Two Ontario Law Reform Changes of Note to Lenders and Lessors

March 28, 2017 | Jennifer Babe

On March 22, 2017  Ontario Bill 27, the Burden Reduction Act, 2017  (“BRA”) went into force and, among other things, this legislation made two changes of note to lenders and lessors.

  1. Waiver of Receipt of PPSA Registrations

Your present forms of Ontario security agreement or lease contract likely state: “except where prohibited by law, the debtor waives receipt of a copy of all Personal Property Security Act (“PPSA”) registrations”.

Ontario’s personal property regime has now been made uniform to the other eleven  PPSA statutes across Canada and now allows the debtor in Ontario to agree in writing to waive receipt of copies of PPSA registrations. If the debtor refuses to waive, the debtor continues to have the right to receive copies.

Lenders and lessors need to check that their Ontario contracts are updated to ensure there is PPSA registration waiver language in the contract.   Then they may stop sending copies of all PPSA registrations, amendments, renewals and discharges to any debtor who has waived.    This is a significant overhead cost saving for lenders and lessors to no longer have to copy and mail these verification statements.

  1. Bulk Sales Act is repealed

Ontario was the last province to have bulk sales legislation in Canada.   This statute applied where there was a sale of assets out of the ordinary course of the vendor’s business. The purchaser had to comply with the Bulk Sales Act (“BSA”)  failing which the unpaid creditors of the vendor could move to have the deal declared void and make the purchaser account for the value it obtained in the deal. This compliance work added costs to transactions as the parties considered how to comply or obtain court exemption orders or negotiate waivers and indemnities to cover the risk (although case law held  one cannot waive compliance with the BSA).

For lenders funding an asset acquisition by their customer, it created an added risk that the deal might be unwound.

The BRA repealed the BSA with no transition rules.   My interpretation is that if your deal closed before March 23, 2017, the purchaser was subject to compliance with the BSA.   If your deal is scheduled to close after March 22, 2017, there is no longer a BSA in effect to observe.

The BRA also made some consequent amendments to other statutes to deal with the repeal of the BSA.   One of these is  a PPSA amendment that makes Ontario uniform to other PPSAs.   This amendment to section 4 of the PPSA provides that where the vendor of accounts and chattel paper (as part of a sale of a business) remains in apparent control of the business, a PPSA filing needs to be done.

This is not a significant change as section 2 of the PPSA already requires a registration for an absolute sale of accounts, so one filing could cover both section 2 and the new section 4(1)(g).  Furthermore, it is certainly simpler to do that one PPSA filing than it was to comply with the BSA.


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