Federal Security Interests Research Study and Report 2000


In addition to the various statutes examined above, there are several federal statutes that impact on security interests in certain specific contexts.; These contexts include where a corporation issues debt obligations that are available to the public and where the government expropriates an interest that is subject to a security interest.; A brief overview of some of these provisions is provided below and in Appendix K.;

A.The Canada Business Corporations Act

Sections 82-93 of the Canada Business Corporations Act (the "CBCA") lay down rules for trustees appointed as trustee under the terms of a trust indenture to which a corporation is a party.; As trust indentures involve the issuing of debt obligations and often the creation of security interests, these sections impact on security interests.; Sections 82-93 apply to a trust indenture only if the debt obligations issued or to be issued under the trust indenture are part of a distribution to the public.

Section 86(1) has the most direct impact on security interests.; Section 86(1) requires issuers and guarantors of debt obligations issued under a trust indenture to furnish the trustee with evidence of compliance with the conditions in the trust indenture relating to the release or release and substitution of property subject to a security interest constituted by the trust indenture.; Section 90 is also of interest, as it requires trustees to give notice to holders of debt obligations issued under a trust indenture notice of every default arising under the trust indenture within thirty days of the default having arisen.; Finally, s. 85(1) gives holders of debt obligations issued under a trust indenture the right to require the trustee to furnish a list setting out the names and addresses of the holders of the debt obligations, the principal amount of outsanding debt obligations owned by each holder and the aggregate principal amount of debt obligations outstanding.

Sections 82-93 of the CBCA ensures that corporations issuing debt obligations which effect a security interest will (i) be subject to certain obligations with respect to providing information and (ii) will have a trustee who is obliged to monitor the corporation's compliance with the conditions of the debt obligation.;

B. The Canada Cooperatives Act

Sections 267 to 277 of the Canada Cooperatives Act (the "CCA") mirror the provisions contained in ss. 92-93 of the CBCA.; Again, these sections are designed to ensure that there is an appropriate level of accountability and monitoring with respect to corporations whose debt obligations are made availabel to the public.

C. The Canada Corporations Act

Section 68 of the Canada Corporations Act is similar to ss. 82-93 of the CBCA and ss. 267-277 of the CCA in that it is designed to create some level of monitering of debt obligations created by corporations. Section 68 of the Canada Corporations Act requires corporations to deliver to the Minister particulars in respect of certain kinds of charges.; These include charges for the purpose of securing an issue of debentures, charges on the uncalled share capital of the company and charges on the goodwill or intellectual property of the company.; The particulars to be delivered to the Minister are the total amount secured by the whole series, the date of the covering deed, if any, a general description of the property charged and the names of the trustees, if any, for the debenture holders.; The Minister upon payment of the prescribed fee enters these particulars in a register.

D. The Expropriation Act

Section 26(10) of the Expropriation Act provides a formula for determining the value of expropriated land that is subject to a security interest.; Section 33(2) of the Expropriation Act ensures that payments made pursuant to s. 26(10) will be deemed to discharge any liability, under the terms of the security, of the owner of the interest subject to the security interest, to the extent of the compensation so agreed or adjudged to be payable.; Sections 26 and 33 of the Expropriation Act are designed to ensure that secured creditors - to the extent possible - will recover the same value on their security as they would absent any expropriation.

E. Conclusion

The above-mentioned statutes do not have a major impact on security interests.; They are, however, of interest to large corporations who issue debt obligations made available to the public and in situations where the government expropriates interests subject to a security interest.

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