19/11/2015
Changes to the Personal
Property Security Act (Ontario):
What Does This Mean for You?
Jason Arbuck
Josh Calderon
Jonathan Fleisher
November 19, 2015
Agenda
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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
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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
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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
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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
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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:
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New Rules under the PPSA
Type of Debtor
Jurisdiction for Registration
Individual
Where the individual’s principal residence is located
Partnerships that are not Limited
Partnerships
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
Corporation, Limited Partnership and
Organization (incorporated/ continued/
amalgamated/organized under provincial
or territorial law)
Province or territory where the incorporation,
continuance, amalgamation or other organization
occurred
Corporation (incorporated/continued/
amalgamated under federal law)
The jurisdiction where the registered office or head office
of the debtor is located
Registered organization that is organized
under the law of a US State
US State where the organization is organized
If none of the above apply
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
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Transitional Provisions
● Transitional provisions were incorporated into the
amendments to resolve conflicts between old and new
rules
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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
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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
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19/11/2015
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
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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
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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
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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
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Q&A
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