Nova Scotia Farm Loan Board Regulations
made under Section 8 of the
Agriculture and Rural Credit Act
R.S.N.S. 1989, c. 7
O.I.C. 2018-304 (effective November 29, 2018), N.S. Reg. 205/2018
amended to O.I.C. 2021-105 (effective April 27, 2021), N.S. Reg. 65/2021
Table of Contents
Please note: this table of contents is provided for convenience of reference and does not form part of the regulations.
Click here to go to the text of the regulations.
Citation
Definitions
Eligibility for loan
Applying for loan
Processing applications
Application fee and legal costs
Appraisal
Loan limit
Loans requiring Governor in Council approval
Insurance
Security
Security document
Combining or transferring loan
Interest rate, terms and amortization
Prepayment under closed-prepayment loan
Annual prepayment options under closed-prepayment loan
Determining interest rate
Prescribed fees
Citation
1 These regulations may be cited as the Nova Scotia Farm Loan Board Regulations.
Definitions
2 In these regulations
“Act” means the Agriculture and Rural Credit Act;
“applicant” means an applicant for a loan;
“loan” means a loan made by the Board under the Agriculture and Rural Credit
Act and these regulations;
“partnership” means a partnership as defined in the Partnership Act.
Eligibility for loan
3 To be eligible for a loan,
(a) an individual must meet all of the following requirements:
(i) they must meet the criteria in subclause 2(b)(i) in the definition of
“borrower” in the Act with respect to citizenship and age and, in
particular, they must be at least 19 years old at the time of their
application,
(ii) they must have adequate experience, training or education in
operating an agri-rural business,
(iii) they must be able to adequately protect the assets to be used as
security for the loan during the term of the loan, including by
obtaining and keeping insurance as required by Section 10;
(b) a partnership must have a representative who satisfies the requirements for
an individual in clause (a);
(c) a body corporate must meet all of the following requirements:
(i) it must meet the criteria for a corporation in subclause 2(b)(ii) in the
definition of “borrower” in the Act;
(ii) it must be in good standing under the laws of the jurisdiction in
which it was incorporated,
(iii) it must be registered with the Nova Scotia Registry of Joint Stock
Companies,
(iv) it must commit to not transfer voting control in whole or in part
during the term of the loan without prior written notice to the Board,
(v) its officers, directors, employees or agents have adequate experience,
training or education in operating an agri-rural business,
(vi) it must be able to adequately protect the assets to be used as security
for the loan during the term of the loan, including by obtaining and
keeping insurance as required by Section 10.
Applying for loan
4 An application must include all of the following:
(a) the application fee, calculated in accordance with Section 6;
(b) a statement of the purpose of the loan;
(c) a business plan in a form acceptable to the Board;
(d) complete details of the costs relating to the loan, including appropriate
quotations from any suppliers or contractors;
(e) the applicant’s written agreement to obtain and keep insurance on the assets
to be used as security for the loan on terms satisfactory to the Board, and to
assign the insurance to the Board;
(f) for an application by an individual, a signed statement of assets and
liabilities;
(g) audited financial statements or financial statements satisfactory to the
Board;
(h) for an application by a partnership,
(i) the full name of each of the partners, together with a statement of
each partner’s interest in the partnership,
(ii) a signed partnership agreement in a form acceptable to the Board;
(i) for an application by a body corporate,
(i) the names of its officers and directors,
(ii) the names of all persons who have subscribed for shares, with a
statement showing the amount paid up on all shares authorized or
issued,
(iii) a certified copy of a special or extraordinary resolution of its
shareholders authorizing it to borrow money,
(iv) evidence that it is in good standing, issued by the Registrar of Joint
Stock Companies or equivalent authority in the jurisdiction in which
it was incorporated;
(j) any additional information the Board requires to assess the application.
Processing applications
5 The Board may establish guidelines for and the manner in which applications are to be
processed by staff.
Application fee and legal costs
6 (1) Except as provided in subsection (2), the application fee is 0.25% of the amount of
the loan being applied for, with a minimum fee of $400 plus applicable taxes, and
a maximum fee of $2000 plus applicable taxes.
(2) For loans of $5 000 000 or more, the application fee is $3000 plus applicable
taxes.
(3) The Board may include the legal costs to close a transaction as part of the loan
amount.
(4) If an application is processed, but is withdrawn by the applicant before
completion, the applicant is liable for all legal costs incurred by the Board in
processing the application.
(5) If an application is not approved, the Board may refund 25% of the application fee
to the applicant.
Appraisal
7 (1) The Board may at any time require the appraisal of any assets used to secure a loan
to determine the sufficiency of the Board’s security.
(2) The borrower is responsible for the cost of any appraisal required by the Board
under subsection (1).
Loan limit
8 (1) Except as provided in subsection (2), the maximum amount of a loan is 90% of the
appraised value of the assets securing the loan.
(2) The Board may lend additional funds to a borrower based on its assessment of the
managerial ability of the borrower and the ability of the agri-business to repay the
loan, and its assessment of the value of other security items.
Loans requiring Governor in Council approval
9 The Board must not grant a loan that would result in the borrower’s total obligation to
the Board exceeding $5 000 000 except with the approval of the Governor in Council.
Insurance
10 A borrower must obtain and keep insurance on terms satisfactory to the Board on the
assets to be used as security for the loan, and must assign the insurance to the Board.
Security
11 (1) The Board may take any security or guarantee that it considers appropriate for any
loan and enforce the security or guarantee in accordance with its terms and
conditions, or release the security or guarantee on terms and conditions specified
by the Board.
(2) The Board may make any payments necessary to protect the security of a loan, and
the borrower is liable for any amounts paid by the Board under this subsection.
(3) In enforcing security held under this Section, the Board may do any of the
following:
(a) advance money to a receiver;
(b) guarantee the accounts of a receiver;
(c) pay or guarantee a payroll of a borrower in default under the security;
(d) expend money in attracting a person to revive, take over or re-establish a
borrower’s business.
(4) It is a term and condition of each loan that the Board may add to the amount of the
loan the amount of any fees and expenses incurred by the Board to register any
security the Board requires for the loan.
Security document
12 Each security document securing a loan must contain all of the following covenants:
(a) that the borrower will repay the loan in accordance with the following, all to
be specified in the security document:
(i) the amortization period and interest rate,
(ii) the payment schedule, specifying whether the loan payments are to
be made weekly, bi-weekly, semi-monthly, monthly, bi-monthly,
quarterly, semi-annually or yearly,
(iii) the dates and times when and place where loan payments are to be
made;
(b) that the borrower will not remove any gravel, fill or forest products from the
secured property without the prior written permission of the Board;
(c) that the borrower will keep all secured property, both real and personal,
including improvements to the property, in good condition and state of
maintenance and repair;
(d) that the borrower will maintain all relevant standards and requirements for
the secured property, including any relevant registrations, inspections and
licences;
(e) that, if required by the Board, the borrower will provide the Board with
detailed financial statements covering the borrower’s operations and any
additional information about their operations that the Board specifies,
including copies of personal or corporate tax returns.
Combining or transferring loan
13 (1) If a borrower obtains additional funds from the Board at an interest rate different
from that charged on existing indebtedness to the Board, the total indebtedness to
the Board may be combined into 1 principal balance with 1 repayment schedule at
the composite interest rate.
(2) If a borrower that is a partnership or body corporate is dissolved and 1 or more of
its partners or shareholders will continue as the borrower, the Board may transfer
the balance of the existing loan at the interest rate and on the same terms and
conditions that applied to the existing loan.
(3) If a borrower that is an individual or partnership forms a body corporate to include
the assets held by the Board as security for the loan, the Board may transfer the
balance of the existing loan to the body corporate at the interest rate and on the
same terms and conditions that applied to the existing loan.
(4) The Board may require a party to a loan transfer under subsection (2) or (3) to
provide any information or submit any documentation that the Board considers
necessary to complete the transfer.
Interest rate, terms and amortization
14 (1) Subject to any deferral or adjustment under subsection (4), the interest rate,
amortization period and term of a loan must be established in accordance with 1 of
the following options:
(a) a fixed interest rate for an amortization period to a maximum of 30 years
with the loan of the same term;
(b) a fixed interest rate for a specified term of years with an amortization period
to a maximum of 30 years;
(c) a variable interest rate for a specified term of years with an amortization
period to a maximum of 30 years.
(2) A loan may be
(a) open for prepayment at any time during the term of the loan; or
(b) a closed-prepayment loan in accordance with Sections 15 and 16.
(3) The Board may reduce the amortization period of a loan if, in the opinion of the
Board, conditions warrant the reduction.
(4) The Board may defer or adjust payment of principal, interest and other accruals for
any length of time the Board considers necessary
(a) to permit the borrower to establish a business; or
(b) to permit the borrower’s business to recover, if the business is suffering
economic hardship as a result of reduced income.
(5) A deferral under subsection (4) must be capitalized.
Prepayment under closed-prepayment loan
15 (1) A borrower under a closed-prepayment loan who is not in default under the loan
may, at any time during the term of the loan, prepay the whole or any part of the
loan on payment to the Board of a prepayment fee in an amount equal to the
greater of
(a) 3 months’ interest on the loan balance at the established interest rate; and
(b) interest calculated using the interest rate differential for the period
remaining in the term of the existing loan or 5 years, whichever is shorter.
(2) In clause (1)(b), “interest rate differential” means the difference between an
existing loan’s actual interest rate and the interest rate that would be applicable to a
new loan with a term, calculated in number of months, equivalent to the period
remaining in the term of the existing loan.
Annual prepayment options under closed-prepayment loan
16 (1) A borrower under a closed-prepayment loan may, if not in default under the loan,
exercise 1 of the following prepayment options once in each calendar year:
(a) to increase the amount of each payment of principal and interest by an
amount no greater than 10% of the current amount of a payment of
principal and interest;
(b) to pay down the principal of the loan, without payment of interest, in an
amount that is no greater than 10% of the original amount of the loan,
unless the Board accepts a higher amount in accordance with subsection (2).
(2) The Board may accept, without the payment of interest, a payment that exceeds the
10% limit specified in clause (1)(b), but only if the Board is satisfied that 1 of the
following special and unforeseen circumstances exists:
(a) proceeds from property insurance on secured assets have been recovered;
(b) proceeds have been recovered from a subsidy or grant that has been
assigned to the Board;
(c) proceeds from life insurance on the death of an insured borrower have been
recovered;
(d) the Board refinances the existing loan with a loan of similar terms and
outstanding principal but that bears a higher interest rate.
Determining interest rate
17 (1) The minimum interest rate for a loan is the Government of Nova Scotia’s all-in
cost of borrowing on similar terms plus 0.50% for the relevant term, including any
prepayment options permitted by Section 16.
(2) Subject to the minimum interest rate in subsection (1), the Board must fix interest
rates based on the cost of borrowing for the Government of Nova Scotia provided
quarterly by the Department of Finance and Treasury Board, and adjusted to
include any markup that the Board considers appropriate.
(3) The Board may adjust the interest rate on an individual loan for any of the
following factors:
(a) business risk factors, including debt servicing capacity, security and the
management ability of the borrower;
(b) development policy factors of the Department of Agriculture and the Board.
Prescribed fees
18 (1) Subject to subsections (2) and (3), the fees payable to the Board by borrowers are
as set out in the following table:
Fees Payable to Board
|
Type of Fee
|
Fee Amount
(plus any applicable taxes)
|
Mortgage release fee
|
$50.00
|
Reamortization fee
|
lesser of:
0.125% of loan balance or $250.00
|
Mortgage assumption fee
|
$310.00
|
Loan guarantee fee
|
Amount determined necessary by
Board management to compensate
for risk being undertaken (minimum
1.5% per year on outstanding
balance)
|
Fee for preparing deed, mortgage,
agreement of sale, chattel mortgage,
lease or any related document
|
$124.00
|
Fee for preparing detailed financial
statements, searching legal records and
providing statistical data
|
$62.00
|
File review fee
|
$100.00
|
Insufficient funds fee
|
$35.00
|
(2) The Board may charge to a loan account any fees charged by an external agency
for registration or release of registration of the Board’s security interest.
(3) The Board may exempt a borrower from the file review fee if the borrower meets
the reporting requirements set out in the loan agreement.
The
following regulations are not yet in force and are not included in the current
consolidation: