On June 1st, 2019, amendments to the British Columbia Personal Property Security Act came into force which will provide greater certainty to the location of the debtor for certain types of collateral. With these amendments, British Columbia followed Ontario in adopting the U.S rules governing the location of the debtor for security interests in: intangible goods (such as accounts), mobile goods, or investment property; as well as non-possessory security interests in negotiable documents of title, money, or chattel paper.
The location of the debtor is important because it determines which jurisdiction's law governs the validity, perfection, effect of perfection and non-perfection, and priority of the security interest. With greater certainty as to the location of the debtor, secured parties will be able to better determine which jurisdiction's laws they must comply with in order to properly register their interest.
Under the new regime, the rule used to determine the location of the debtor is different depending on the organization of the debtor. If the debtor is:
If none of the above rules apply, the location of the debtor will be where the "chief executive office" of the debtor is located (as it was prior to the amendment).
Any existing affected security interest perfected prior to this amendment will remain perfected until the earlier of (a) the day perfection ceases under prior law, or (b) June 1st, 2024. In order to remain continuously perfected, these security interests must be amended prior to these two events. Any amendments made to security interests perfected prior, and which add collateral to the security agreement, do not benefit from this grace period and must be perfected according to these new rules.
Secured parties should review their financial statements to determine if their collateral is affected by the new rules. If they are affected in a way that changes the jurisdiction governing their security interest, secured parties should take steps to comply with the new rules to ensure their security interest is continuously perfected.
The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.
