Four Firms Seek Stated Capital Reductions

Summary#

Notices say four financial firms intend to apply for regulator approval to reduce the recorded capital of their common shares and pay that money to their sole shareholder. The firms are Montreal Trust Company of Canada (up to $120,000,000), National Trust Company (up to $100,000,000), Scotia Mortgage Corporation (up to $100,000,000) and Tangerine Bank (up to $435,530,000). The shareholder passed resolutions on June 11, 2020, and the notices were published June 27, 2020.

What it does#

• Each company says it will apply to the Superintendent of Financial Institutions (Canada) for approval under the Trust and Loan Companies Act (Canada) or the Bank Act (Canada) to reduce the stated capital of their common shares.
• The reductions may be made in one or more payments by October 30, 2020, up to these limits:
  • Montreal Trust Company of Canada: up to $120,000,000
  • National Trust Company: up to $100,000,000
  • Scotia Mortgage Corporation: up to $100,000,000
  • Tangerine Bank: up to $435,530,000
• Each firm’s chief financial officer will decide the exact amounts and timing within the stated limits.
• The money taken from the stated capital would be distributed to the sole shareholder if the regulator approves. The shareholder had approved these resolutions on June 11, 2020.

Who's affected#

• The most directly affected is the sole shareholder of each company (not named in these notices).
• The listed firms — Montreal Trust Company of Canada, National Trust Company, Scotia Mortgage Corporation, and Tangerine Bank — would change their recorded share capital if approved.
• The Superintendent of Financial Institutions (Canada) will review and decide whether to allow the changes.
• It is unclear from the notices whether ordinary customers, depositors, or the public will see any immediate effects.

Why it matters#

• If approved, these actions would let the companies move up to the bolded amounts out of their stated capital and send that money to their sole shareholder.
• That can change a firm’s capital structure — something regulators watch because it relates to financial strength and solvency.
• Because approval is required from the Superintendent, these are proposed steps, not final. The notices are largely a routine corporate step to inform the public and regulator.