Constitution, regulation by Title III and organization of a mutual company (ss. 201-232 IA)
Application
This section applies to the constitution of a mutual company under the Insurers Act 
This link will open in a new window in order to be considered a Québec insurer.
Summary
A mutual company constituted under the IA is regulated by Title III (ss. 196 to 376) of this Act. For this reason, the constitution of a mutual company and its becoming regulated by Title III are the outcome of a same decision by the Minister and cannot be dissociated (s. 205, 1st par. IA). A decision by the Minister to make a mutual company subject to regulation by Title III entails the order to constitute the company. Conversely, an order by the Minister to constitute a mutual company entails the company’s being subject to regulation by Title III. The same applies to the Minister’s refusal to make a mutual company subject to regulation by Title III or to order the constitution of a mutual company (s. 205, 2nd par. IA).
Under section 201 IA, the constitution of a mutual company results from a decision to that effect by the Minister, following the filing of an application for that purpose with the AMF and the publication of a notice of intention to apply to become regulated by Title III.
A mutual company is constituted on the initiative of its promoters (s. 206 IA).
Provisions
The procedure to constitute, regulate by Title III and organize a mutual company is set out in sections 201 to 232 of the IA This link will open in a new window CQLR, c. A-32.1. The Business Corporations Act This link will open in a new window, (the “BCA”), CQLR, c. S-31.1 applies on a suppletive basis, with the necessary modifications and subject to specifically provided exclusions and substitutions (ss. 198, 199 and 200, pars. 2 to 4 IA). Moreover, for the purpose of applying the provisions of the BCA to mutual companies, the AMF is substituted for the enterprise registrar, except as regards maintaining an enterprise register (s. 200(1) IA).
Promoters
Before filing an application for constitution, the promoters of the mutual company must solicit persons to become mutual members. Under the first paragraph of section 206 IA, the application for the constitution of a mutual company may be filed on the initiative of one or more promoters, if at least 200 persons have undertaken to enter, within the year after the AMF’s authorization is obtained, into an insurance contract or to enroll in a group insurance contract underwritten by the company.
The third paragraph of section 206 IA states that the Act respecting the distribution of financial products and services (Distribution Act), CQLR, c. D-9.2, does not apply to the obtaining of such an undertaking.
Section 206 IA also states, in the second paragraph, that the promoters must be qualified to serve as directors of the mutual company. Therefore, the following persons may not act as promoters:
- a person found guilty of an indictable or other offence involving fraud or dishonesty, unless the person has obtained a pardon (s. 269 IA)
- a minor (s. 327, 1st par. Civil Code of Québec (“CCQ”)
- a person of full age under tutorship or curatorship (s. 327, 1st par. CCQ)
- a bankrupt (s. 327, 1st par. CCQ)
- a person prohibited by the court from holding such office (s. 327, 1st par. CCQ).
The promoters must designate a provisional secretary, see to the preparation of the documents necessary for the constitution of the mutual company and sign the documents (s. 207, 1st par. IA), in particular:
- the notice of intention
- the articles of constitution
- the application to become regulated by Title III
They must also see that an organization meeting is called within 60 days after the date on which the mutual company is constituted (s. 207, 2nd par. IA).
Lastly, if the proposed mutual company will be a member of a federation, the promoters must obtain a resolution attesting the federation’s undertaking to admit the company as a member (s. 207, 3rd par. IA).
Notice of intention
The information to be stated in a notice of intention to apply to become regulated by Title III is set out in the first paragraph of section 209 IA.
The notice of intention must accompany the application to become regulated by Title III to be filed with the AMF (s. 209, 2nd par. IA), which will publish it in its Bulletin (s. 215 IA).
Articles of constitutions
The content of the articles of constitution of a mutual company is described in section 208 IA. The articles must state the name of the mutual company and may set out any provision permitted by the IA to be set out in the by-laws of a mutual company.
The section also states that, in case of conflict, the articles of constitution prevail over the by-laws.
Application to become regulated by Title III
The information to be included in a mutual company’s application to become regulated by Title III is set out in sections 210 and 212 IA.
The application must include the information prescribed by regulation of the Minister in addition to the information stated in the notice of intention (s. 210, 1st par. IA) as well as the information set out in section 212 IA. It may also include the date and, if applicable, the time as of which the company wishes to become regulated by Title III, if later than the date and time of the Minister’s decision (s. 210, 2nd par. IA).
The documents that must be filed with the application are set out in section 213 IA. These documents must be filed with the AMF together with the application and prescribed fees (s. 214 IA).
Checklists
The checklists below describe the information to be included in the following documents:
- Notice of intention to apply to become regulated by Title III
- Articles of constitution
- Application to become regulated by Title III
Notice of intention to apply to become regulated by Title III
Contents of the notice of intention
| information/Document | Source | Clarification by the AMF |
|---|---|---|
| 1. The notice of intention to apply to become regulated by Title III must state: | s. 209, 1st par. IA | n/a |
| 1.1 The proposed name of the insurance company; | s. 209, 1st par. (1) IA | n/a |
| 1.2 The juridical form of the insurance company, namely, that it is a mutual company; | s. 209, 1st par. (2) IA | n/a |
| 1.3 The name and address of its promoters; | s. 209, 1st par. (3) IA | n/a |
| 1.4 The classes of activities for which the corporation is applying for the AMF’s authorization; | s. 209, 1st par. (4) IA | n/a |
| 1.5 The location of the proposed head office of the insurance company. | s. 209, 1st par. (5) IA | n/a |
Articles of constitution
Contents of the articles of constitution
| Information/Document | Source | Clarification by the AMF |
|---|---|---|
| 1.The name of the mutual company; | 2s. 208 IA | n/a |
| 2.Optional: Any provision permitted by the IA to be set out in the by-laws of a mutual company, i.e.: | S. 208 IA | n/a |
| 2.1 For each class of shares: | s. 263, 1st par. IA | n/a |
| 2.1.1 The contribution required per share for its issue; | s. 263, 1st par. (1) IA | n/a |
| 2.1.2 The maximum interest that may be paid on the shares; | s. 263, 1st par. (2) IA | n/a |
| 2.1.3 The conditions on which and manner in which shares may be transferred; | s. 263, 1st par. (3) IA | n/a |
| 2.1.4 The redemption terms, if applicable; | s. 263, 1st par. (4) IA | n/a |
| 2.1.5 The order in which shares are repaid in the event of liquidation or dissolution; | s. 263, 1st par. (5) IA | n/a |
| 2.1.6 The other rights, privileges and restrictions attached to the shares; | s. 263, 1st par. (6) IA | n/a |
| 2.2 The fixed number of directors or the minimum and maximum number of directors; | s. 267, 1st par. IA | Also specify the duration of their term |
| 2.3 The minimum period, which may not exceed 90 days, during which a mutual member must have had that status to be eligible for office as director or nominate as a candidate another person to such a position; | s. 275 IA | n/a |
| 2.4 The quorum for the holding of a meeting of mutual members; | s. 286, 1st par. IA | n/a |
| 2.5 The possibility for mutual members to be represented at a meeting by a proxyholder, in accordance with the BCA. The proxyholder may not represent more than one person; | s. 287 IA | n/a |
| 2.6 When the mutual company becomes a member of a federation, the provisions relating to notices of meetings in sections 165 and 212 of the BCA. | s. 288(2) IA | n/a |
Application to become regulated by Title III
Contents of the application to become regulated by Title III
| Information/Document | Source | Clarification by the AMF |
|---|---|---|
| 1. The information included in the notice of intention, i.e.: | s. 210, 1st par. IA | s.o. |
| 1.1 The proposed name of the insurance company; | s. 209, 1st par. (1) IA | Provide proof that the name has been reserved with the Québec enterprise registrar This link will open in a new window (REQ). |
| 1.2 The juridical form of the insurance company, namely, that it is a mutual company; | s. 209, 1st par. (2) IA | s.o. |
| 1.3 The name and address of its promoters; | s. 209, 1st par. (3) IA | s.o. |
| 1.4 The classes of activities for which the company is applying for the AMF’s authorization; | s. 209, 1st par. (4) IA | s.o. |
| 1.5 The location of the proposed head office of the insurance company. | s. 209, 1st par. (5) IA | s.o. |
| 2. If later than the date and time of the Minister’s decision: The date and, if applicable, the time as of which the applicant wishes to become regulated by Title III; | s. 210, 2nd par. IA | s.o. |
| 3. The names and addresses of the persons who have undertaken to enter into or enroll in an insurance contract to be underwritten by the mutual company and the names and addresses of the promoters; | s. 212(1) IA | s.o. |
| 4. The name and address of the person designated, if applicable, as provisional secretary of the mutual company; | s. 212(2) IA | s.o. |
| 5. A description of the manner in which the organization meeting will be called and the time limit for doing so; | s.212(3) IA | s.o. |
| 6. The information prescribed by regulation of the Minister. | s. 210, 1st par. IA | s.o. |
Documents to be enclosed with the application to become regulated by Title III
| Information/Document | Source | Clarification by the AMF |
|---|---|---|
| 1. The notice of intention; | s. 209, 2nd par. and s. 213, 1st par. IA | s.o. |
| 2. The articles of constitution of the mutual company; | s. 213, 1st par. (1) IA | s.o. |
| 3. A description of the projected capital structure of the company and its business plan and financial forecasts for a three-year period; | s. 213, 1st par. (2) IA | Refer to the authorization procedure for details. An opening balance sheet must also be provided. |
| 4. If the mutual company intends to become a member of a federation, a certified copy of the resolution of the federation attesting that it has undertaken to admit the company as a member; | s. 213, 1st par. (3) IA | s.o. |
| 5. A description of the composition and operation of the committee on ethics, the audit committee and any other proposed committee; | s. 6, 1st par. (3) RARI | Refer to ss. 98 to 114 IA. Enclose the duly completed table: Composition of the Board of Directors |
| 6. The proposed policies and riders; | s. 6, 1st par. (6) RARI | s.o. |
| 7. The other documents prescribed by regulation of the Minister; | s. 213, 1st par. (5) IA | s.o. |
| 8. The fees prescribed by government regulation. | s. 213, 1st par. (6) IA | Refer to the section Fees and costs payable. |
The AMF's report and the minister's decision
Section 215 IA provides that, on receipt of the application and the required documents and fees, the AMF will publish the notice of intention in its Bulletin.
The AMF must then prepare a report for the Minister on the reasons for granting or denying the application to become regulated by Title III in which it assesses, among other things, consumer interest and the impact of the decision on the insurance market in Québec (s. 216, 1st par. IA). The report also covers the other matters indicated in the 2nd paragraph of section 216 IA.
As part of its analysis, the AMF must, among other things, ensure that the company’s proposed name is compliant with the requirements of the IA. These requirements are set out in sections 233 to 236 IA. Pursuant to section 198 IA, these provisions are supplemented by section I of Chapter IV of the BCA (ss. 16 to 28). For the purpose of applying these latter provisions, the AMF is substituted for the enterprise registrar, except as regards maintaining an enterprise register (ss. 200(1) and 233, 1st par. IA).
To the extent that the company’s proposed name is compliant with the requirements of the IA, the AMF sends its report to the Minister together with the application to become regulated by Title III and the accompanying documents (s. 217 LA).
The Minister may, if the Minister considers it advisable, make the company subject to regulation by Title III (s. 218 IA). When doing so, the Minister sends a document attesting that decision to the company and to the AMF (s. 219, 1st par. IA). The document must include the date and time of the Minister’s decision and, if different, the date and time specified in the application for becoming regulated by Title III (s. 219, 2nd par. IA).
Processing of articles and issuance of certificate of constitution
Pursuant to the first paragraph of section 220 IA, on receipt of a document attesting that a mutual company is regulated by Title III, the AMF processes the articles of constitution and issues the certificate of constitution in accordance with Chapter XVIII of the BCA (ss. 468 to 484).
The AMF then sends a copy of the articles and the certificate to the enterprise registrar, who deposits them in the enterprise register.
A mutual company is constituted as of the effective date and, if applicable, time shown on the certificate of constitution issued by the AMF. The company is a legal person as of that time (s. 221 IA).
Pursuant to section 474 1rst par. BCA This link will open in a new window, the AMF refuses to issue the certificate of constitution if the articles do not meet the requirements indicated in the BCA and are not filed in the form prescribed by the Act respecting the legal publicity of enterprises (Legal Publicity Act). The AMF may also refuse to issue a certificate in the cases provided in section 474, 2nd par. BCA This link will open in a new window.
Organization
The organization of the company is provided for in sections 222 to 232 IA.
As of the time it becomes constituted and regulated by Title III, the company must, pursuant to section 222 IA, take the actions in order to obtain the AMF’s authorization. To obtain its authorization, the company must file an application pursuant to section 30 IA.
Refer to the Application for authorization procedureSome information and documents requested for regulation by Title III are also requested for the authorization. They therefore do not have to be filed again when applying for authorization.
The application for authorization can be filed concurrently with the application to become regulated by Title III, which may facilitate and expedite processing.
The first paragraph of section 224 IA states that the provisional secretary of a mutual company must call an organization meeting in the manner described in the application to become regulated by Title III and within the specified time limit, but no later than 60 days after the date of constitution (s. 207, 2nd par. IA). The Minister may extend that time limit or set a new one if it has expired (s. 224, 2nd par. IA).
The persons who, on the date the organization meeting is called, have undertaken to enter into an insurance contract or enroll in a group insurance contract underwritten by the mutual company must be called to the meeting (s. 225 IA). Two of those persons or a promoter may call the organization meeting if the provisional secretary is absent or unable to act (s. 226, 1st par. IA).
The persons attending the organization meeting must adopt by-laws and elect the directors. They may take any other measure relating to the affairs of the mutual company (s. 227 IA).
Section 228 IA states that the directors elected at the organization meeting must hold a subsequent organization meeting during which they must, in particula
- issue the shares of the share capital of the mutual company that, if applicable, were subscribed and paid (s. 228(1) IA);
- take any other measure toward organizing the company that is not reserved to the mutual members’ meeting (s. 228(2) IA).
The organization concludes when the AMF grants or refuses to grant its authorization or when such authorization has not been obtained on the expiry of a one-year period after the company became regulated (s. 229, 1st par. IA). The Minister may, on the company’s application, extend its organization for a period not exceeding one year (s. 229, 2nd par. IA).
Under section 232 IA, a mutual company whose organization ends without its having obtained the AMF’s authorization must liquidate and dissolve because, unlike business corporations, mutual companies cannot exist outside of the insurance field.
Fees and costs payable
Refer to the complete list of fees and costs payable to the AMF for more information.
Processing time
Except in specific circumstances, the AMF will send its report to the Minister of Finance within 180 days from the date the application is complete.