Is the SI Perfected? (Perfecting Security Interests) Steps to Perfection A SI is perfected when: (19) (a) It has attached (19(a)). A SI attaches when: (12(1)) (a) is given (by C to D), value and (b) the debtor has rights in the collateral or power to transfer rights in the collateral to SP, and (c) SI becomes enforceable under s.10 (possession of collateral or writing requirements), except as between the parties to the SA i.e. – only to third parties. unless the SA provides for a different time of attachment. AND: (b) all steps required for perfection under the Act have been completed, regardless of the order of occurrence: (19(b)) the creditor has possession of collateral (if application), unless for seizure or repossession (24). If perfected by possession: (26) (a) a SI in collateral that is delivered to the D for sale r OR registration of a financing statement. (25) OR the SI is deemed perfected by a grace period. Option 1: Perfection by Possession (19(b)(1)) SIs in some types of collateral can be perfected by the debtor taking possession: (24(1)) Chattel paper Instruments Negotiate document of title Money BUT possession as a result of seizure or repossession does not result in perfection. NB you can always file a FS in advance to cover the situation. Policy: repossession is not possession to secure or guarantee a payment. Example: SP took possession of trucks default possession was to – realize the debt, not to secure interest. (BNS) Requirements - possession must be: Actual: i.e. not constructive Voluntary: must be for the purpose of perfection.
Is the SI Perfected? (Perfecting Security Interests) Steps to Perfection A SI is perfected when: (19) (a) It has attached (19(a)). A SI attaches when: (12(1)) (a) value is given (by C to D), and (b) the debtor has rights in the collateral or power to transfer rights in the collateral to SP, and (c) SI becomes enforceable under s.10 (possession of collateral or writing requirements), except as between the parties to the SA – i.e. only to third parties. unless the SA provides for a different time of attachment. AND: (b) all steps required for perfection under the Act have been completed, regardless of the order of occurrence: (19(b)) the creditor has possession of collateral (if application), unless for seizure or repossession (24). If perfected by possession: (26) (a) a SI in collateral that is delivered to the D for sale r OR registration of a financing statement. (25) OR the SI is deemed perfected by a grace period. Option 1: Perfection by Possession (19(b)(1)) SIs in some types of collateral can be perfected by the debtor taking possession: (24(1)) Chattel paper Instruments Negotiate document of title Money BUT possession as a result of seizure or repossession does not result in perfection. NB you can always file a FS in advance to cover the situation. Policy: repossession is not possession to secure or guarantee a payment. Example: SP took possession of trucks default – possession was to realize the debt, not to secure interest. (BNS) Requirements - possession must be: Actual: i.e. not constructive Voluntary: must be for the purpose of perfection.