Court File and Parties

COURT FILE NO.: CV-23-00696271-00CL DATE: 20230315 ONTARIO SUPERIOR COURT OF JUSTICE COMMERCIAL LIST

RE: IN THE MATTER OF SILICON VALLEY BANK AND IN THE MATTER OF THE WINDING-UP AND RESTRUCTURING ACT, R.S.C. 1985, C.W-11, AS AMENDED AND IN THE MATTER OF THE BANK ACT, S.C. 1991, c.46, AS AMENDED

BETWEEN:

ATTORNEY GENERAL OF CANADA Applicant

and

SILICON VALLEY BANK Respondent

BEFORE Justice Thomas J. McEwen

COUNSEL: James Gorham and Walter Kravchuk, for the Attorney General of Canada Natasha Rambaran, for Silicon Valley Bridge Bank N.B. Marc Wasserman, Michael De Lellis, Dave Roseblat and Blair McRadu, for PricewaterhouseCoopers Inc.

HEARD: March 15, 2023

Endorsement

[1] The Attorney General of Canada (“AG”) brings this Application at the request of the Superintendent of Financial Institutions (the “Superintendent”) pursuant to s. 621 of the Bank Act, S.C. 1991, c. 46, as amended (the “Bank Act”). The AG primarily seeks the following relief:

• An order (the “Winding-up Order”) under s. 10.1 of the Winding-Up and Restructuring Act, R.S.C. 1985, c. W-11, as amended (the “WURA”) for the winding-up of the business in Canada of the respondent, Silicon Valley Bank (“SVB”) and for the liquidation of its assets as defined in s. 618 of the Bank Act.
• In connection with the Winding-up Order, an order pursuant to s.23 of the WURA appointing PricewaterhouseCoopers Inc. (“PwC”) as liquidator of the estate and effects of SVB.
• An order providing directions under s. 28 of the WURA regarding the proposed final appointment of PwC as liquidator.
• An order restraining further proceedings against SVB pursuant to s. 17 and s. 154 of WURA.
• An order abridging and validating the time for service.
• Other related relief with respect to the Winding-up Order and appointment of PwC.

Background

[2] SVB is a U.S. bank based in California. It offers commercial and private banking products primarily to clients in the technology and life science/healthcare industries and global private equity and venture capitalists. SVB is jointly regulated by the U.S. Federal Reserve Board and the Department of Finance Protection and Innovation (“DFPI”).

[3] In Canada, SVB is an authorized foreign bank pursuant to the Bank Act. In 2019, the Minister of Finance authorized SVB to establish a branch in Canada (the “Canadian branch”) and the Superintendent authorized it to carry on business in Canada. SVB is regulated by the Superintendent with respect to its Canadian operations. The Canadian branch has been primarily focused on lending to early and mid-stage start-up businesses in Canada in the technology and life sciences sectors, as well as to venture capital and global private equity firms that assist Canadian start-up businesses in those industries. The Canadian branch is not authorized to accept deposits from Canadian sources.

[4] On March 8, 2023, SVB announced significant losses. The following day, investors and depositors reacted by initiating withdrawals which caused SVB to be incapable of paying its obligations as they became due. It is insolvent. On March 10, 2023, the DFPI appointed the Federal Deposit Insurance Corporation (the “FDIC”) as receiver of SVB. On March 13, 2023, FDIC announced that it had transferred all SVB deposits and substantially all of SVB’s assets to a newly created FDIC operated bridge bank (“Bridge Bank”) to protect the depositors of SVB.

[5] In Canada, on March 10, 2023, the Office of the Superintendent of Financial Institutions (“OSFI”) advised SVB and the Canadian branch that it was taking control measures to ensure that sufficient assets were maintained in Canada. On March 11, 2023, the Superintendent appointed PwC as its representative to assist in the supervision of the Canadian branch.

[6] On March 12, 2023, the Superintendent provided notice to SVB that it had temporarily taken control of SVB’s Canadian assets as per the provisions of the Bank Act and that it continued to control the assets. At this time, the Superintendent gave SVB the opportunity to make written representations in respect of the Superintendent’s proposed course of action. No representations were received.

[7] Given the above events, the Superintendent has now determined that it wishes to continue its control over SVB’s assets in Canada in respect of its Canadian business pursuant to the provisions of the Bank Act. The AG has therefore applied to this Court for a Winding-up Order in respect of SVB’s business in Canada pursuant to s. 10.1 of the WURA.

[8] The AG is of the belief that in light of the circumstances facing SVB in the U.S., including the fact that it is in receivership and that substantially all of its deposits and assets have been transferred to Bridge Bank, which is not authorized to carry on business in Canada, any measures short of a Winding-up Order and appointment of a liquidator would be inadequate to deal effectively with the risk posed to Canadian creditors.

[9] The FDIC did not oppose the order sought. Bridge Bank consented to OSFI’s taking control of the Canadian branch and the issuance of a Winding-up Order. Bridge Bank did not oppose the related relief.

[10] For the reasons below I granted the relief sought in the Winding-up Order.

The Law

[11] Section 10.1 of the WURA provides for winding-up orders in circumstances where the Superintendent has, amongst other things, taken control of the assets of an authorized foreign bank pursuant to s. 619(1)(b) of the Bank Act.

[12] Specifically, a court is authorized to grant a winding-up order either (a) where the court is of the opinion that for any reason it is just and equitable that the authorized foreign bank be wound up; or (b) where control of the authorized foreign bank’s assets have been taken on a ground referred to in s. 619(2)(a), (b), (d) or (f) of the Bank Act. In the circumstances, both WURA and the Bank Act provide this Court with jurisdiction to grant the Winding-up Order as SVB is insolvent, has failed to pay its liabilities and will not be able to pay its liabilities as they become due and payable. This is equally so with respect to the Canadian branch.

Analysis

[13] Based on the foregoing it is just and equitable to grant the Winding-up Order and the related relief. SVB is admittedly insolvent and has now ceased its operations in the U.S. pursuant to the order of the DFPI. Its affairs are now under the control of the FDIC as receiver and its assets have been moved to Bridge Bank.

[14] Currently, FDIC is not in a position to ensure that Canadian creditors will be protected as part of the process to address the issues facing SVB in the U.S. The Canadian branch cannot survive without support.

[15] At this time, the only practical alternative under the statutory regime applicable to authorized foreign banks is the making of the Winding-up Order and appointment of a liquidator. I agree with the AG that the appointment of a liquidator is urgently required to address risks posed to Canadian creditors, claimants and other Canadian stakeholders and to ensure that the resolution of SVB’s affairs in Canada are carried out with integrity, fairness and efficacy under the supervision of this Court.

[16] The Winding-up Order will assist with an orderly, fair and efficient transition, if possible, of the Canadian branch operations. Currently, there is an intention to co-operate between Bridge Bank, FDIC and OSFI. They are in continued discussions. Given the fact, however, that Bridge Bank is not authorized to operate in Canada, the Winding-up Order is the only sensible path forward at this time. It represents the best way forward to attempt to achieve a resolution where the Canadian branch can continue as a going concern.

[17] Insofar as the provisions of the Winding-up Order are concerned, I agree with the AG that the liquidator requires some broad powers. The Winding-up Order demonstrates that PwC will carry on the business of the Canadian branch. The Winding-up Order, however, also provides the necessary protections to stakeholders in that PwC, as per paragraph 7(b), is to manage, operate and carry on the business of the Canadian branch insofar as it is necessary to the beneficial winding-up of the business and the liquidation of the assets. Further, pursuant to paragraph 7(c), any new lending transactions will be subject to further order of the Court. The Canadian branch’s assets will remain within Canada subject to the ordinary course of activities that will have to be carried out by PwC.

[18] Last, as per paragraph 40 of the Winding-up Order, any interested parties may apply to this Court for advice and direction.

[19] Insofar as future conduct is concerned, I have further ordered that this matter return to this Court on March 28, 2023 at which time the AG and PwC will provide the Court with an update. In the interim, PwC will also file its first report.

McEwen J.

Date: March 15, 2023