.O. 1990, c. B.16, s. 48 (4).
Evidence of compliance
49. (1) An issuer or a guarantor of debt obligations issued or to be issued under a trust indenture, before doing any act referred to in clause (a), (b), (c) or (d), shall furnish the trustee with evidence of compliance with the conditions in the trust indenture relating to,
(a) the issue, certification and delivery of debt obligations under the trust indenture;
(b) the release or release and substitution of property subject to a security interest constituted by the trust indenture;
(c) the satisfaction and discharge of the trust indenture; or
(d) the taking of any other action to be taken by the trustee at the request of or on the application of the issuer or guarantor. R.S.O. 1990, c. B.16, s. 49 (1).
(2) Evidence of compliance as required by subsection (1) shall consist in each case of,
(a) a statutory declaration or certificate made by a director or an officer of the issuer or guarantor stating that the conditions referred to in that section have been complied with in accordance with the terms of the trust indenture; and
(b) where the trust indenture requires compliance with conditions that are subject to review,
(i) by legal counsel, an opinion, and
(ii) by an auditor or accountant, an opinion or report of the auditor of the issuer or guarantor, or any accountant licensed under the Public Accounting Act, 2004 or comparable legislation of the jurisdiction in which the accountant practises, based on the examinations or enquiries required to be made under the trust indenture,
in each case approved by the trustee, that the conditions have been complied with in accordance with the terms of the trust indenture. R.S.O. 1990, c. B.16, s. 49 (2); 2004, c. 8, s. 46.
(3) The evidence of compliance referred to in subsection (2) shall include a statement by the person giving the evidence,
(a) declaring that the person has read and understands the conditions of the trust indenture described in subsection (1);
(b) describing the nature and scope of the examination or investigation upon which the person based the statutory declaration, certificate, opinion or report; and
(c) declaring that the person has made such examination or investigation as the person believes necessary to enable the person to make the statements or give the opinions contained or expressed therein. R.S.O. 1990, c. B.16, s. 49 (3).
Certificate of issuer or guarantor
(4) At least once in each twelve-month period beginning on the date debt obligations are first issued under the trust indenture and at any other reasonable time upon the demand of a trustee, the issuer or guarantor of debt obligations issued under a trust indenture shall furnish the trustee with a certificate that the issuer or guarantor has complied with all requirements contained in the trust indenture that, if not complied with, would, with the giving of notice, lapse of time or otherwise, constitute an event of default, or, if there has been failure to so comply, giving particulars thereof. R.S.O. 1990, c. B.16, s. 49 (4).
Evidence of compliance
(5) Upon the demand of a trustee, the issuer or guarantor of debt obligations issued under a trust indenture shall furnish the trustee with evidence in such form as the trustee may require as to compliance with any condition therein relating to any action required or permitted to be taken by the issuer or guarantor under the trust indenture or as a result of any obligation imposed by the trust indenture. R.S.O. 1990, c. B.16, s. 49 (5).
Reliance on opinions
(6) A trustee is not in contravention of subsection 47(1) if the trustee relies in good faith upon statements contained in a statutory declaration, certificate, opinion or report that complies with this Act or the trust indenture. R.S.O. 1990, c. B.16, s. 49 (6).
Trustee not to be receiver
50. A trustee under a trust indenture and any related person to the trustee shall not be appointed a receiver or receiver and manager or liquidator of the assets or undertaking of the issuer or guarantor of the debt obligations under the trust indenture. R.S.O. 1990, c. B.16, s. 50.
Notice of events of default
51. (1) The trustee shall be required to give to the holders of debt obligations issued under the trust indenture, within a reasonable time but not exceeding thirty days after the trustee becomes aware of the occurrence thereof, notice of every event of default arising under the trust indenture unless the trustee in good faith determines that the withholding of the notice is in the best interests of the holders of the debt obligations and so advises the issuer or guarantor in writing. R.S.O. 1990, c. B.16, s. 51 (1).
(2) Where notice of the occurrence of an event of default under a trust indenture is given under subsection (1) and the default is thereafter cured, notice that the default is no longer continuing shall be given by the trustee to the holders of the debt obligations within a reasonable time, but not exceeding thirty days, after the trustee becomes aware that the default has been cured. R.S.O. 1990, c. B.16, s. 51 (2).
Where list of debt obligation holders to be furnished
52. (1) Any person, upon payment to a trustee of a reasonable fee therefor, may require the trustee to furnish, within ten days after delivering to the trustee the statutory declaration referred to in subsection (3), a list setting out,
(a) the names and addresses of the registered holders of the outstanding debt obligations;
(b) the principal amount of outstanding debt obligations owned by each such holder; and
(c) the aggregate principal amount of debt obligations outstanding,
as shown on the records maintained by the trustee on the day that the statutory declaration is delivered to the trustee. R.S.O. 1990, c. B.16, s. 52 (1).
Information to be furnished to trustee
(2) Upon the demand of a trustee, the issuer of debt obligations shall furnish the trustee with the information required to enable the trustee to comply with subsection (1). R.S.O. 1990, c. B.16, s. 52 (2).
(3) The statutory declaration required under subsection (1) shall state,
(a) the name and address of the person requiring the trustee to furnish the list and, if the person is a body corporate, the address for service thereof; and
(b) that the list will not be used except as permitted under subsection (5). R.S.O. 1990, c. B.16, s. 52 (3).
(4) If the person requiring the trustee to furnish a list under subsection (1) is a body corporate, the statutory declaration required under that subsection shall be made by a director or officer of the body corporate. R.S.O. 1990, c. B.16, s. 52 (4).
Use of list
(5) No person shall use a list obtained under this section except in connection with,
(a) an effort to influence the voting of the holders of debt obligations;
(b) an offer to acquire debt obligations; or
(c) any other matter relating to the debt obligations or the affairs of the issuer or guarantor thereof. R.S.O. 1990, c. B.16, s. 52 (5).
Burlington Business Lawyer Christopher R. Neufeld is a corporate attorney admitted to practice law in both Ontario (Canada) and New York (U.S.A.). Christopher's legal practice focuses primarily on business law, in particular corporate commercial transactions. The law firm of Neufeld Legal Professional Corporation is headquartered at 719 Catalina Crescent, Burlington, Ontario L7L 5B9, and as such is in immediate proximity to downtown Toronto, Mississauga, Hamilton, Oakville, Brampton, Milton, Guelph and Kitchener Waterloo. COPYRIGHT 2009.