In February 2015, an expert panel (the Panel) was convened by the Minister of Government and Consumer Services (the Minister) to provide advice on the priorities for reform of Ontario’s business laws. In June of this year, the Panel released its recommendations in a comprehensive report [PDF]. Terry Burgoyne, a senior partner in the Corporate Group at Osler, was a member of the Panel and a member of the steering committee. Of particular note to the financial services industry was a recommendation to review and further harmonize Ontario’s Personal Property Security Act (the PPSA), taking into consideration recent case law and changes to the law in other jurisdictions (both Canada and the United States). The Panel outlined priorities for review of the PPSA which included facilitating the use of cash collateral.
Currently in Ontario, a secured party can only perfect its security interest in cash collateral by registering a financing statement under the PPSA. In the United States, Revised Article 9 of the Uniform Commercial Code allows a creditor to perfect a security interest in cash collateral in a deposit account by control rather than through registration alone, and provides priority for such security interest. While this approach has been widely recommended by practitioners in Canada, Québec is the only Canadian jurisdiction to date to adopt legislative measures to allow perfection of cash collateral by control. The Panel agreed that the PPSA should be amended to facilitate the use of cash collateral and encouraged continued discussions among stakeholders (including pension experts) to assist the Minister in determining how best to achieve this. Changes to facilitate the use of cash collateral would provide businesses with another means to finance their operations.
The Panel proposed other amendments to the PPSA which will impact secured financing transactions. Read the full report [PDF].