Guarantee Company Capital Reduction

Summary#

The Guarantee Company of North America plans to reduce the stated capital for its common shares to $1.00 as a step before a planned amalgamation with Intact Insurance Company. The sole shareholder approved the change on February 23, 2021, and the notice was published on March 6, 2021; the company must get approval from the Superintendent of Financial Institutions (Canada) under the Insurance Companies Act (Canada) before it can go ahead.

What it does#

• Reduces the stated capital account for the company’s common shares to $1.00.
• Specifies the reduction will happen without any cash or other distribution to the sole shareholder.
• Makes the reduction effective immediately before the proposed amalgamation with Intact Insurance Company.
• Authorizes company officers and directors to apply for regulatory approval and to sign whatever documents are needed to complete the change.

Who's affected#

• The Guarantee Company of North America (the company making the change).
• The company’s sole shareholder (whose vote approved the change).
• The Superintendent of Financial Institutions (Canada), who must approve the reduction under the Insurance Companies Act (Canada).
• It is unclear from the notice whether policyholders, creditors, employees or others will be directly affected; the notice does not say.

Why it matters#

• This is a legal-accounting step that changes the company’s recorded capital before a planned merger.
• The change does not give money to the shareholder; it likely clears a technical hurdle for the amalgamation with Intact Insurance Company.
• Approval is not automatic. The regulator will review the application, so the change only happens if the Superintendent of Financial Institutions (Canada) agrees.