Publication date: August 21, 2024

This supervisory policy explains how a registered payment service provider (PSP) should assess whether it will be the subject of a planned acquisition of control or a prescribed change.

The policy also describes the re-registration process when a PSP plans to undergo an acquisition of control or a prescribed change. In addition, the policy explains the impact of requirements under the Retail Payment Activities Act (RPAA) on individuals and entities that plan to acquire a controlling interest in a PSP or are involved in a PSP’s plan to undergo a prescribed change.

For terminology about retail payment supervision, refer to the glossary.

Introduction

The Bank of Canada is responsible for supervising PSPs for compliance with the Retail Payment Activities Act (RPAA). The RPAA requires a PSP to submit a new application for registration, and become re-registered under that new application, before making certain changes to its organizational structure.

A new application for re-registration is needed:

  • before another individual or entity acquires control of the PSP, or
  • before the PSP undergoes a change prescribed by regulation

A PSP must be re-registered with the Bank before:

  • any individual or entity acquires a controlling interest in the PSP, provided that the PSP will not be the subject of an exclusion under section 9 or section 10 of the RPAA following the acquisition, or
  • a state-owned enterprise acquires any interest in the PSP

Re-registration is required regardless of the acquirer’s plans for the PSP following completion of the acquisition.

Acquisition of control

Under subsection 24(1) of the RPAA, if an individual or entity plans to acquire control of a PSP, the PSP being acquired must submit a new application for registration that takes the planned acquisition into account. The PSP being acquired must be re-registered with the Bank under the new application before the planned acquisition of control is completed.

Section 21 of the Retail Payment Activities Regulations (RPAR) sets out the conditions for when a transaction, change of business structure or other event meets the definition of an acquisition of control. The events that constitute an acquisition of control are different based on the legal structure of the PSP—namely, whether the PSP is:

  • a corporation
  • a limited partnership
  • another type of legal entity

To understand the obligations of a PSP under subsection 24(1) of the RPAA, it is important to consider:

  • the timing of the steps required
  • the party responsible for carrying out the steps

The requirement to submit a new application begins when an individual or entity plans to acquire a PSP. The application must be submitted by the PSP and must take the planned acquisition into account. The Bank’s review of the application must be complete, and the PSP must be re-registered under the new acquisition before the acquisition occurs.

Types of acquisition of control

This section provides an overview of the three types of acquisition of control as defined in section 21 of the RPAR.

Acquiring control of a corporation

There are two ways an individual or entity could acquire control over a PSP that is a corporation:

  • by acquiring securities attached to votes that may be cast to elect directors of the PSP, or
  • by acquiring control of an entity that itself controls the PSP
Acquiring securities of a corporation

An individual or entity (alone, or in combination with its affiliates1) acquires control of a PSP when it acquires securities of the PSP attached to one-third or more of the votes that may be cast to elect directors of the PSP. These securities may be held directly, or indirectly through an intermediate entity. In both cases, they would be attributed to the ultimate owner of the securities. The individual or entity would also be considered to control the PSP where a third party holds the securities on its behalf. If the ownership interest is acquired only as a security interest, such as collateral held by a lender with respect to a loan, this action would not be considered an acquisition of control.

For clarity, in cases where a PSP has many classes of shares, including shares that carry voting rights over other issues, only shares that carry voting rights to elect members of the board are relevant to an assessment of an acquisition of control.

Similarly, in the case of an acquisition of a PSP’s convertible securities, such as convertible non‑voting shares or options, an acquisition of control will only occur if and when those securities are converted to director voting shares. Re-registration must therefore occur prior to conversion, with the re-registration taking the planned conversion into account.

Acquiring control of an entity that controls the corporation

An individual or entity (alone, or in combination with its affiliates) can also acquire control of a PSP by acquiring control of an entity that controls the PSP, where the PSP is a corporation. Acquiring control of an entity can occur by any of the ways in which an individual or entity can acquire control of a corporation, limited partnership or other type of entity pursuant to section 21 of the RPAR. Control of the corporation (in this case a PSP) means that control is held as described in paragraph 21(a) of the RPAR (that is, through ownership of shares that are attached to one-third or more of the votes that may be cast to elect directors).

For example, if an individual or entity was planning to acquire control of a company that itself owns all the voting shares of an incorporated PSP, the PSP would need to submit a new application for re-registration and be so registered before the owner of its shares is acquired.

Acquiring control of a limited partnership

A limited partnership comprises limited partners and one or more general partner(s). The general partner has unlimited liability for the business and plays a role in day-to-day management of the business, whereas limited partners contribute capital but do not have a role in managing the business. Typically, a limited partner does not have personal liability for the business.

Where a PSP is a limited partnership, any addition of a new general partner is considered an acquisition of control. This addition would require a new application for re-registration pursuant to subsection 24(1) of the RPAA. The re-registration must be completed before the individual or entity becomes a general partner.

Acquiring control of another type of entity

An individual or entity can acquire control of a PSP that is neither a corporation nor a limited partnership in one of two ways:

  • by acquiring an ownership interest in a PSP that entitles it to one-third or more of the profits or one-third or more of its assets upon dissolution
  • by acquiring control over an entity that controls the PSP

An individual or entity can acquire control of an entity either alone or in combination with any of its affiliates as defined in section 3 of the RPAA.

Acquiring an ownership interest in the PSP

An individual or entity acquires control over a PSP that is not a corporation or limited partnership when it acquires an interest that would entitle it to either one-third or more of the PSP’s profits, or to one-third or more of the PSP’s assets were it to be dissolved. This ownership interest can be held directly, or indirectly through an intermediate entity. In both cases, ownership of the interest would be attributed to the ultimate owner. The individual or entity would also be considered to control the PSP when a third party holds the interest on behalf of the individual or entity.

Acquiring control of an entity that controls the PSP

An individual or entity can also acquire control of a PSP by acquiring control of an entity that controls a PSP. Acquisition of control can occur by any of the ways in which an individual or entity can acquire control of an entity pursuant to section 21 of the RPAR. That entity is considered to control the PSP when the threshold described in paragraph 21(c) of the RPAR is met (that is, when the individual or entity is entitled to one-third or more of profits or assets at dissolution).

Timing of the new application

A PSP must submit a new application for re-registration when an individual or entity plans to acquire control of it, as defined in section 21 of the RPAR. Beyond this requirement, the PSP must determine the appropriate time to submit its application. When the PSP applies, it must:

  • have enough information about the acquisition to complete the application form
  • allow for sufficient time for the application to be reviewed before completing the transaction, as the PSP must be re-registered under the new application before the acquisition of control transaction proceeds

For example, a PSP may submit its application after signing a non-binding letter of intent outlining the material terms of a transaction, or after signing purchase and sale agreements that are conditional on receipt of confirmation of re-registration.

If a PSP submits a new application in response to an acquisition of control that triggers subsection 24(1) of the RPAA, and the details of the acquisition materially change after submitting the application (e.g., an addition of new parties to the acquisition, changes to the anticipated corporate structure post-transaction), the PSP must amend the application. Amending an application may affect the time required by the Bank to review the new application for registration. If there are material changes to the planned acquisition before it closes but after the re-registration is granted, the PSP must inform the Bank of these changes. For more information, see the Bank’s supervisory policy on amending applications for registration.

The time required for the review of an application is described in further detail later in this document.

Who must submit the new application

The PSP being acquired must submit the new application for re-registration, pursuant to subsection 24(1) of the RPAA.

The individual or entity planning to acquire the PSP may need to provide certain information to the PSP in order for the PSP to complete the application form for the planned acquisition.

Timing of re-registration

To remain compliant with its registration obligations during an acquisition of control, a PSP must be re-registered under its new application pursuant to subsection 24(1) of the RPAA before the acquisition is closed. Even when the PSP will no longer conduct retail payment activities following the acquisition of control, if the PSP is still conducting retail payment activities when the acquisition closes, it must have received its re-registration reflecting the acquisition before the acquisition takes place.

Prescribed change

Under subsection 24(2) of the RPAA, a PSP that plans to undergo a prescribed change must submit a new application for re-registration that takes the changes into account. The PSP must also become re-registered before the changes take place. The types of changes that trigger this requirement are prescribed in the RPAR.

Under Section 22 of the RPAR, there is one type of change prescribed for the purposes of subsection 24(2) of the RPAA. This prescribed change relates to an acquisition of certain interests in the PSP by a state-owned enterprise as defined in section 3 of the Investment Canada Act.

Requirements that PSPs must follow when making a prescribed change (RPAA subsection 24(2)) align with those that apply in the event of an acquisition of control (RPAA subsection 24(1)). In particular, the PSP must submit its new application and be re-registered before the change may be implemented.

Acquisition by a state-owned enterprise

As described above, section 22 of the RPAR prescribes that re-registration is required when a state-owned enterprise plans to acquire an interest in a PSP.

Note that section 22 of the RPAR captures a broader range of acquisition scenarios than those defined in section 21 of the RPAR, as there is no lower bound of the interest that must be acquired for obligations under subsection 24(2) of the RPAA to be triggered.

State-owned enterprises as defined in the Investment Canada Act

The Investment Canada Act defines “state-owned enterprise” as:

  1. the government of a foreign state, whether federal, state or local, or an agency of such a government;
  2. an entity that is controlled or influenced, directly or indirectly, by a government or agency referred to in paragraph (a); or
  3. an individual who is acting under the direction of a government or agency referred to in paragraph (a) or who is acting under the influence, directly or indirectly, of such a government or agency

Practically speaking, a state-owned enterprise is any individual or entity that is owned, controlled or influenced, directly or indirectly, by a foreign government.

Power to appoint

A new application for registration is required when a state-owned enterprise would obtain the power to appoint a PSP’s chief executive officer or other senior management officer(s), or member(s) of its board of directors. The senior management officers of an entity include its chief financial officer, chief operating officer, chief risk officer, president and other individuals who are responsible for the highest level of decision-making within the entity. The PSP must be re-registered pursuant to the new application before the power to make such an appointment is granted to the state-owned enterprise, not merely before the power is exercised.

Voting rights in a PSP

A new application for registration is required when a state-owned enterprise will obtain any voting rights in a PSP that is a corporation. That is, if a state-owned enterprise plans to acquire any number of securities to which are attached the power to cast a vote to elect a PSP’s director(s), a new application for registration must be submitted, and the PSP must be re-registered prior to the acquisition occurring.

Ownership interests in a PSP

For PSPs that are not corporations, a re-registration is required before a state-owned enterprise acquires any ownership interest in the PSP. The acquisition of even the smallest possible unit of ownership available to be acquired in the PSP may go forward only after a new application is submitted and the PSP is re-registered by the Bank pursuant to this application. A unit of ownership entails any right to profit of the PSP or its assets on dissolution.

Exclusion from submitting a new application

Pursuant to subsection 24(3) of the RPAA, a PSP does not need to submit a new application for registration when, upon closing the acquisition, the PSP would fall under an entity-based exclusion as set out in sections 9 and 10 of the RPAA. Note that, in this circumstance, the PSP would nevertheless likely have obligations to notify the Bank of the change pursuant to other provisions of the RPAA, such as section 22, section 59 or section 60. For more information, see the supervisory policy on Amendments to registration applications.

For more information on entity-based exclusions, see the Bank’s Criteria for registering payment service providers.

How to submit a new application for registration

This section provides guidance on submitting a new application for registration under section 24 of the RPAA. The guidance is applicable once a PSP has determined that the requirements in section 24 apply to the planned acquisition of control or prescribed change.

Completing a new application under section 24

The process to submit a new application for registration under section 24 of the RPAA is similar to the initial application process for PSPs; however, some parts of the process are unique to section 24 applications.

In the process of completing a new application for registration, a PSP is expected to make all necessary updates to the application form arising from the planned acquisition or change. Accordingly, a PSP that submits a new application pursuant to section 24 does not need to notify the Bank of any change in information pursuant to sections 59 and 60 of the RPAA. Similarly, the PSP would not be expected to submit reports of any significant change or new activity pursuant to section 22 of the RPAA, provided that the significant change or new activity arises from the planned acquisition or prescribed change. However, notification for changes to registration information that arise after the re-registration application is submitted must be provided to the Bank in the manner required by the RPAA.

To begin the process, PSPs may log in to PSP Connect, and select the re-register option.

When to submit a section 24 application

As previously explained, section 24 of the RPAA requires that a PSP submit a new application for registration, and be re-registered, before a planned acquisition of control or prescribed change takes place.

An application may be submitted under section 24 at any time before an acquisition of control or prescribed change is completed. However, PSPs should ensure that they allocate sufficient time for the Bank and the Minister of Finance to complete their reviews of the application and re-register the applicant prior to completion. PSPs should not expect timelines for review to be expedited because they have not applied sufficiently in advance of the planned completion of their transaction.

The time required to review a re-registration application under section 24 of the RPAA will vary depending on the particular facts of the application. Applicants should consider the following:

  • The Bank has up to 45 days to determine whether to refuse an application under subsection 48(1) of the RPAA once it deems the application complete.
  • The Minister has up to 60 days to determine whether to review an application for registration and may extend this by one or more additional 60-day periods.
  • If the Minister decides to review an application, the Minister has up to 180 days after making this decision to complete the review. This period may be extended by one or more additional 180-day periods.

If a PSP proceeds with an acquisition of control or prescribed change before re-registration is granted, it is operating without a valid registration and is non-compliant with the registration requirements of the RPAA. The PSP must allow sufficient time for review(s) by the Bank and the Minister as part of its plans for an acquisition of control or prescribed change.

Providing information to the Bank specific to the planned acquisition or prescribed change

Once a PSP selects the re-register option within PSP Connect, it will be asked to identify the reason for re-registration. It should select re-registration under subsection 24(1) for a planned acquisition of control, or subsection 24(2) for a planned prescribed change. The PSP will then be asked to provide information specific to the planned acquisition or prescribed change. It must provide to the Bank all relevant information in the respective fields and upload any supporting documents as necessary to provide a complete description of the planned acquisition of control or prescribed change.

Updating the registration application form

Once the PSP has provided specific information about the planned acquisition of control or prescribed change, it will be directed to the registration application form. The fields in the form will contain the most recent registration information provided to the Bank.

The PSP must update the application form to reflect all information that will be true once the planned acquisition of control or prescribed change takes place. This may include:

  • information about the business structure that will be in place following an acquisition of control, including an updated organizational chart
  • information on all entities that will control the PSP or will be controlled by the PSP, within the meaning of section 21 of the RPAR
  • any changes to payment functions, values and volumes of transactions or end-user funds held, or any changes to agents, mandataries or affiliates that may perform retail payment functions on the PSP’s behalf

All information should be from the perspective of the PSP following the acquisition or change, and not from the perspective of the individual or entity that plans to acquire control of the PSP.

For more information about application requirements, consult subsection 29(1) of the RPAA and section 24 of the RPAR. The Bank’s How to complete a registration application: A step-by-step guide also describes the information required as part of a PSP’s application for registration.

Paying the application fee

To finalize and submit an application under section 24, the PSP must pay a new application fee. This fee must be paid in full using a credit card or electronic funds transfer. The Bank will start assessing an application only once the applicant has paid the application fee.

Reviewing the new application

Once the PSP submits its application, the Bank will send a confirmation notice through PSP Connect. The Bank will then review the information provided and may contact the applicant if further information is required.

Once the Bank decides that the application is complete, the application information will be shared with the Financial Transactions and Reports Analysis Center of Canada (FINTRAC) and the Department of Finance Canada.

Review by the Minister of Finance

A new application for registration under section 24 provides the Minister of Finance an opportunity to conduct a national security review based on the new information relating to the planned acquisition of control or prescribed change.

Under subsection 26(1) of the RPAR, the Minister has 60 days upon receiving the application from the Bank to decide whether to conduct a national security review of the application. The Minister may extend that decision period by one or more additional 60-day periods in accordance with subsection 34(2) of the RPAA and subsection 26(2) of the RPAR.

If the Minister decides to undertake a national security review, the Minister has 180 days to complete the review. The Minister may also extend the period for performing a national security review by one or more 180-day periods if the Minister considers it necessary to do so and informs the Bank. The Bank will then, in turn, notify the PSP.

Re-registration before completing the planned acquisition or prescribed change

Once the Bank and the Minister of Finance have completed their reviews of the new application for registration, the Bank will communicate the outcome of the application to the PSP. If re-registration is granted, the Bank will provide the PSP with a notice of registration based on the information contained in the new application. This notification from the Bank satisfies the requirement in section 24 of the RPAA that the PSP be re-registered before the acquisition of control or prescribed change occurs. The Bank’s PSP registry will be updated to reflect this new registration once the planned acquisition of control or prescribed change is implemented.

In the meantime, the PSP will continue to be registered with the Bank under its existing registration information while it continues to perform retail payment activities before the acquisition of control or prescribed change.

The Bank expects that PSPs will send a message to the Bank confirming that the acquisition of control or prescribed change has been completed within five business days of closing or implementation. This may be done by sending a message to the Bank through PSP Connect.

Refusal of a section 24 application

The Bank may refuse a new application for registration submitted under section 24, in accordance with its powers under section 48 of the RPAA or following a Minister’s directive issued under section 40 of the RPAA. For more information on the Bank’s powers and policies for refusing or revoking PSP registrations, see the policy on refusals and revocations.

In the event the Bank refuses an application for re-registration submitted under section 24, the PSP will remain registered with the Bank under its existing registration and may continue to perform retail payment activities under that registration. However, the Bank will not re-register the PSP under new information submitted with respect to the planned acquisition of control or prescribed change. Proceeding with the planned acquisition or prescribed change would result in the PSP operating without valid registration. Section 23 of the RPAA requires PSPs to be registered with the Bank before they perform any retail payment activities.

Acquiring a controlling interest in a PSP

If an individual or entity is planning to acquire a controlling interest (as defined in section 21 of the RPAR) in a PSP, and the individual or entity is not itself a PSP, then it does not need to submit an application for registration, except as discussed below. To complete the review of the application for re-registration submitted by the PSP under section 24 of the RPAA, the Bank may need certain information from the PSP about the acquirer. The acquirer should provide the PSP with the required information. In addition, in developing its commercial plans, the acquirer should consider the timelines for the Bank and the Minister of Finance to review the PSP’s application for re-registration. The review must be complete before the acquirer can complete its acquisition of control of the PSP.

Beginning retail payment activities following an acquisition of control of a PSP

An individual or entity that plans to acquire control of a PSP does not need to apply for registration, except when that individual or entity will begin performing retail payment activities in its own right. Under the RPAA, every affiliated individual and entity that performs retail payment activities must separately register as a PSP.

If an individual or entity plans to acquire a controlling interest in a PSP, they should carefully examine which individuals or entities will perform retail payment activities following the acquisition. Any individuals or entities that are unregistered before the acquisition, but will begin performing new retail payment activities following the acquisition, should apply separately for registration. This application must be submitted in addition to the new application of the PSP that is the target of the acquisition and is applying for re-registration under section 24.

For more information on determining if an individual or entity currently performs, or will perform, retail payment activities, consult the Bank’s Criteria for registering payment service providers.

PSPs acquiring control of another PSP

If the entity that is seeking to acquire control of a PSP is itself a PSP, it does not need to submit an application for re-registration. However, other reporting requirements may apply, depending on the nature of the acquisition. These other reporting requirements include:

  • updating, in accordance with sections 59 and 60 of the RPAA, the acquiring PSP’s registration information, such as an organizational chart, information on all affiliated entities and other PSPs that control or are controlled by the PSP
  • informing the Bank of any significant change or new activity in accordance with section 22 of the RPAA (see the supervisory guideline on significant change)
  • providing updated information in annual reports under section 21 of the RPAA (see the supervisory policy on annual reporting)
  1. 1. For the purposes of section 21 of the RPAR, affiliates has the meaning as defined in section 3 of the RPAA.[]

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