We recently represented a US bank in Ontario on a secured
refinancing for a Canadian borrower. The Canadian borrower owns a
number of Canadian and US subsidiaries (the Canadian borrower and
its subsidiaries, the "Loan Parties") which delivered
secured guarantees. US counsel for the bank agreed to a request of
US counsel for the Loan Parties that the US security agreement
contain only a grant of a security interest (in contrast to also
including an assignment, charge etc. by way of security like the US
security agreement did on the original financing). The bank's
US counsel stated that they accepted this request on the basis that
the Uniform Commercial Code applied to insurance proceeds.
The Loan Parties' US counsel requested that the Canadian
security agreement be conformed to the US security agreement on
point. We advised our client to not accept this request on the
basis that the Personal Property Security Act
(Ontario) ("PPSA") does not apply to a claim in or
under, or the proceeds of, the Loan Parties' property insurance
(which is unlike some other Canadian jurisdictions where the PPSAs
are stated to apply to insurance proceeds) and, accordingly, the
Canadian security agreement should contain an assignment by way of
security. Canadian counsel for the Loan Parties agreed with us and,
accordingly, the Canadian security agreement was not conformed to
the US security agreement on point.
The covenant in the 2012 credit agreement on naming the
collateral agent as loss payee under the Loan Parties' property
insurance also was amended, from the unconditional covenant
contained in the original credit agreement, to require the Loan
Parties to use commercially reasonable efforts to so name the
collateral agent. This accommodation of the Loan Parties was made
on account of their expressed administrative burden in amending
approximately 100 insurance policies (the collateral agent not
being the same person under the refinancing as in the original
financing). We advised our client that in order to be perfected on
property insurance, the insurers should at least be notified of our
client's interest in the Loan Parties' insurance and
requested to acknowledge that interest. The collateral agent made
the business decision that it would accommodate the Loan Parties on
point and only require their commercially reasonably efforts to
name the collateral agent as loss payee.
It is customary in secured transactions that the loan parties
represent and warrant and covenant to ensure that the liens granted
to the lender parties are perfected first priority liens on the
collateral, subject to permitted liens. In the secured refinancing
referred to above, such representation and covenant should provide
for an exception for insurance claims and proceeds until the
applicable action is taken to perfect the assignment of such claims
Scott's practice is focussed on acting for
domestic and U.S. financial institutions and issuers on asset-based
lending, acquisition financings and DIP finance transactions.
The content of this article is intended to provide a general
guide to the subject matter. Specialist advice should be sought
about your specific circumstances.
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Under the Income Tax Act, the Employment Insurance Act, and the Excise Tax Act, a director of a corporation is jointly and severally liable for a corporation's failure to deduct and remit source deductions or GST.
Under the Income Tax Act, the Employment Insurance Act, the Canada Pension Plan Act and the Excise Tax Act, a director of a corporation is jointly and severally liable for a corporation's failure to deduct and remit source deductions.
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