CHAPTER 04 Financing a Business Operation
Where security is taken on personal or movable property, a lender may have to effect registrations in a number of jurisdictions across (or even outside) Canada in order to protect its security interest, since personal property security is primarily (although not exclusively) under provincial jurisdiction. Ontario’s Personal Property Security Act is modelled on Article 9 of the U.S. Uniform Commercial Code . All other Canadian common law provinces have similar, but not identical, legislation. With some exceptions, the Act applies to every transaction that in substance creates a security interest, including a lease that secures payment or performance of an obligation, and any lease of goods with a term of more than one year. To perfect its security interest, a secured party must either take control of the property secured or register a financing statement at a searchable computerized registry, depending on the type of collateral. Further registrations are required in certain circumstances, such as a debtor name change or a transfer of collateral, and to effect a renewal. The Civil Code of Québec generally provides for a single form of consensual security: the hypothec. A hypothec is a charge on movable (personal) or immovable (real) property that is granted to guarantee the performance of any present or future obligation. The security created by a hypothec is set up against third parties by the registration of a notice in registries established for that purpose or by the secured party taking delivery or control of the secured property, depending on the type of property. Further registrations are required in certain circumstances, such as a debtor name change or a transfer of collateral, and to effect a renewal. Unlike in other Canadian provinces, in Québec, it is possible to set up a hypothec over deposits in a bank account by registration or by control.
Québec has requirements relating to the execution and form of security and the notices thereof that differ from those applicable in the other Canadian provinces. For example, there are notarial requirements for the execution of hypothecs charging immovable (real) property and hypothecs granted in favour of an agent acting on behalf of other secured parties. Also, Québec law has been amended to require that notices of security and any documents submitted to the movable (personal) property and immovable (real) property registries must be drafted in French. The amendments also require that parties to certain types of contracts predetermined by one party (such as standard form contracts) be provided with French translations of those contracts before signing the English versions.
In Canada, securities regulation is within provincial jurisdiction, and each province and territory has securities regulatory legislation that is, broadly speaking, comparable to that of the United States.
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