Amendments to BC PPSA: Determining the Location of the Debtor
/On June 1, 2019, amendments (“Amendments”) were made to British Columbia’s Personal Property Security Act (the “PPSA”) that affect where security interests in certain types of collateral must be registered for perfection purposes. These changes are consistent with changes made to the Ontario PPSA regime in 2015.
The Amendments change the basis for determining the location of the debtor, which impacts the following:
which province’s laws govern the validity, perfection and priority of security interests in mobile goods and intangibles, as well as non-possessory security interests in instruments, documents of title, money and chattel paper; and
the governing law for perfection by registration of security interests in investment property.
Former Rules and the New Rules
Under the former rules, debtors were located at their “place of business” or, if they had multiple places of business, their “chief executive office”. These terms were not defined in the PPSA, therefore determining the debtor’s location could create ambiguity and often led to a secured party registering in every jurisdiction that could be conceived as the location of the place of business or chief executive office.
The new rules introduce more certainty for determining the location of a debtor, particularly in the case of partnerships, trusts, and U.S. organizations, and include the following: A debtor incorporated under the laws of a province in Canada is located in the jurisdiction where it is incorporated; A debtor existing under the Canadian federal law is located in the jurisdiction where its registered office or head office is located as specified by its constating documents, or its bylaws; A debtor that is a partnership (other than a limited partnership) is located in the province whose laws govern the partnership as stated in the partnership agreement; If the debtor is a limited partnership, the debtor is located in the province where it was organized; If the debtor is a trustee acting for a trust, the debtor is located in the province whose laws govern the trust as specified by the trust instrument.
Transition Rules
The Amendments hold that security interests that were perfected under the old rules must be perfected under the new rules by June 1, 2024.
Key Point
It is recommended that secured parties review the jurisdictions in which financing statements were registered for security agreements entered into before June 1, 2019 to identify those for which the amended location of debtor rules would result in a new jurisdiction becoming applicable.
