CANADA Law and Practice Contributed by: Scott Hyman, Anthony Spadaro and David Wilson, Davies Ward Phillips & Vineberg LLP
security interest in the debtor’s property and specifies the various contractual remedies avail- able to the secured party if the debtor defaults on its debt. The most common remedy is the power to appoint a receiver (either a private receiver or a court-appointed receiver) to gather the debtor’s property and prepare it for sale. In syndicated loan transactions or bond deals, one person (known as a collateral trustee or col- lateral agent) will act as agent on behalf of the various creditors. The security interest would be granted by the debtor in favour of this collateral trustee or agent, whose powers must be exer- cised in accordance with the loan agreement or bond indenture. The agent will be indemnified by both the borrower and the creditors for acting in this capacity, and will typically not exercise any independent judgement. The PPSA does not generally apply to security interests in real property. If a security interest is taken in real property of a debtor, this is typically documented by way of “mortgage” ; the rules governing mortgages are found in the Mort- gages Act (Ontario) or similar legislation in other provinces and territories. In general, mortgages are registered on title to the property in the land titles office of the applicable land titles division where the property is situated. Quebec In Quebec, the taking of security over both real (immovable) and personal (movable) property is governed by the CCQ. A security interest over immovable property or movable property must be granted by a deed of hypothec, other than in the case of a pledge, which is created by the act of the delivery of the pledged collateral to the creditor rather than by contract. If a deed of hypothec secures immovable property, or if it secures only movable property (other than a
pledge) but is granted in favour of an agent or any person or entity acting on behalf of other creditors (a hypothecary representative), then the deed must be in notarial form and executed in front of a notary licensed to practise in Quebec. Notarial deeds cannot be signed in advance nor held in escrow. There is no notarial requirement for pledges or for deeds of hypothec charging movable property in favour of a single creditor or in favour of multiple creditors acting in their own right. A deed of hypothec needs to include what is known as “hypothec amount” , which is an amount denominated in Canadian dollars that serves as a hard cap on the realisable value of the security under the hypothec. The hypothec amount is a notional amount that limits the creditor’s recovery rights under the hypothec but does not represent any obligations whatsoever on the part of the grantor. 5.3 Registration Process Common Law Provinces Perfection by registration is a fairly straightfor- ward process in the common law provinces. The secured party will typically file “financing state - ment” with the applicable provincial personal property register. The financing statement con- tains the names and addresses of the debtor and the secured party, a description of the collateral (or, in Ontario, the collateral classification, such as inventory, equipment, accounts and other) and the term of the registration. Registrations can be for an indefinite term. If a registration is set to expire, it can be extended by filing “financ - ing change statement” . Other amendments can also be made by way of financing change state- ments, including to reflect any change in the name of the debtor or an assignment by the secured party of its security interest.
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