What is the Personal Property Security Act?

In Canada, all common law provinces and the territories have a Personal Property Security Act, which regulates the creation and registration of security interests in all personal property within their respective jurisdictions.

Alberta’s Personal Property Security Act (the “PPSA”) originally came into force in 1990 and produced a significant improvement in secured transactions in Alberta by removing many of the restrictions and limitations that prevented the use of secured credit.

However, over time, the introduction of online banking and e-commerce, as well as other issues, has created a need to reform such legislation.

As a result, in 2017, the Canadian Conference on Personal Property Security Law (“CCPPSL”) issued a document called Proposals for Changes to the Personal Property Security Acts. The proposals have been implemented, in part or in whole, in Saskatchewan, British Columbia and Ontario, with others like to follow.

Proposed Reforms to Alberta’s PPSA

In its December 2020 “Report for Discussion #35” (the “Report”), the Alberta Law Reform Institute reviewed the changes proposed by the CCPPSL and their adoption in Saskatchewan, British Columbia and Ontario.

The Report recommends that the proposed CCPPSL changes be adopted in Alberta with any necessary modifications.

The major areas of reform are set out as follows in the Report:

  • The rules that govern negotiable property are rationalized and expanded to address electronic transfer of funds.
  • The concept of electronic chattel paper is introduced to facilitate paperless transactions where this form of property is sold or used as collateral.
  • The rules that govern purchase-money security interests are clarified and expanded to provide greater guidance on this crucial form of financing. The changes enhance the ability of secured parties to claim purchase-money security interests in inventory, and preserve purchase-money security interest status in a refinancing.
  • The rules governing the transfer of collateral to buyers and others are rationalized and improved.
  • Secured financing is facilitated through amendments that clarify that valuable assets such as licences may be used as collateral, that eliminate red tape requirements that unnecessarily increase the administrative costs of secured finance, and that improve the ability of secured parties to take steps to protect their interest.
  • The rights of account debtors asserting set-off against secured parties are clarified and strengthened.
  • A number of uncertainties in the rules that determine priorities between secured parties and other competing claimants are clarified so as to produce greater certainty and predictability.
  • The choice of law rules are revised, and the method for determining the location of the debtor is changed so as to align with the new approach adopted in British Columbia, Saskatchewan and Ontario. This produces greater certainty in the law and avoids the deleterious effects of forum shopping that will inevitably arise if provinces and territories employ different choice of law rules.
  • The registration provisions are improved to better achieve the underlying goals of the registry system, namely the publication of information in a manner that will allow effective risk-assessment by affected parties.

The Report also contains 31 recommendations.

The Alberta Law Reform Institute is inviting comments on its Report and the issues raised therein until March 1, 2021.

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