By way of Bill C-5 An Act to amend the Bills of Exchange Act, the Interpretation Act and the Canada Labour Code (National Day for Truth and Reconciliation) (the Act, effective August 3, 2021), Parliament created a new federal holiday. This legislation, establishing a "National Day for Truth and Reconciliation", to be observed on September 30, beginning in 2021, fulfills the Truth and Reconciliation Commission of Canada's Call to Action #80: "to establish, as a statutory holiday, a National Day for Truth and Reconciliation to honour Survivors [of Residential Schools], their families, and communities, and ensure that public commemoration of the history and legacy of residential schools remains a vital component of the reconciliation process." This legislation, developed in collaboration with Indigenous communities, is therefore an important part of Canada's ongoing reconciliation work.
The creation of this significant new federal holiday gives rise to a range of practical considerations. In this bulletin, we consider implications of this new holiday for businesses, employers and lenders, some of which may raise issues requiring prompt attention between now and September 30.
The holiday applies to all federally-regulated employers, including public and private sector employers who are subject to the Canada Labour Code (the Code), such as banks and the federal government. Accordingly, federally-regulated employees are now statutorily-entitled to ten general holidays under the Code, and federally-regulated employers will be required to treat the new holiday in the same manner as the other general holidays. It will be up to each territorial and provincial government to decide whether it wishes to follow the federal government's lead and make September 30 a statutory public holiday for workers within their jurisdiction; at the time of writing, only British Columbia had announced an intention to do so. Therefore, the new holiday will not presently apply to provincially-regulated employers, such as securities dealers, except those in British Columbia.
Implications for financial services
The new holiday has significant implications for the financial services sector. As the Bank of Canada and Payments Canada will observe this holiday, there will be no clearing or settlement on September 30. While agreements typically include language to address the consequences of a holiday falling on a business day, it would be prudent for federally regulated institutions to review documentation to ensure that they adequately address the new holiday. The observance of the holiday in 2021 may present operational challenges if billing, payment, and other systems lack the flexibility to adjust to this new holiday and, in particular, the lack of clearing and settlement on September 30. These operational issues may, in turn, raise regulatory, legal, and other risks. For example, if systems do not adjust to the lack of settlement on September 30, inconsistencies between credit agreements and disclosures provided to borrowers, on the one hand, and the actual processing of the customer's account, on the other, may arise. Other areas of note include:
- collections, which will need to take account of the new holiday to ensure compliance with the requirements under the Credit Business Practices Regulations and corresponding provincial legislation;
- branch banking, as branch closures may disproportionately affect certain groups, such as seniors, that use a branch to make month-end payments;
- transactions such as real estate closings scheduled for September 30; and
- marketing and customer communications-federally-regulated entities may wish to develop a customer communications plan to raise awareness of the holiday and its implications.
Federally regulated institutions should assess the impact of this new holiday on an enterprise-wide basis as soon as possible in order to address and mitigate potential risks.
Companies that have outstanding securities with dividends payable, or interest or principal payments due, on September 30, should review their share terms and loan documents to determine whether they will be required to make payments prior to or following September 30 and, in the event of a delay in payment, to determine additional payment obligations will accrue. Issuers of new instruments that are considering maturity dates and payment obligation reset dates should consider whether they wish to avoid September 30 for payment operations reasons. For listed instruments, the TSX announced that it will be open for trading on National Day for Truth and Reconciliation and regular operating hours will be in effect. However, as this holiday is considered a non-settlement day, settlement dates and ex-distribution dates will be impacted and the TSX has released an updated settlement schedule.
Loan agreements often require that payments of interest and/or principal be made on the last day of each calendar month or the last day of each fiscal quarter, and typically include an exception where such day is not a business day (in which case such payments are generally required to be made on either the immediately preceding or the immediately following business day). Whether September 30 will constitute a business day under any particular loan agreement as a result of the National Day for Truth and Reconciliation will depend on the definition of business day in such agreement. While many loan agreements define "business day" to mean any day other than Saturday or Sunday or other day where banks are required or authorized to close in the borrower's or lender's applicable jurisdiction, some loan agreements may have business day definitions that instead reference statutory holidays in the applicable jurisdiction. As the National Day for Truth and Reconciliation will not constitute a statutory holiday in provinces that do not elect to adopt the holiday, lenders and borrowers should review the definition of business day in their loan agreements and consider whether a formal extension of any payments due on September 30 will be required.
The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.