Lightening the Load – Proposed Reduction in Secured Party's Burdens When Taking Security Over Personal Property

Financial Services

09/22/2016

Pursuant to Bill 218, Burden Reduction Act, 2016, which passed its first reading in June 2016, the Personal Property Security Act (Ontario)1 (PPSA (Ontario)) will be amended so that a debtor will be able to waive its right to receive a copy of the verification statement.

Currently, the PPSA (Ontario) states:

Section 46(6) Copy to debtor - Within 30 days after the date of registration of a financing statement or financing change statement, the secured party shall deliver a copy of a verification statement to the debtor.


Failure to comply with this requirement is punishable by a fine of $500 payable by the secured party to the debtor.

The proposed amendments provide that:

  • Unless waived in writing by the debtor, a secured party must still provide the debtor with a copy of the verification statement within 30 days after the date of registration of a financing statement or financing change statement; and
  • The ability to waive the right to receive a verification statement will apply proactively on or after the day that these amendments come into force.

When?

In speaking to representatives at the Ministry of Economic Development and Growth, they were unable to confirm when this amendment is expected to come into force. Given the recent prorogation of the legislature and the Ontario government’s plans to reintroduce the Burden Reduction Act, we do not expect these changes to be implemented before Q1 2017.

Why?

These proposed changes will bring Ontario in line with all other Canadian provinces, except Quebec. In practice, security agreements in other provinces (other than Quebec) will typically include a waiver of the requirement to provide a copy of a verification statement. We expect to see Ontario law-governed security agreements begin to follow the same practice.

What Next?

Since most older forms of Ontario security agreements do not include a waiver provision, once this proposed amendment comes into force, secured parties should ensure that their form of security agreements is amended to provide for this waiver.

For more information, please contact Patience Omokhodion or any member of the Financial Services Group.

The author of this article gratefully acknowledges the contributions of articling student, Samuel Massie.

________________________

1 R.S.O. 1990, Chapter P.10