The Regulation to amend the Regulation respecting the
register of personal and movable real rights (Québec)
(the "Regulation") was adopted on January 14, 2009 and
came into force on January 16, 2009. It amends section 15.02 of the
Regulation respecting the register of personal and movable real
rights (Québec) (the "RPMRR Regulation") to
broaden the definition of movable property which may be
hypothecated without delivery by a natural person who does not
carry on an enterprise to include, amongst other property,
securities, security entitlements, claims, rights resulting from an
insurance contract and intellectual property rights, but excluding
in all cases property constituting a registered retirement savings
plan, a registered retirement income fund, a registered education
savings plan or a registered disability savings plan within the
meaning of the Taxation Act (Québec).
The Québec legislator, by way of the Regulation, has thus
addressed what many in the financial services community had
considered to be a gap in the recently adopted Act respecting
the transfer of securities and the establishment of security
entitlements (the "Act") which came
into force on January 1, 2009. We refer you to our December 2008
newsletter entitled "New legislation comes into effect in
Québec as of January 1, 2009 regarding transfers, pledges
and hypothecs in securities pursuant to An Act respecting the
transfer of securities and the establishment of security
entitlements" for further information on the Act.
Natural persons who do not carry on an enterprise will
henceforth be able to grant a pledge (a hypothec with delivery) on
uncertificated securities and security entitlements within the
meaning of the Act by granting control of such property to the
creditor in accordance with the applicable provisions of the Act
(cf. new articles 2714.1 and 2714.5 of the Civil Code
of Québec introduced pursuant to article 136 of the
Act). It will also be possible for natural persons to grant a
hypothec on a universality of present or future securities and
security entitlements within the meaning of the Act (new article
2684.1 of the Civil Code of Québec introduced
pursuant to article 133 of the Act).
The Regulation also settles an issue raised concerning the
validity of the publication of "dematerialized" pledges
(i.e. pledges constituted without physical delivery and possession)
granted prior to the coming into force of the Act by a natural
person who does not carry on an enterprise on property not listed
in section 15.02 of the RPMRR Regulation as it read before the
adoption of the Regulation. As a result of the Regulation, any such
pledges granted on property other than uncertificated securities or
security entitlements within the meaning of the Act will remain
enforceable at the expiration of the grace period set forth in the
Act, namely December 31, 2009, provided that they are registered at
the Register of personal and movable real rights prior to January
1, 2010 (article 174 of the Act). As for any such pledges on
uncertificated securities or security entitlements within the
meaning of the Act effected by the creditor obtaining control
thereof, these may not be cancelled or declared unenforceable on
the grounds that control of the securities or security
entitlements, although obtained in conformity with the provisions
of the Act, was obtained before January 1, 2009 (article 173 of the
In conclusion, the adoption of the Regulation is welcome news.
Natural persons who do not carry on an enterprise will be able to
grant a hypothec without delivery on a wider range of movable
property. Securities and security entitlements within the meaning
of the Act may henceforth also be subject to a hypothec with
delivery by way of control in accordance with the Act. Finally,
"dematerialized" pledges granted by a natural person
before the coming into force of the Act which charge property
listed in new section 15.02 of the RPMRR Regulation (other than
securities and security entitlements within the meaning of the Act)
must be registered at the Register of personal and movable real
rights before January 1, 2010 in order to remain enforceable beyond
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