To perfect a security interest in rail cars in Canada, the
underlying document which creates the security interest must be
deposited with the Registrar General of Canada pursuant to either
section 104 or 105 of the Canada Transportation
Act1 (the CTA). Please see our previous e-LERT for an overview of the process for
registering security interests over rail cars in Canada. As with
most registration systems, the CTA deposit system is not perfect.
This article provides tips for conducting a comprehensive search of
the CTA deposit system and depositing a document with the Registrar
General of Canada.
Before Depositing Your Document
Before a document is deposited under the CTA, a search of the
deposit system should be conducted to determine if there are any
prior security interests against the debtor or collateral in
question. Under most Canadian registration systems, a search
against the relevant debtor's name would be sufficient to
determine if there are any prior security interests of concern.
However, given that many of the documents deposited under the CTA
date back several decades, the process of converting the text of
older documents to searchable text can often result in errors and,
as a result, certain text (including a party's name) may be
converted incorrectly. For example, "ABC Company" might
be converted to "ABO
Company" and a search for ABC Company may not produce all
deposits relevant to ABC Company. In addition, the CTA deposit
system may not reflect amalgamations or other transactions
involving changes in corporate name.
As a result, we recommend conducting additional searches against
the specific collateral (for example, reporting marks). Although
searching specific collateral increases the likelihood that all
relevant deposits will be displayed, it is worth noting that
equipment may be listed as a range instead of listing each piece of
equipment separately and, accordingly, this search method may also
be imperfect. For example, a deposited document may list reporting
marks "ABC 001 - ABC 100", but if a secured party is only
concerned with a specific rail car in that range (for example, ABC
050) a search of "ABC 050" would not display the
previously deposited document. Accordingly, best practice is to
conduct CTA searches against both the relevant debtor name and
Depositing Your Document
To ensure that your security interest is displayed when searches
against the same debtor or collateral are conducted in the future,
the document submitted for deposit should list collateral
individually (as opposed to listing a range of collateral) and the
document should be a high resolution or searchable PDF. These steps
will minimize the risk that your security interest is not displayed
in future searches as a result of the issues noted above.
1. S.C. 1996, c. 10
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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The Canadian Office of the Superintendent of Financial Institutions ("OSFI") recently ruled that a bank cannot promote comprehensive credit insurance ("CCI") within its Canadian branches under the Insurance Business (Banks and Bank Holdings Companies) Regulations (the "Regulations").
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