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Financing and secured loans in Canada

Secured loan pipelines are neither particularly resilient nor particularly arid. Over the past 12 month or so, some of the tendencies and conditions often found in US loan contracts have sneaked into the Canada loan contract markets. Are secured credits a regular business in your jurisdictions?

To that end, the following could be matters of relevance to the assessment of whether a creditor is conducting operations in Canada or in a jurisdiction of Canada when concluding a loan transaction: when making the decision to grant a loan; when negotiating the loan documentation or when the creditor's officer and employee or agents are domiciled on creditor's account who participates in the telecommunications related to such negotiation; when financing is provided by the creditors and payment is made to them; when the creditors have a branch or employee in Canada.

Supplementary prudential consideration may be required if mortgages are to be assumed in the context of granting credit, as in Canada, in general, a mortgagee must be licenced or extra-provincially incorporated in the respective jurisdictions in order to maintain recorded ownership of the immovable in question (i.e. in the event of liquidation of such collateral).

Certain jurisdictions request that a company in their jurisdictions obtain a license or extra-provincial registration to incorporate all rights (including a mortgage) to immovable properties in that jurisdictions. In addition, there are laws on mortgages brokers at province levels (with the associated license provisions) that make it necessary to consider when a creditor will borrow funds in order to be secured by collateral.

Is there a particular set of regulatorial questions that a potential creditor should consider when agreeing or concluding a secured credit arrangement? Is there a particular set of regulatorial questions that a potential creditor should consider when agreeing or concluding a secured credit arrangement? Which are the current suppliers of secured financing in your jurisdictions (e.g. global banking, domestic banking or non-banking)?

There are many different types of proactive suppliers of secured financing. Does your legal system use customary commercial credit transaction documents? In Canada, there is no customary collateralised credit exposure document in the industry. Does your legal system typically have secured credit syndication arrangements? In Canada, syndicated secured credit lines are very common.

Whilst the Agents are acting on account of the Underwriters, the credit record would normally need the Creditor's approval when changes are made to matters such as interest rate, redemption and repayment conditions, duration, collateral and its release, while a Mehrheit or 66. In your jurisdictions, does the Act allow collateral and warranties to be fiduciarily retained by a collateral fiduciary for the account of the bank consortium?

Some of the most popular forms of securities can be provided to a fiduciary in favor of a consortium of creditors. Similarly, a guaranty may be given for commitments to a consortium of creditors in favor of a guarantor. In Canada, under a revolving loan syndication scheme, it would be typically for a management agency or guarantor agency (in Quebec as mortgage agent) to consider the surety as a loan syndicate rather than designating a guarantor fiduciary.

Part of this may be due to the existence of provincial law which, inter alia, governs the capacity of a body to act in the provinces as a fiduciary for a services it provides to the general public or otherwise to conduct all or part of the activities of a fiduciary company.

However, this law may be applicable if: the lender consortium or a significant part of the consortium is domiciled in Canada; in the context of the securities implementation, the collateral taker will take measures to conduct the debtor's affairs directly (e.g. rather than through an insolvency administrator). In the case of secured financial operations for SEVs (Special-Purpose Vehicles, SPVs), is it customary to use the asset to be funded for safekeeping?

As a rule, would collateral be provided for the interests in the SNI or would creditors demand immediate collateral? It would not be normal in a typically secured finance operation with a company loanee or group of companies for a going concern company to keep the funded financial instruments through an SPA.

SPAs are more common in the area of mortgages when a particular type of financial instrument is used to finance a particular type of financial instrument. Penal code makes it a crime to conclude an arrangement on the paying of interest at a penal sentence. Further legal interest limitations comprise limitations under the Interest Act that restrict the interest that can be levied on the default of capital or on the interest secured by a land charge to the interest on capital or non-arrears of interest.

How is the process for their preparation? As a rule, warranties are recorded in the contract or in an individual contract. Outline the most commonly used ways to structure the priorities of debt and collateral. Every provincial and territorial state in Canada (except Quebec) has a law to protect individual properties that governs amicable interests in most kinds of individual properties.

The Law on the Protection of Individual Ownership of each Provincial and Area provides for techniques for perfecting an interest, which shall differ according to the nature of the securities, provided that the protection of all kinds of securities governed by the Law on the Protection of Individual Ownership may be improved by registration of a financial certificate in the Register of the Protection of Individual Ownership of the Provincial or Area.

Precedence of interests governed by the law on the safety of private properties and made perfect by virtue of registry is generally established by order of register. It is therefore characteristic for a creditor to provide proof of funding against a debtor before and in expectation of the acceptance of collateral by the debtor, so that the creditor gives as much credit as possible to the collateral as a matter of prioritisation.

Funding declarations may be submitted in several counties or regions, dependent on the type and place of securities and the borrower's place of business (as defined by the law on the protection of private property). There is also a province registry of fundamental human and immovable freedoms in Quebec, which also provides for the disclosure of securities, and the precedence of mortgages by mutual agreement over movables is generally established according to the order in which they are entered in the registry.

A creditor may request that other lenders, in particular secured lenders, of the debtor conclude with the creditor agreements between lenders to provide their collateral under contract to the creditor or otherwise prioritise between lenders. Is there any tax, stamping tax or other charge to be paid when a credit, surety or interest is granted or enforced?

No document tax or stamping duty is due to any regulator for the execution, registration or execution of credit, suretyship or collateral instruments. For the submission of financial declarations and other kinds of safety documentation, registration charges shall be paid to the competent register or registrationentity. Is there any restriction on lending by or the provision of collateral or guaranties to overseas creditors?

Is there any control on currency that restricts payment to a non-resident creditor under a securities instrument, bond or credit contract? It is possible to establish a lien over all of a company's financial instruments? Assuming so, would a lump-sum collateral arrangement be sufficient or is a lump-sum collateral arrangement necessary for each kind of financial instrument?

Personally owned safety laws that apply to most kinds of personally owned properties exist in every provincial and territorial Canada. According to this law, for most kinds of private ownership, a charge can be made under a general surety arrangement that encumbers inventories, assets, accounts receivable (including claims and liabilities ), bonds and other private ownership, whether present or not.

Unless the contracting partners agree on the deferment of the seizure, the guarantee shall be immediately linked to individual ownership to which the defendant has a right and, in the event of the latter, to individual ownership obtained later. The term lien does not exist in Quebec. Instead, a borrower may pledge his moveable assets (i.e. his own belongings ) or his immoveable assets (i.e. his land) in favor of the collateral taker or a mortgage agent.

A mortgage can take into account the universal nature of the debtor's present and prospective ownership, similar to a general surety arrangement in other Canada jurisdiction. Besides Quebec properties (which may be the object of a mortgage), properties, vessels, aircraft, vehicles and government claims are just some example of properties that may need special safety records.

How do you formalise the provision of collateral for the most popular types of investment? Generally, collateral for an asset is provided on the basis of an arrangement entered into by the collateral taker. As a rule, the Arrangement authorizes the Mortgagor and its legal representative to record any redundancies of securities registration in relation to the Securities that have been cleared and contains a further assurance provision under which the Mortgagor undertakes to perform all documents required for clearance and relief.

Financial reports under the Personal Property Securities Act may be transmitted by electronic means. Different kinds of securities registrations, however, involving mortgage in certain jurisdiction and Quebec collateral, may necessitate the registry of initially performed duplicates of mandatory relief arrangements. Is it possible to provide collateral for property? And if so, what are the most commonly used securities for property and what is the process?

Canada provides collateral for properties. The collateral usually consists of a mortage and a general transfer of rent and lease agreements (or a mortage if the home is in Quebec) entered against ownership of the home in the relevant Quebec Cadastral Register, as well as notification of a lien against the debtor in the relevant Quebec Cadastral Register in accordance with a general collateral arrangement or a moveable mortage in Quebec.

Is it possible to guarantee safety for machines and plants? And if so, what are the most usual ways of securing this type of ownership and what is the process? Guarantee for machines, equipments and other kinds of goods, such as stocks, can be provided under a surety arrangement that encumbers this restricted class of sureties, or generally be incorporated into a wider surety for all existing and subsequently purchased individual assets of the obligor (see "Guarantee - General" above for surety arrangements and the process for taking over such sureties).

Is it possible to provide securities for claims? And if so, what are the most usual types of securities for this kind of ownership and what is the process? Generally, securities can be provided for exposures on the basis of a surety arrangement which can encumber this restricted kind of securities or which can normally be incorporated into a wider assignment of all existing and subsequently purchased debtors' assets (see "Collateral - General" above in relation to surety arrangements and the process for providing such collateral).

As a result of government laws at the federation or province levels and in some province courts, securing the claims of some government agencies may either not be possible or may necessitate further special action in accordance with this law to obtain legal certainty. Contract restrictions on the transferability of an Account may also preclude a provision of collateral validly held on that same Account, although the personal property collateral law rules that make such restrictions non-enforceable against third persons may be operated in such a way that the collateral can be provided.

Furthermore, an assignation of bank accounts to a payee may not be executed until the payee has been notified of the transfer, until which date the payee may still make payments to the assignee. Except for certain kinds of loans where the bank deposits are the principal security, this notification is usually given only when the assertion of the transfer is considered.

Is it possible to provide securities for financing documents? And if so, what are the most usual types of securities for this type of ownership and what is the process? Securities on instrumental ities may be provided under a surety arrangement that encumbers this restricted class of assets, or may generally be incorporated into a wider assignment of all existing and subsequently purchased assets of the obligor (see "Collateral - General" above in relation to surety arrangements and the process for providing such collateral).

Besides perfecting through enrolment, transferable assets - comprising transferable assets and custody account assets - can be made perfect through scrutiny (through physically delivered stock certificates, properly approved or tripartite arrangements with non-securitised or broker ed issuers), giving higher precedence to the collateral taker. As a rule, the secured counterparties may also demand that the borrower provide ownership of tools (e.g. documentary credits and movable assets ) in order to best safeguard its collateral.

Is it possible to provide collateral in the form of liquid assets? And if so, what are the most commonly used types of collateral for this type of ownership and what is the process? The safeguarding of a debtor's claims against its banking or custody account is provided and improved in the same way as other claims and account balances (procedure see "Claims" above).

At Quebec, collateral on banking books can be made enforceable against third persons (or perfected) by giving the collateral taker full command of the book, possibly incorporating a tripartite arrangement with the custodian which can give better precedence to the collateral taker. Is it possible to provide certainty about IP? And if so, what are the most commonly used types of collateral for this type of ownership and what is the process?

The IP Retention may be provided under a surety arrangement that encumbers this restricted class of sureties, or may usually be incorporated into a wider assignment of all existing and subsequently obtained debtors' assets (see "Collateral - General" above in relation to surety arrangements and the process for assuming such sureties).

Since there is some confusion as to whether the level of intergovernmental responsibility for IP related matters is confined to the level of either the federation or the province, it may be advisable to record proof of the safeguards arrangement (often a mere unilateral affirmation of the granting of securities under the safeguards arrangement) with the Canadian IP Bureau in relation to the IP recorded in that agency.

In view of the costs associated with such registering, it is quite normal for creditors to request such registers only if the IP is essential. Which are the joint trigger mechanisms for credit, guarantee and collateralisation? Non-compliance with capital, interest or charges; non-compliance with unfavourable or pecuniary obligations; non-compliance with other obligations beyond an agreed extension of time; imprecision of declarations; crisscross delay in other liabilities; receivership or liquidation; nomination of a liquidator, fiduciary or similar officer, whether private or procedural; changes of Control; judgement of a certain amount of money; encumbrance imposed or a mortgage creditor taking ownership of a substantial part of the asset of a debtor or surety; significant detrimental effects.

Among the most commonly used execution proceedings are: notification of accountholders to make direct payment to the secured party; nomination of the beneficiary (private or by judicial order); provision of security; execution of security. An obligation to observe a period of 10 calendar days under the Bankruptcy and Insolvency Act (Canada) if the secured lender liquidates all or substantially all of the assets, liabilities or other properties of an insolvent obligor.

A commitment to recognise the excess of the disposal gain over the amount payable to the borrower. Commitment to apply due diligence in the safekeeping of securities when the secured person is repossessed. Commitment to notify 15 working days in advance all outstanding secured lenders who appear in pursuance of the Personal Property Security Act, as well as the obligor and all sureties entitled to repayment.

Guarantee taker may be the buyer of the security, but in these conditions it must be a sales by open market or auctions and not a sales by retail. In the event that a substantive opposition is raised, the secured party shall be obliged to sell and not to exclude. Insolvency and Insolvency Act and Enterprise Agreement Act restrict the execution prerogatives of a secured entity and offer some degree of security to obligors - if a obligor makes a suggestion for insolvency and insolvency law or receives cover under the Enterprise Agreement Act, makes a willing transfer or goes bankrupt, the guarantor's capacity to liquidate securities may be suspended or deferred.

Thereafter, a borrower's normal creditor class would normally be ranked in the following order: secured lenders, with some exemptions, in the order in which they register under the Personal Property Security Act; uncovered lenders.

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