Whether you’re a person or a company looking to enter into a movable hypothec with delivery, or whether you’re a person or a company already involved in a movable hypothec with delivery, we’re here to help!
While many questions can be answered with the help of the guides, sample letters and forms in our legal toolkit, an independent jurist affiliated with PSP Legal will always be happy to help you by answering any questions you may have.
Of course, if you prefer to have an experienced practitioner take charge of your situation and intervene directly and quickly on your behalf, you can also request that one of the independent jurists affiliated with PSP Legal represent you by clicking here.
What is a movable hypothec with delivery?
A movable hypothec with delivery, also known as a “pledge”, is a form of security offered to a creditor that can be taken by any person, without the prior condition of operating a business. A hypothec with delivery is a contract between a debtor and a creditor. The contract may be written or oral, but it is strongly recommended that it be in writing.
Hypothecs may be granted on tangible or intangible assets. There are therefore different regimes that can be applied depending on the type of asset. The common law pledge applies to physical property, and is governed by the Civil Code of Quebec. A pledge on physical property implies physical delivery of the property to the creditor to secure the loan. The pledge may also involve intangible assets such as receivables, securities, intermediated securities or certain so-called pecuniary claims. Where this is the case, there will be no physical handover, but rather control of the intangible asset by the creditor. These pledges are governed by the Civil Code of Québec or the Act respecting the transfer of securities and the establishment of security entitlements.
The different hypothecs with delivery
The common law regime
Articles 2702 to 2709 of the Civil Code of Québec apply when the hypothec with delivery relates to physical property or a security to be delivered into the hands of the creditor (e.g. shares or bonds).
The physical delivery of the property or security is necessary for the validity of the pledge contract, but above all for its enforceability. The delivery of the asset is therefore a dual condition that must be met for the hypothec to be valid and enforceable. The creditor’s possession of the property or title must be continuous. The debtor could hand over the property or title to a third party mandated by the creditor, but there must be a written contract to corroborate this. The creditor could also decide to register the hypothec in the Register of Personal and Movable Real Rights, but this is not necessary, since continuous holding makes the hypothec enforceable against third parties.
The derogatory regime
If the hypothec with delivery concerns pecuniary claims, you’ll need to turn to articles 2713.1 to 2713.9 of the Civil Code of Québec. This type of hypothec covers sums of money in a financial account, or sums of money held by a third party to guarantee the performance of an obligation. They are not negotiable instruments or securities. Physical delivery and holding will therefore be replaced by control of the pecuniary claim.
Control of the pecuniary claim can be achieved in two ways:
- If it is a claim held against the creditor: The grantor’s consent is required when a bank takes a pledge on the creditor’s sum held by that same bank. Consent is all that is required, without any mastery agreement;
- In the case of a claim held against a third party: If the bank takes a pledge on the credit balance of another bank or a third party, such as a jurist, notary or court clerk, there must be a mastery agreement. This agreement can also be obtained by titularity.
The derogatory regime under the Securities Transfer and Intermediated Securities Act
When the pledge concerns transferable securities or intermediated securities, the provisions of the Act on the Transfer of Transferable Securities and the Acquisition of Intermediated Securities must be applied. The perfection of the hypothec depends on whether the securities have been issued with or without a certificate.
- If there is a certificate: perfection is effected by delivery of the certificate;
- If there is no certificate: perfection is effected by registration in the issuer’s books or by a master agreement.
How we can help
Our legal toolkit includes a variety of online resources and links to templates and guides to help you better understand your obligations.
However, should the Legal Toolkit prove insufficient in your situation, you can obtain additional assistance by speaking with one of PSP Legal’s affiliated jurists:
Of course, if you prefer to have an experienced practitioner handle your situation, you can always request that one of the independent jurists affiliated with PSP Legal intervene on your behalf by clicking here. He or she will then be able to intervene directly and rapidly on your behalf by:
- Preparing, negotiating and drafting applications, procedures or any other legal documents related to your situation;
- Assisting and advising you on your legal rights and obligations;
- Representing you before the courts when legal action is taken;
- Guiding you through the choices available to you, leading to a fair and satisfactory solution.
PSP Legal, because you deserve expert advice!
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