Canada: Amendments To The PPSA (British Columbia) Affecting Where To Register Security Interests

On June 1, 2019, amendments were made to British Columbia's Personal Property Security Act (the "PPSA") that affect where security interests in certain types of collateral must be registered in order to ensure perfection is achieved. These changes bring British Columbia in line with the regime in Ontario that was adopted in late 2015, which we described previously.

Primarily, the amendments change the rules regarding the determination of the location of the debtor, which impact the following:

  1. which province's laws govern the validity, perfection and priority of security interests in mobile goods and intangibles, as well as non-possessory security interests in instruments, documents of title, money and chattel paper; and
  2. the governing law for perfection by registration of security interests in investment property.

Thus, the amendments affect where secured parties must register security interests in these types of collateral.

The old law

Under the former rules, debtors were located at their "place of business" or, if they had multiple places of business, their "chief executive office". Neither of these terms are defined in the PPSA and therefore determining the debtor's location was a difficult undertaking which often led to secured parties registering in every jurisdiction that could be conceived as the location of the place of business or chief executive office.

The new law

The amendments add certainty to the determination of the location of the debtor as a debtor's location is now characterized based on the type of debtor and is often tied to the jurisdiction of formation or incorporation, as set out below.

Type of debtor Location of debtor
Individual The jurisdiction where the individual's principal residence is located
Partnerships (other than limited partnerships) The jurisdiction that governs the partnership, as stated in the partnership agreement
Limited partnerships The jurisdiction where the limited partnership was created
Corporation (incorporated, continued or amalgamated by or under the laws of a province) The jurisdiction of incorporation, continuance or amalgamation
Corporation (incorporated, continued or amalgamated by or under a law of Canada) The jurisdiction where the registered office or head office, as stated in the debtor's organizing documents, is located
Trustee (a) the jurisdiction that governs the trust instrument; or,

(b) if the trust instrument is silent, the jurisdiction where the trustee principally carries out administration of the trust
Registered organization that is organized under U.S. state law The state in which the debtor is organized
Registered organization that is organized under U.S. federal law (a) the state that U.S. federal law designates as the organization's location;

(b) the state that the organization designates, if such designation is authorized by U.S. federal law; or

(c) if (a) and (b) do not apply, the District of Columbia in the United States of America
If none of the above rules apply The jurisdiction where the debtor's chief executive office is located

The transition rules

The amendments include the following transition rules:

  1. security interests that were perfected under the old rules but are not perfected under the new rules will only stay perfected until June 1, 2024, to the extent that perfection does not otherwise expire before that date; and
  2. if an amendment, renewal, or extension adds new collateral to a security interest that was registered before June 1, 2024, the security interest must be re-perfected in accordance with the new rules.

Key takeaways

You may need to register in multiple jurisdictions

A debtor's location in British Columbia can generally be ascertained by looking at the debtor's organizing documents or by searching a public registry. However, Canadian laws are not uniform in this respect. To date, every province except British Columbia and Ontario continue to determine a debtor's location based on their chief executive office. Saskatchewan has recently passed amendments to bring Saskatchewan's laws in line with the British Columbia and Ontario regime, but these amendments have not yet been proclaimed into force. It remains to be seen if and when other provinces/territories will follow suit.

It follows that security interests may still need to be registered in multiple jurisdictions, which has implications for both secured parties wishing to perfect and prospective secured parties.

You may need to re-perfect before June 1, 2024

Secured parties should review their security interests to ensure they are registered (and perfected) in the applicable jurisdiction as security interests perfected under the old rules may not be perfected under the new rules. In British Columbia, such security interests must be re-perfected before June 1, 2024 in accordance with the new rules to ensure perfection and priority do not lapse.

You may need to re-perfect on renewal or amendment

If new collateral is added to an existing security agreement, the grandfathering provisions of the PPSA do not apply and the security interest must be perfected in accordance with the new rules.

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