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Legal Guide


PPSA jurisdictions

All of Canada’s provinces and territories, other than Quebec, have enacted specific Personal Property Security Acts (“PPSA”). Generally, the PPSA in each of these jurisdictions is comparable in terms of form and substance. Modelled after the original Article 9 of the US Uniform Commercial Code, the PPSAs provide defined rules with respect to creating, perfecting, prioritizing and enforcing all forms of security interests

granted by debtors against personal property they have an interest in to creditors. Moreover, each PPSA uses a computer-based registration regime wherein a central registry database records and maintains security interests of creditors in various of certain debtors. In this way, the personal property registry of each province  provides notice of security interests to people who deal with debtors and their or its personal property. With specific exceptions, priority is measured by the order of registration. This chapter focuses primarily on security taken in PPSA jurisdictions.

Civil Code of Québec

The Province of Québec, a civil law jurisdiction, permits security to be taken under the Civil Code of Québec (“CCQ”). The CCQ came into force in 1994 and requires security to be taken over “movable” or personal property by way of a “hypothec”. The CCQ requires all hypothecs to be “published” or registered in order for the secured party’s interests to be effective as against, or “opposable to”, third parties. Although the terminology, concepts and procedures are somewhat different, the Quebec regime operates in a manner that is in many respects similar to the personal property security systems in place
in other jurisdictions.

Other relevant legislation

There is other legislation applicable in all provinces that may also be relevant to lenders and other creditors. For example, fraudulent preference legislation deals with assignments and other transfers intended to defeat, hinder, or delay creditors; repairers’ and storers’ lien legislation gives protection to repairers and storers of personal property; and consumer protection legislation may regulate borrowing charges and disclosure.

Bankruptcy legislation is a federal responsibility that expressly recognizes the rights of secured creditors under provincial laws, but may alter unsecured creditors’ priorities from the pre-bankruptcy status. Bankruptcy legislation also sets out provisions regarding preferential or reviewable transactions, and the ability of a trustee or affected parties to reverse such transactions.

Bank Act security

In addition to using the various types of security available to lenders generally, Canadian chartered banks have a special form of security they can take under the Bank Act (Canada). This form of security is also available to Canadian banks may only take this special Bank Act. Canadian banks may only take this special Bank Act security from specific classes of borrowers, such as wholesale and retail purchasers or shippers of, and dealers in, farm, mine, and sea products and manufacturers. This type of security is available to charge the borrowers’ inventory and certain other property, such as receivables generated from the sale of their products. Canadian Banks are also able to obtain special security rights under the Bank Act with respect to loans and advances made on the security of hydrocarbons and minerals -, a form of security that may be useful in the oil and gas, and mining sectors. Security taken in this context covers related rights, such as licenses or permits, and equipment used in the extraction, mining, production or storing of such hydrocarbons or minerals

One of the big advantages which Bank Act security offers, is the ease with which the security can be taken and “perfected” throughout the entire country.

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