Repealed Provisions to be Fixed
As has been mentioned in previous e-LERTs from our firm, certain provisions of the Personal Property Security Act (Ontario) (the “OPPSA”) were repealed: see An Overview of Bill 152: An Act to Modernize Various Acts Administered By or Affecting the Ministry of Government Services, 2006 and Unexpected Change to the Personal Property Security Act (Ontario): Estoppel Letters Now Always Required. It has often been suggested that these deletions were inadvertent. In addition, there were a number of other suggested changes that were not adopted in the most recent revision of the OPPSA. Bill 68, An Act to promote Ontario as open for business by amending or repealing certain Acts (the "Act") will reinstate the repealed provisions and make further amendments. The Act has passed second reading and was referred to the Standing Committee on Finance and Economic Affairs on June 3, 2010. The proposed amendments to the OPPSA include:
Ontario is the only province with a personal property security act where a collateral description is not required. When registering a financing statement, a secured party checks the box pertaining to the particular collateral (i.e. inventory, accounts, equipment, motor vehicle, consumer goods or other) and may, but is not required to, include a word description describing the collateral. Section 46(3) provided that where a word description was included in the financing statement, the collateral was limited by that description.
Consequently, secured parties would rely on this section prior to advancing funds to borrowers as there was no need to obtain waivers from prior secured parties acknowledging that the prior secured party’s collateral was limited. Transaction costs were reduced as less documentation was required.
Currently, word descriptions in a financing statement cannot technically be relied upon to limit the scope of the collateral. The proposed amendments to the OPPSA provide welcome clarity as to the reliance on words of limitation in OPPSA financing statements.
Where to File
Determining where to file a financing statement when the collateral is a mobile good or an intangible is problematic under the current “location of debtor” rules in the OPPSA. Currently, under the OPPSA, the debtor is deemed to be located at the debtor’s place of business if there is one, at the debtor’s chief executive office if there is more than one place of business, or otherwise at the debtor’s principal place of residence. Each location more mysterious than the last! At least the OPPSA can take some solace in the fact that it is not alone. All of the common law provinces’ Personal Property Security Acts (“PPSA”) follow the same confusing directions.
However, help is on the way! In 2007, Ontario introduced the Ministry of Government Services Consumer Protect and Service Modernization Act, 2006 (the “Modernization Act”), which, among other things, seeks to amend the OPPSA’s location rules. Once the Modernization Act is proclaimed into force, for the purposes of the OPPSA, you will register at either the debtor’s registered office or, if it is a Canadian company, at the address set out in its articles. However, before Ontario proclaims into force these easy to follow amendments, Ontario wants the other provinces to join in. Recently, British Columbia and Saskatchewan followed suit and introduced Bill 6 – Finance Statutes Amendment Act, 2010 and Bill 102 – An Act to amend the Personal Property Security Act, 1993, respectively. These bills would have the same effect as the Modernization Act with respect to each provinces’ PPSA. It is anticipated that these acts may nudge Ontario to bring its own amendments into force.