3-in-3: Taking a Secured Interest in Canada via the PPSA
3-in-3 is a 3 question, 3 minute interview with an NCS colleague.
Today’s 3-in-3 features Shannon Dooley in our Collection Services Group. Read this post to learn more about the similarities and differences of the UCC and PPSA.
Canada’s Personal Property Security Act was enacted in the early 70’s and modeled after Article 9 of the Uniform Commercial Code. Just like a UCC filing, a properly perfected PPSA requires a signed security agreement, public registration of the Financing Statement, and search/notification of any previously secured creditors.
A UCC is filed based on where your customer is registered. What determines where a PPSA is registered?
Shannon: Under Article 9 of the UCC Financing Statement, it’s filed in the jurisdiction of where the debtor is registered, or if an individual, in their state of residence. Under the PPSA, the security interest is registered in the jurisdiction where the chief executive office is located.
Unfortunately, the PPSA does not define chief executive office, which leaves where to file when shipping to multiple provinces open to interpretation. Under the current PPSA, if the chief executive office is in Alberta, but you’re shipping to British Columbia and Ontario, you would want to file in Alberta, British Columbia and Ontario.
The good news is the Ontario PPSA recently enacted an amendment that better defines a debtor location and this change is more in line with Article 9’s debtor location rules. (Hopefully the remaining provinces will follow suit!)
Another exception is the province of Quebec. Quebec has chosen not to follow the PPSA and governs its secured transactions under the Quebec Civil Code which requires an agreement called the Deed of Hypothec.
Is establishing priority in equipment different when registering a PPSA vs. filing a UCC?
Shannon: Yes, under Article 9 you have 20 days from the date of delivery of the equipment to file a UCC to maintain priority rights in your equipment. To maintain your rights under the PPSA, you only have 15 days from the date of delivery to file your PPSA. If you file on the 16th day after the equipment is delivered, you will lose your priority on that equipment which also includes the loss of right of repossession.
UCC filings are effective for 5 years (except Wyoming, which is 10 years). Is a PPSA also effective for 5 years?
Shannon: No, under PPSA you choose the length of time for your security interest. You can choose between 1 to 25 years or even infinity. Of course, the longer the filing is effective, the more expensive the filing fee. If you do choose to validate your PPSA for longer than 5 years, the best practice would be to conduct periodic searches to review for any changes that may affect your security interest.