Changes to the Personal Property Security Act (Ontario): What Does This Mean for You?

Transcription

1 Changes to the Personal Property Security Act (Ontario): What Does This Mean for You? Jason Arbuck Josh Calderon Jonathan Fleisher November 19, 2015 Agenda Current rules under the PPSA What is a mobile good? New rules under the PPSA Transitional provisions Conflicts What to Do Key Takeaways Q&A slide 2 1

2 Current Rules under the PPSA The question of where to register to perfect a security interest is determined by the type of collateral being pledged For intangibles (e.g., Intellectual property) or mobile goods (e.g., Motor vehicles), registration is done where the debtor is located Location = chief executive office slide 3 Current Rules under the PPSA PPSA does not provide a definition of what the chief executive office is it is not the same as the registered head office Example of issue: president and chief financial officer are in one office but the chief executive officer is in another office slide 4 2

3 What is a Mobile Good? The definition of a mobile good is a good that is of the type that is normally used in more than one jurisdiction if the goods are equipment or inventory leased or held for lease by a debtor (Section 7 of the Ontario PPSA) Almost no case law other than it is an objective test rather than a subjective test It is clear that motor vehicles and aircraft are mobile goods and maybe laptops Examples of difficult cases: yellow iron, cranes, forklifts slide 5 New Rules under the PPSA New rules come into force December 31, 2015 No change if assets are not intangibles or mobile goods. Still register where the asset is located For intangibles and mobile goods, the new rules for determining the location of a debtor (and thus, where to register) will be determined in accordance with the following table: slide 6 3

4 New Rules under the PPSA Type of Debtor Individual Partnerships that are not Limited Partnerships Corporation, Limited Partnership and Organization (incorporated/ continued/ amalgamated/organized under provincial or territorial law) Corporation (incorporated/continued/ amalgamated under federal law) Registered organization that is organized under the law of a US State If none of the above apply Jurisdiction for Registration Where the individual s principal residence is located If the partnership agreement has a stated governing law, and such governing law is a province or territory of Canada, then the province of the stated governing law Province or territory where the incorporation, continuance, amalgamation or other organization occurred The jurisdiction where the registered office or head office of the debtor is located US State where the organization is organized The jurisdiction where the chief executive office of the debtor is located Note: chief executive office is only used as a last resort under the new rules slide 7 Transitional Provisions Transitional provisions were incorporated into the amendments to resolve conflicts between old and new rules slide 8 4

5 Transitional Rules The most significant transitional provisions are: A secured party may rely on the old rules when amending or renewing a security agreement that was entered into before December 31, 2015 so long as it does not include additional collateral A security interest perfected under the old rules will continue to be perfected after the new rules come into force until either (a) the registration expires, or (b) December 31, 2020 A security interest perfected under the old rules will be deemed continuously perfected if you take steps to register under new rules before December 31, 2020 slide 9 Conflicts What to Do No other provinces have announced that they will follow the changes made to the Ontario PPSA Until other provinces change their rules, there will be conflicts between the rules in those province and the new Ontario rules slide 10 5

6 Conflicts What to Do 1. Example: You are financing mobile good owned by a BC-formed corporation with its chief executive office in Ontario BC law: register in Ontario Ontario law: register in BC Solution: register in Ontario and BC slide 11 Conflicts What to Do 2. Example: You are financing a mobile good of an Ontario-formed corporation with a chief executive office in Alberta Ontario law: register in Ontario Alberta law: register in Alberta Solution: register in Ontario and Alberta slide 12 6

7 Conflicts What to Do 3. Example: Financing a crane on a truck situated in Alberta; the debtor is a Delaware corporation with its chief executive office in Ontario and a large office in Alberta UCC: register in Delaware Ontario law: register in Delaware for the truck, and Alberta for the crane Alberta law: register in Ontario but since the definition of chief executive office is challenging, also register in Alberta Solution: register in Delaware, Ontario, and Alberta slide 13 Key Takeaways Registrations made after December 31, 2015 must be perfected in accordance with new rules Existing registrations that extend beyond December 31, 2020 additional registrations may be required Searches conducted between December 31, 2015 and December 31, 2020 consider both the old rules and the new rules Drafting agreements include a negative covenant not to change jurisdiction of incorporation slide 14 7

8 Q&A slide 15 Cassels Brock & Blackwell LLP Suite 2100, Scotia Plaza Suite 2200, HSBC Building 40 King Street West 885 West Georgia Street Toronto, ON Canada M5H 3C2 Vancouver, BC Canada V6C 3E8 Tel: Tel: Fax: Fax: CASSELS BROCK & BLACKWELL LLP. ALL RIGHTS RESERVED. This document and the information in it is for illustration only and does not constitute legal advice. The information is subject to changes in the law and the interpretation thereof. This document is not a substitute for legal or other professional advice. Users should consult legal counsel for advice regarding the matters discussed herein. 8