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ARTICLE · 30 JUNE 2009

Amendments To CDIC Act Alter Eligible Financial Contract Protections

Stikeman Elliott LLP
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The “Budget Implementation Act”, 2009 (Canada) S.C. 2009, c.2, passed on March 12, 2009, introduced amendments to the financial institution restructuring provisions of the “Canada Deposit Insurance Corporation Act” (CDIC Act) that will modify the stay exemption for close-out netting and collateral enforcement rights under eligible financial contracts (EFCs) with CDIC member institutions.

CanadaFinance and Banking
Stikeman Elliott LLP
Stikeman Elliott LLP
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The Budget Implementation Act, 2009 (Canada) S.C. 2009, c.2, passed on March 12, 2009, introduced amendments to the financial institution restructuring provisions of the Canada Deposit Insurance Corporation Act (CDIC Act) that will modify the stay exemption for close-out netting and collateral enforcement rights under eligible financial contracts (EFCs) with CDIC member institutions. These provisions are not yet in force and will come into effect by Order-in-Council.

Current Close-Out Protections For EFCs In CDIC Act Proceedings

A Canadian bank that is in financial difficulty could be subject to one of two types of order made under section 39.13(1) of the CDIC Act by the federal Cabinet on the recommendation of the Superintendent of Financial Institutions. These are (1) an order vesting the shares of the institution in CDIC and (2) an order appointing CDIC as receiver of the institution. These orders have different effects, but in both cases there is an automatic

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