Special Resolution

In 2021, First West Credit Union’s members approved, by special resolution, that First West adopt the Bylaws when it becomes a federal credit union under the Bank Act (Canada). For any changes to the Bylaws to be approved and adopted, the members must also pass a special resolution.  A special resolution is a significant action or change by the credit union that must be approved by the Board, then voted on and passed by the general membership before adoption.

The Board approved the proposed amendments to the Bylaws (discussed further below) on March 6, 2025.

If you are a First West Credit Union member in good standing, we ask you to consider the following special resolution and, if deemed fit, approve the special resolution by voting “Yes—in favour” on the ballot. To pass, a special resolution must be approved by no less than two-thirds of the votes cast by members eligible who vote. The changes being proposed pursuant to the special resolution will only come into effect when First West continues and will not impact First West provincial Rules.

Should you have any questions related to the special resolution, please email governance@firstwestcu.ca.

 Special Resolution for holders of First West Credit Union Class A Membership Equity Shares

 BE IT RESOLVED, as a Special Resolution, that:

1. The members of First West Credit Union (the “Credit Union”) hereby approve and confirm the amendments to the Credit Union’s federal Bylaws (the “Bylaws”) that were approved by the members by special resolution in 2021, to create a new class of shares, namely an unlimited number of non-voting Class D equity shares (the “Class D Shares”) without par value.
2. The members also hereby approve and confirm the corresponding amendments made to the Bylaws in connection with the creation of the Class D Shares as set out in the version of the Bylaws made available at FWCU-Bylaws.pdf.
3. Any one or more directors or officers of the Credit Union, for and on behalf of the Credit Union, is authorized and directed to take all necessary steps and proceedings and to execute, deliver and file any and all applications, declarations, documents and other instruments and do all such other acts or things that may be necessary or desirable to give effect to the provisions of this Special Resolution.

Rationale and Summary

The Board and management of First West consider and review various options to support First West’s growth, to meet the financial and lending needs of our members, and to make investments in our products, services and capabilities so that First West can better serve you. One such option is to issue capital instruments to raise additional capital (in the form of shares or debt). First West has shown that it has the capabilities to issues various instruments to raise capital which have helped build and maintain First West’ capital base and financial strength. In 2022, First West issued senior deposit notes and raised $150 million and in 2023 First West issued subordinated notes and raised another $150 million.

To ensure that First West has the flexibility to create, structure and issue other types of capital instruments the Board is recommending that the Bylaws be amended to create the Class D Shares. The Bylaws were approved by our members in November 2021 and will come into effect when First West continues as a federal credit union.

With the creation of the Class D Shares, First West is being prudent and putting into place a share structure that will give First West additional options to raise capital as a federal credit union to continue to support the needs of our members. With the proposed changes to the Bylaws, First West would also be able to create and issue instruments that receive the desired and appropriate capital treatment under applicable federal requirements.

For an instrument to be treated as additional Tier 1 or Tier 2 capital under federal requirements, the instrument must, among other things, include a clause requiring the full and permanent conversion of the instrument into common shares (or an equivalent Common Equity Tier 1 (CET1) instrument) at the point of non-viability as described under OSFI’s non-viability contingent capital (NVCC) requirements set forth in its Capital Adequacy Requirements Guideline. The NVCC requirements were put into place to help to maintain or restore the viability of a financial institution in the unlikely event the institution has become unviable or is likely to become unviable. The NVCC requirements aim to ensure that investors in non-CET1 regulatory capital instruments bear losses before taxpayers where the government determines it is in the public interest to rescue a non-viable institution. This is an unlikely scenario for First West as First West maintains healthy capital levels and meets applicable regulatory capital requirements. However, in order to issue capital instruments that qualify as additional Tier 1 or Tier 2 capital under OSFI’s Capital Adequacy Requirements Guideline, First West could structure the instrument so that it would be converted to the Class D Shares in the highly unlikely event that First West becomes unviable and meet the NVCC requirements.

The new Class D Shares will rank junior to the Class B Equity Shares and the Class C Preferred Shares. They will rank equally with the Class A membership equity shares (Class A Shares). This would mean that the Class C Preferred Shares and the Class B Equity Shares, which some members currently hold, would retain the same priority as they currently have under the Bylaws, which rank ahead of the Class A Shares (and will rank ahead of the Class D Shares). The Class C Preferred Shares and the Class D Shares can only be issued after First West continues as a federal credit union (these shares do not and will not exist under First West’s provincial Rules).

In connection with the creation of the Class D Shares, the other material change being proposed to the Bylaws is the creation of the definition of “Intermediate Entitlement”. As the Class A Shares and the Class D Shares will rank equally, in the event of a liquidation, dissolution or winding-up of the credit union, or any other distribution of the assets of First West among its members and shareholders, the Class A Shares and the Class D Shares will be entitled to rateably share the Intermediate Entitlement. The Intermediate Entitlement is the property of the credit union that remains available for distribution to the holders of the Class D Shares and the Class A Shares after all claims ranking ahead of these shares have been satisfied. Several factors impact the value of the Intermediate Entitlement, including the value of First West’s Common Equity Tier 1 capital before events such as liquidation and the property left after distributions are made to satisfy the claims ranking ahead of the Class A Shares and Class D Shares (for example the claims of the Class B Shares and the Class C Preferred Shares).

Dividends on the Class D Shares can only be declared in the sole discretion of the Board and there is no guaranteed dividend rate on these shares. If the Class D Shares are issued and a dividend is declared on the Class A Shares, a dividend must also be declared on the Class D Shares that is at least equal to the dividend declared on the Class A Shares.

Like the Class C Preferred Shares, and except as may be required by law, the Class D Shares do not have the right to attend or vote at any meeting of First West’s members.

Pursuant to the special resolution passed by the members in November 2021, the Bylaws will replace First West’s current provincial Rules when First West becomes a federal credit union. If the amendments being recommended by the Board are approved, the Bylaws will be updated to include the amendments and the Bylaws with the amendments will be effective when First West continues as a federal credit union. If the amendments are not approved by the members, then the recommended changes to the Bylaws will not go into effect and the 2021 version of the Bylaws will remain unchanged and will be the Bylaws of First West when it continues federally.

Described and shown below (as underline and strikethrough) are the amendments being recommended by the Board for member approval. We have only included those sections where changes are being made. The full Bylaws with the proposed amendments are available to review on our website at FWCU-Bylaws.pdf.

The key changes are as follows:

1. Add to s. 1.1 of the Bylaws the following definition:

“Intermediate Entitlement” means the greater of zero and the value of the credit union’s gross common equity tier 1 capital (or equivalent thereof under the regulatory capital rules applicable to the credit union) – as reflected in the credit union’s consolidated balance sheet most recently filed with the Office of the Superintendent of Financial Institutions before the credit union’s liquidation, dissolution or winding-up – and multiplied by a factor of 0.9999. The Intermediate Entitlement is shared rateably between the holders of Membership Shares and Class D Equity Shares in proportion to:

(A) in the case where the only Class D Equity Shares issued and outstanding were issued as part of a non-viability contingent capital conversion, the aggregate number of all outstanding Membership Shares and the aggregate number of all outstanding Class D Equity shares, respectively; or

(B) in the case where some or all of the Class D Equity Shares issued and outstanding were issued prior to a non-viability contingent capital conversion, the aggregate value of the issue price of all outstanding Membership Shares and the aggregate value of the issue price of all outstanding Class D Equity shares, respectively. For greater certainty, the aggregate issue price of any Class D Equity Shares issued in connection with a non-viability contingent capital conversion will be (i) in the case of a conversion of subordinated debt, the aggregate nominal issue price of the subordinated debt instrument plus accrued but unpaid interest thereon (if any) at the time of conversion; and (ii) in the case of a conversion of another class of shares, the aggregate nominal issue price of those shares plus declared but unpaid dividends thereon (if any) at the time of conversion.

2. Amend s. 4.1 of the Bylaws as follows:

4.1 Authorized Capital – The authorized capital of the credit union shall consist of:

(a) an unlimited number of class A equity membership shares without par value (the “Membership Shares”);

(b) an unlimited number of class B equity shares without par value (the “Class B Equity Shares”); and

(c)  an unlimited number of non-voting, class C preferred shares without par value (the “Class C Preferred Shares”); and

(d) an unlimited number of Class D equity shares without par value (the “Class D Equity Shares”).

3. Amend Schedule A to the Bylaws as follows:

Membership Shares

(a) The rights of the holders of the Membership Shares of the credit union shall be equal in all respects and shall be as follows:

(i) the right to receive dividends declared by the board on those shares; and

(ii)     in the event of the liquidation, dissolution or winding-up of the credit union, voluntary or involuntary, or any other distribution of assets of the credit union among its members and shareholders for the purpose of winding-up its affairs, the holders of Membership Shares – subject to the prior rights of the holders of the Class B Equity Shares and the Class C Preferred Shares with respect to a return of capital and dividends on the occurrence of such event – shall be entitled to receive the Intermediate Entitlement (rateably with the entitlement thereto of the holders of Class D Equity Shares) and the right to receive the remaining property and assets of the credit union on dissolution.

(b) The maximum dividend payable in any year on a Membership Share shall not exceed 1,000 per cent of the value of its issue price and, for greater certainty, dividends are payable at the discretion of the board, shall be noncumulative, and shall not be paid unless a dividend is first or concurrently paid on any issued and outstanding Class D Equity Shares and the value of dividend per Class D Equity Share (as a percentage of the average issue price) is equal to or greater than the value of dividend per Membership Share (as a percentage of the average issue price).

Class C Preferred Shares

(b) Preferred Ranking of Class C Preferred Shares.

(i) No rights, privileges, restrictions or conditions attached to a series of Class C Preferred Shares confer on the series a priority in respect of dividends or return of capital over any other series of Class C Preferred Shares. The Class C Preferred Shares are entitled to a preference over the Membership Shares, the Class B Equity Shares, the Class D Equity Shares and any other shares ranking junior to the Class C Preferred Shares with respect to priority in the payment of dividends and in the distribution of assets in the event of the liquidation, dissolution or winding-up of the credit union, whether voluntary or involuntary, or any other distribution of the assets of the credit union among its members and shareholders for the specific purpose of winding up its affairs.

Class D Equity Shares

The Class D Equity Shares shall have attached thereto the following rights, privileges, restrictions and conditions:

(a) Issue Price. Class D Equity Shares shall be issued at a price to be determined by resolution of the board.

(b) Dividends. Holders of Class D Equity Shares shall be entitled to receive non-cumulative dividends declared thereon in the sole discretion of the board.

(c) Ranking. In the event of the liquidation, dissolution or winding-up of the credit union, voluntary or involuntary, or any other distribution of assets of the credit union among its members and shareholders for the purpose of winding-up its affairs, the holders of Class D Equity Shares — subject to the prior rights of the holders of the Class B Equity Shares and the Class C Preferred Shares with respect to a return of capital and dividends on the occurrence of such event — shall be entitled to receive the Intermediate Entitlement (rateably with the entitlement thereto of the holders of Membership Shares), and after payment to the holders of the Class D Equity Shares of the amount so payable to them, they shall not be entitled to share in any further distribution of the property or assets of the credit union.

(d) Voting Rights. Except as hereinafter referred to or as required by law, the holders of the Class D Equity Shares as a class shall not be entitled as such to receive notice of, to attend or to vote at any meeting of the members of the credit union.

(e) Amendment with Approval of Holders of Class D Equity Shares. The rights, privileges, restrictions and conditions attached to the Class D Equity Shares as a class may be added to, changed or removed but only with the approval of the holders of the Class D Equity Shares given as hereinafter specified.

(f) Approval of Holders of Class D Equity Shares. The approval of the holders of the Class D Equity Shares to add to, change or remove any right, privilege, restriction or condition attaching to the Class D Equity Shares as a class or in respect of any other matter requiring the consent of the holders of the Class D Equity Shares may be given in such manner as may then be required by law. The formalities to be observed with respect to the giving of notice of any such meeting or any continuation of an adjourned meeting, the quorum required therefor and the conduct thereof shall be those from time to time required by the Act as in force at the time of the meeting and those, if any, prescribed by the Bylaws or the administrative resolutions of the credit union with respect to meetings of the credit union. On every poll taken at every meeting of the holders of the Class D Equity Shares as a class, each holder of Class D Equity Shares entitled to vote shall have one vote in respect of each Class D Equity Share held.