Gehlen Dabbs Lawyers
Call Us
T: 604 642 6422
Call Us : 604 642 6422
Main navigation

British Columbia Personal Property Security Act updates rules for determining location of debtor

The British Columbia _Personal Property Security Act _(“PPSA”) has recently been updated to provide new rules for determining the location of a debtor where security is taken over mobile or intangible personal property (e.g. vehicles, licenses, etc.). This update is of major significance to lenders who take security against personal property that is intangible or does not have a fixed location, because in such cases, the jurisdiction in which a security interest must be perfected is based on the location of the debtor.

Under the prior law, the location of a debtor was determined by reference to where the debtor’s business took place. Specifically, the PPSA previously deemed the debtor’s location to be:

  1. The place of business of the debtor;
  2. If the debtor has more than one place of business, the chief executive office of the debtor; and,
  3. If the debtor has no place of business, the place of residence of the debtor.

Notably, the term “chief executive office” is not defined by the PPSA or by provincial corporate legislation.

Effective June 1, 2019, the new rules, set out at section 7 of the PPSA, attempt to provide certainty and clarity by allowing for the location of debtor organizations to be determined by reference to certain government filings.

As such, the location of corporations, partnerships, and limited partnerships can be determined with reference to their place of incorporation or constating documents. Particular rules apply to the various types of organizations, and apply to both Canadian and American organizations, and should be reviewed in detail. However, if none of the new rules apply, the default continues to be the undefined “chief executive office” of the organizational debtor. Individuals continue be located by reference to their place of residence.

While anyone dealing in secured transactions will need to familiarize themselves with these new rules going forwards, it will also be important for secured lenders to consider whether any existing security registrations need to be updated.

In that regard, the amendments create a five year transition period, expiring June 1, 2024. During the transition period, security that was perfected under the old rules will remain valid until June 1, 2024 (unless it expires earlier). After that date, even security interests perfected prior to the new rules will need to conform to the new rules to remain properly perfected. Secured creditors would be wise to review their security filings well in advance of this date to ensure they are registered in the proper location of the debtor.

contact us today

Submit button