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Modifications to Quebec’s Security Regime Following the Adoption of Bill 28

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Banking & Finance / Real Estate Bulletin

Bill 28 or An Act mainly to implement certain provisions of the Budget Speech of 4 June 2014 and return to a balanced budget in 2015-2016 (“Bill 28”) was adopted on April 20, 2015 and several of its provisions on the law governing security on property have already come into force.

The amendments made by Bill 28 to the Civil Code of Quebec (“CCQ”) will particularly affect the manner in which security is taken in the context of a syndicated loan and hypothecs with delivery are granted on monetary claims (such as credit balances in bank accounts).

The Simplification of Granting Security in Favour of Multiple Creditors

Before the adoption of Bill 28, Quebec law did not contemplate the granting of hypothecs in favour of a lending syndicate agent acting for present and future lenders. Despite this, a practice developed under Article 2692 CCQ whereby debt securities issued by a debtor were secured. A borrower would issue a debt security (commonly referred to as a “debenture” or “bond”) which was secured by a hypothec in favour of the person holding the power of attorney of the creditors, and the debenture or bond would then be pledged in favour of the members of the syndicate of lenders, acting through their agent.

Bill 28 permits both this mechanism and the documentation required for taking such security in Quebec to be simplified. A hypothec can now be created directly in favour of the hypothecary representative in order to secure the performance of any obligation (and not just a debt security). It is therefore no longer necessary to issue an “artificial” debenture or bond and, in turn, have it pledged in order to enable future lenders to benefit from the security. A hypothec in favour of a hypothecary representative must still be executed before a Quebec notary, on pain of absolute nullity, unless it is a movable hypothec with delivery. It should also be noted that hypothecs taken under former Article 2692 CCQ remain valid under the new regime.

Hypothecs Guaranteeing Debt Securities in the Context of a Non-Syndicated Loan

The formalities of hypothecs securing debt securities in the context of non-syndicated loans have also been softened by the introduction of the new wording of Article 2692 CCQ, which no longer requires that such hypothecs be granted in favour of a hypothecary representative. In other words, in the case of a non-syndicated loan, a promissory note, debenture, bond or any other debt security issued by the borrower can now be secured by a hypothec created under private agreement (that is, not notarized) directly in favour of the lender and not in favor of the hypothecary representative.

General Partnerships

Bill 28 also ends the controversy over the ability of a general partnership to grant a hypothec on a universality of properties. In fact, the addition of the term “partnership” in Article 2684 CCQ explicitly provides for this ability by any type of partnership conducting business.

Hypothecs with Delivery on Monetary Claims

A special regime of hypothecs with delivery on monetary claims (such as the credit balance in a bank account) has also been introduced by the new Articles 2713.1 to 2713.8 CCQ. This regime is based on the concept of control of the monetary claim and aims, inter alia, to grant priority to a creditor having such control.

When the charged bank account is maintained by the creditor itself, the control is granted to the creditor once the grantor (i.e. the borrower or the guarantor) agrees that the claim secures the performance of an obligation owed to that creditor. However, when the bank account is maintained by a third party financial institution, the creditor, the grantor, and the third party maintaining the account must enter into a control agreement whereby the third party agrees, with respect to the credit balance, to comply with the instructions of the creditor without any additional consent of the grantor. It should be noted that the third party is not required to enter into such an agreement.

Moreover, the new Article 2713.7 CCQ grants the creditor of a hypothec on a monetary claim over which it has control a kind of “super priority” on that claim. In other words, the creditor's hypothec does not require any publication and automatically ranks ahead of all other hypothecary creditors that do not possess control, even if their hypothecs were published on an earlier date.


Quebec is the first Canadian province to harmonize its legislation with that of our neighbours down South. In fact, Article 9 of the Uniform Commercial Code of the United States already provides for similar rules, and the use of “Deposit Account Control Agreements” has been common practice for many years.

Although Bill 28 was assented to on April 21, 2015 and the majority of its provisions have come into force since that date, it should be noted that the provisions regarding hypothecs with delivery on monetary claims will only take effect as of January 1, 2016. Nonetheless, the mechanisms for acquiring the control of monetary claims can be put into place immediately.

Our banking and real estate finance teams are on the leading edge of these legislative developments and will be closely monitoring the evolution of practices that will result from these amendments to Quebec security law. Do not hesitate to contact us with any questions.

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