The 2006 Amendments are Coming to Fruition for the Ontario PPSA
The 2006 amendments to Ontario’s Personal Property Security Act (PPSA) are set to become effective by the end of the year.
Initially I thought “…the amendments passed nearly 10 years ago, and now there is a random rush to implement them?” Apparently I wasn’t alone with this thought. The same surprise appears right in the title of an article by Margaret Grottenthaler & Kelly Niebergall of Stikeman Elliott LLP: “A Little More Notice Please! Amendments to Ontario PPSA Debtor Location Rules Effective December 31 May Require Additional Registrations”
What’s changing?
As you may know, the PPSA is registered in the jurisdiction where the debtor’s “chief executive office” is located.
Unfortunately, “chief executive office” was not well defined under current statute, and by “well defined” I mean not defined at all. Creditors had difficulty in identifying the chief executive office, especially when business structures vary, as Grottenthaler & Niebergall pointed out:
“The background of the 2006 amendments (which are now to be brought into effect) is that there had been criticism of the existing Ontario PPSA debtor’s location definition, on the grounds that the whereabouts of a debtor’s chief executive office is not always obvious given that it is not generally identified on a public record. In addition, the location of the chief executive office can be difficult to determine in the context of partnerships and trusts that may be managed by persons in a variety of jurisdictions or in the case of entities that do not have a specific physical location from which they conduct business.”
How will the 2006 amendments clear up jurisdiction confusion?
The jurisdiction will be determined by the entity type. Grottenthaler & Niebergall provide a great chart which lists the debtor type and jurisdiction side by side.
This is a sample of the chart, Stikeman Elliott LLP, posted on their blog – in this example, if the entity is a corporation, the location of the debtor is where it is incorporated.
What if I have PPSAs currently registered? What if I just registered a PPSA in Ontario?
If you have registered a PPSA in Ontario, you have a few options. Technically there is a grace period for these amendments, much like what we saw when UCC Article 9 was amended – and the grace period is 5 years (again, just like the UCC).
- Option 1: you could leave your registered PPSA as is and review it sometime over the next 5 years to ensure you have it registered in the proper jurisdiction. (or)
- Option 2 – The Preferred & Recommended Best Practice: review all existing PPSAs now, and confirm they are registered in the proper jurisdiction. If, in your review, you determine that a PPSA is not registered in the proper jurisdiction, you should amend the PPSA after the first of the year.
We aren’t the only ones recommending you review now as opposed to later – Robert M. Scavone & Maria Sagain, of McMillan LLP make the same recommendation:
“Although in most cases the amendments will provide a five-year grace period to perfect security interests under the new rules, secured parties should avoid being caught by surprise on December 30, 2020 and should begin reviewing existing registrations well in advance of that date to identify which ones will need to be “refreshed” during the grace period. Secured parties will also need to develop new due diligence procedures to ascertain the debtor’s location in accordance with the new rules for all PPSA registrations and searches done after December 31, 2015.”
You can read their full coverage of the Ontario PPSA amendments here: “Where’s Waldo: New Ontario PPSA Debtor Location Rules Finally Coming into Force”
Best Practices
Review all filings now, register a PPSA in the debtor’s jurisdiction and in the jurisdiction in which the inventory is located, and don’t go it alone! NCS UCC experts are here to help
