Welcome to the NCS 2018 Webinar Series - NCS Credit

Copyright 2018 C&S Associates, Inc. 800.826.5256

[email protected]

Today’s Webinar: Secured Transactions in the U.S. and Canada

Welcome to the NCS 2018 Webinar Series


[email protected]

• Article 9 of the Uniform Commercial Code in the U.S.

• Personal Property Security Act (PPSA) in Canada

• Civil Code of Quebec

• Types of Filings

• Filing Rules

• Similarities and Differences

• Establishing Priority

• Default

Agenda


[email protected]

Article 1: General Provisions

Article 2: Sales

Article 2A: Leases

Article 3: Negotiable Instruments

Article 4: Bank Deposits and Collections

Article 4A: Funds Transfers

Article 5: Letters of Credit

Article 6: Bulk Transfers

Article 7: Warehouse Receipts, Bills of Lading

Article 8: Investment Securities

Article 9: Secured Transactions

The Uniform Commercial Code


[email protected]

The same protections are

available under Canada’s

PPSA.

Personal Property Security Act


[email protected]

• The PPSA essentially has

two fathers:

• Article 9 of the Uniform

Commercial Code, and

• Jacob Ziegel, a

distinguished consumer law

expert and chair of the

PPSA committee



[email protected]

• The PPSA and Article 9 of

the UCC are extremely

similar.

• Both have tried to make this

process truly uniform.

• However, the nuances from

state to state or province to

province can be frustrating.



[email protected]

1. Blanket, or Basic

2. Purchase Money

Security Interest

Two Different Types of UCC – PPSA Filings


[email protected]

Is your customer reselling or using your products in

their business?

INVENTORY (GOODS) EQUIPMENT

Customer resells the

goods to another entity

Customer uses the

goods in the course of

their business

Search Contract

Notify 20-day Rule

Inventory vs. Equipment


[email protected]

Is your customer reselling or using your products in

their business?

INVENTORY (GOODS) EQUIPMENT

Customer resells the

goods to another entity

Customer uses the

goods in the course of

their business

Search Contract

Notify 15-day Rule

Inventory vs. Equipment


[email protected]

UCC vs. PPSA - Terminology U.S. Canada

Record Register

UCC-1 Financing Statement Financing Statement

UCC-3:

Continuation Renewal

Amendment Change Statement

Termination Discharge

UCC-11 Information Search Search


[email protected]

1. Security Agreement 2. Financing Statement or UCC-1

Two Required Elements


[email protected]

• A registering party may

choose a period of

registration anywhere from 1

to 25 years or, a registering

party may select “Infinity

registration.”

Personal Property Security Act – Duration


[email protected]

UCC vs PPSA

Where To File?

U.S. – state of organization, state of residence

(individual)

Canada – in the province of where the goods are

located


[email protected]

File financing statements covering goods in the

Province where the goods are located and file

financing statements covering intangible

collateral such as accounts and general

intangibles, in the Province of the debtor’s chief

executive office.

PPSA – Filing Locations


[email protected]

Headquarters

in British

Columbia

Inventory in

Ontario

Inventory in

Manitoba File Here !

File Here ! File Here !

2008 C&S Associates, Inc.

Remote Access Registry System

http://www.practicespot.com/images/photos/bullseye.gif




[email protected]

• Passed in 2006, became

effective December 31, 2015

• Changes debtor’s location

• Previous – physical

location

• New – Province of

organization

Ontario Changes


[email protected]

• Passed in 2006, became

effective December 31, 2015

• Time for transition is 5 years

Ontario Changes


[email protected]

• Quebec did not adopt the

PPSA.

• It drafted legislation intended to

be both the conceptual and

equivalent of a secured interest

as legislated under the PPSA

and UCC Article 9.

Civil Code of Quebec


[email protected]

• Provides a creditor the right

to extract the value of the

secured property.

• Preference in payment.

• Most recognized difference is

interpretation of the concept

of chattel mortgage.

Civil Code of Quebec


[email protected]

1. Hypothec

2. Conditional Sale

Comparable CCQ Two Types of Filings


[email protected]

2. Financing Statement or UCC-1

Both the PPSA and the

CCQ generally provide

that any security

interest may be

perfected by

registration.

Two Required Elements


[email protected]

The Hypothec must describe the

collateral – i.e. the goods sold –

and also outline the sum being

secured.

Hypothec


[email protected]

File where the corporation is registered.

CCQ – Filing Location


[email protected]

The ability to select a long

registration period and to

register a financing statement

without the debtor’s

signature and before a

security agreement exists,

provides opportunities for

abuse.

Control of Potential Abuse



[email protected]

A secured party must give the

debtor a copy of the financing

statement (or a verification

copy if electronic). A debtor

may demand that the secured

party amend or discharge the

registration within 15 days

from the date the demand is

delivered.

Control of Potential Abuse



[email protected]

UCC vs PPSA

Default

U.S. – Allows for repossession upon default

Canada – Also allows for repossession upon

default, provides broader definition of default


[email protected]

A secured party may take possession

of and sell the collateral when:

• The debtor is in default under the

security agreement; or

• The collateral is at risk

PPSA – Article 9 Differences – Default


[email protected]

The collateral is “at risk” if the secured party has

reasonable grounds to believe that the collateral has

been or will be destroyed, damaged, endangered,

disassembled, removed, concealed, sold, or

otherwise disposed of contrary to the terms of the

security agreement.

PPSA – Collateral at risk


[email protected]

Quebec – must be empowered

PPSA – self help works

Remedies

800.826.5256

[email protected] Copyright 2018 C&S Associates, Inc.

PPSA – Change of Name

• If a debtor changes their name, you typically have 15 or 30 days from the date you have knowledge of the name change to amend your PPSA filing.

800.826.5256

[email protected] Copyright 2018 C&S Associates, Inc.

PPSA – Change of Name

What Constitutes Knowledge

• If a reasonable person is cognizant of it

• Partnership – information comes to 1 or more partners

• Corporation – information must come to the attention of a senior employee with responsibility relating to this information.


[email protected]

• This concept of secured transactions originated in the U.S. Canada then

looked to adopt a similar process for secured lending.

• Required elements of the filing process are consistent between the U.S.

and Canada.

• Some variation with the duration of the filings and the terminology used in

the U.S. versus Canada.

• Even though there are differences with the filing processes in the U.S.,

Canada and Quebec, the opportunity to have collateral pledged against

loans or credit lines can make a creditor feel more secure and more

inclined to sell on open credit terms.

• Due diligence is required to be certain the filings are done correctly and

are effective.

Review of Topics Covered


[email protected]

Education & Resources

• Don’t miss our upcoming webinars! View the schedule at:

www.ncscredit.com/education

• NCS webinars are available OnDemand.

Contact us to learn more.

• View NCS Extra Credit videos on our YouTube channel:

http://www.youtube.com/user/NCSCredit

• Follow us on Facebook, Twitter, LinkedIn, YouTube, Instagram and

Google+

http://www.ncscredit.com/education

http://www.youtube.com/user/NCSCredit

Documents

Welcome to the NCS 2018 Webinar Series - NCS Credit