Originally published in Blakes Bulletin on Financial
Services, March 2009
In Quebec, until recently, an individual (unless acting in a
business context) could only grant security over certain very
limited types of property while retaining possession of such
property, for example, certain types of road vehicles, a caravan, a
mobile home, a boat or an aircraft. This list has recently been
expanded with the adoption by the Quebec government on January 16,
2009 of a new regulation amending the Regulation respecting the
register of personal and movable real rights (the Regulation)
which replaces section 15.02 of the Regulation. The Regulation, as
amended, could lead to a decrease in credit costs for individual
debtors by allowing them to hypothecate without delivery additional
types of property, including securities and security entitlements
referred to in An Act respecting the transfer of securities and
the establishment of security entitlements (Quebec) (the Act),
which came into force on January 1, 2009.
REGULATION RESPECTING THE REGISTER OF PERSONAL AND MOVABLE REAL
The amended Regulation expands the categories of movable
property on which an individual debtor not acting in a business
context will be able to grant a hypothec without delivery. In
addition to the property already covered by the existing
Regulation, an individual debtor will now be able, subject to the
exceptions mentioned below, to also grant a hypothec without
delivery on any intangible property, including the following:
1. securities and security entitlements referred to in the
2. precious property within the meaning of the Taxation
Act (Quebec), which could include, for example, any property
owned by an individual debtor which is used primarily for his/her
personal use or enjoyment, such as drawings, paintings, sculptures,
jewellery, stamps or coins, etc.;
3. property that constitutes a form of investment within the
meaning of the Securities Act (Quebec), for example,
shares, bonds, capital stocks of an entity constituted as a legal
person or subscription rights or options to purchase from such
4. derivatives referred to in the Derivatives Act
(Quebec) – in force as of February 1, 2009 –
which could include, for example, options, swaps and futures
5. claims – which could include, for example, deposits
in a bank account;
6. rights arising from an insurance contract; and
7. rights arising from intellectual property.
However, it should be noted that the amended Regulation
specifically excludes 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 (Quebec).
Individual debtors therefore will not be able to grant a hypothec
without delivery on such types of property.
The amendment to the Regulation eliminates uncertainties that
existed with respect to the validity of hypothecs granted by
individual debtors on property such as proceeds of life insurance
policies and term deposits. As a result, it is anticipated that
this should allow financial institutions to finance, or attribute
higher credit values to, the above-mentioned categories of
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