Changes to Ontario's Personal Property Security Act
(the PPSA) may have an effect on M&A
transactions that involve certain security interests. This two-part
post will explore how the PPSA's changes affect security
agreements entered into both before and after December 31,
On December 31, 2015 new rules came into force (the New
Rules) that determine a debtor's location for the
purposes of choosing the jurisdiction in which to register a
security agreement. As these amendments to the PPSA were first
proposed in 2006, they come as no surprise to practitioners but
secured parties should be aware of the New Rules' implications.
The good news is that the New Rules make very clear what used to be
a sometimes challenging determination.
A security interest gives a creditor certain rights over the
assets of a debtor, including the right to sell the assets to
satisfy unpaid obligations of the debtor to the creditor. However,
security interests must be registered in the personal property
security registries of the relevant jurisdiction in order to be
effective against third parties, such as other creditors of the
debtor. In the case of certain collateral (the Affected
Collateral), the jurisdiction is determined by reference
to a debtor's location. Affected Collateral includes:
intangibles (g., accounts
mobile goods (g.,
non-possessory security interests in
instruments, negotiable documents of title, money and chattel paper
The New Rules
Under the old regime, the location of the debtor for PPSA
registration purposes was deemed to be:
the debtor's place of
if there was more than one place of
business, the debtor's chief executive office; or
the debtor's place of
The New Rules were introduced to address the practical
difficulties in determining the location of the debtor,
particularly where there was more than one place of business with
management offices, or where the debtor was a trust or
The New Rules now determine the jurisdiction of the debtor based
on the debtor's organizational form. Generally, the location of
the debtor can be determined as set out below.
Location of the Debtor
incorporated under a provincial statute (such as the Business
Corporation Act (Ontario))
incorporated federally under the Canada Business Corporations
office or head office as set out in articles (or, if not in the
articles, in the by-laws)
(other than limited partnerships)
law of partnership agreement (if it is the law of a province or
territory of Canada)
territory where the limited partnership declaration was filed
law of the trust instrument (if it is the law of a province or
territory of Canada)
The New Rules also set out directions regarding other types of
debtor entities, such as those formed in the United States. As a
catch-all for any other entities, the location of the debtor is
deemed to be the jurisdiction where the chief executive office of
the debtor is located.
As a result of the introduction of the New Rules, all security
agreements that charge Affected Collateral must now be registered
in the jurisdiction determined by the New Rules.
In a future post we will discuss how the New Rules affect
security agreements entered into before December 31, 2015 and what
steps, if any, you need to take in order to continue perfection of
the security interested created by that agreement.
About Norton Rose Fulbright Canada LLP
Norton Rose Fulbright is a global law firm. We provide the
world's pre-eminent corporations and financial institutions
with a full business law service. We have more than 3800 lawyers
and other legal staff based in more than 50 cities across Europe,
the United States, Canada, Latin America, Asia, Australia, Africa,
the Middle East and Central Asia.
Recognized for our industry focus, we are strong across all the
key industry sectors: financial institutions; energy;
infrastructure, mining and commodities; transport; technology and
innovation; and life sciences and healthcare.
Wherever we are, we operate in accordance with our global
business principles of quality, unity and integrity. We aim to
provide the highest possible standard of legal service in each of
our offices and to maintain that level of quality at every point of
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.
Register for Access and our Free Biweekly Alert for
This service is completely free. Access 250,000 archived articles from 100+ countries and get a personalised email twice a week covering developments (and yes, our lawyers like to think you’ve read our Disclaimer).