Amendments To The Personal Property Security Act

Effective June 1, 2024, the Personal Property Security Act, RSA 2000, c P-7 (the "Act"), has enacted extensive changes to secured transactions law and judgement enforcement law.
Canada Corporate/Commercial Law
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Effective June 1, 2024, the Personal Property Security Act, RSA 2000, c P-7 (the “Act”), has enacted extensive changes to secured transactions law and judgement enforcement law. These changes will be accompanied by amendments to the Civil Enforcement Act, RSA 2000, c C-15, aligning the Act with its counterparts in British Columbia, Ontario, and Saskatchewan for a more consistent national approach.

Among the various sections of the Act which have been revised are choice of law rules that simplify registration and search practices as well as purchase money security interests, summarized below.

Choice of Law Rules

Under the amendments, the location of a debtor can be determined as follows:

  1. A registered organization, such a corporation, is located in the jurisdiction in which the public record of the organization, continuation, or amalgamation is registered;
  2. An individual, including a business debtor, is located at their principal residence; and
  3. A business entity that does not fall within (1) or (2) is located at its place of business or, if there is more than one place of business, in the jurisdiction of its chief executive office.

Previously, a registered organization was deemed to be located where its chief executive office was located, and an individual was located at their place of business.

Other amendments to the Choice of Law Rules include the rule that perfections and priority are governed by the law of the jurisdiction in which the collateral or the debtor, respectively, are presently located. Also, the priority of a security interest in documentary intangibles is governed by the law of the jurisdiction where the collateral is located, regardless of whether the security interest is possessory or non-possessory.

Purchase Money Security Interests

The rules surrounding the purchase money security interest (“PMSI”) face the most significant changes, which include the following:

1. A PMSI will not lose its status if:

a) the security agreement also secures an obligation that is not a purchase-money obligation;

b) the security agreement creates a security interest in other collateral to secure the purchase-money obligation; or

c) the purchase-money obligation has been renewed, refinanced, consolidated, or restructured.

2. A secured party who has been given a PMSI in inventory can claim PMSI status in all the inventory it finances to secure all purchase-money obligations if the parties agree to this feature before the initial transaction.

3. A secured party who pays out a PMSI held by a third party is deemed to have taken an assignment of the paid-out PMSI.

4. If a debtor owes more than one obligation to a secured party and the allocation of payments has not been agreed upon, payments are applied first to unsecured obligations, then to non-PMSIs, and lastly to PMSIs.

5. The special priority rule that gives a prior accounts financer priority over an inventory financer who claims a PMSI in accounts as proceeds does not apply to a bank account.

6. The super priority of a production money security interest in crops also covers the following:

a) plants grown hydroponically or otherwise in which the plants are not attached to land; and

b) grains, fruits, vegetables, or other produce that are harvested.

The following are among the other changes implemented by the amendments:

  1. Facilitation of agricultural financing by strengthening production money security agreements, recognizing licenses and quotas as collateral, and eliminating administrative obstacles;
  2. Introduction of electronic chattel paper and secured party rights in electronically transferred funds;
  3. Rationalization of registration requirements for serial number consumer goods and equipment;
  4. Introduction of rules specifying invalidating registration errors; and
  5. Improvement of buyer protection rules.

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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