Security agreements between Canada and the US share DNA but evolved into different species. From infinity-term filings to driver's license requirements, these technical divergences determine whether your million-dollar collateral remains yours or becomes worthless paper when defaults hit. Click here to learn more.
A single missing birthdate just cost a Canadian lender three million dollars. Not because of fraud or default, but because they forgot to include that one piece of information when filing their security agreement. Meanwhile, across the border in Michigan, an American lender lost their entire claim to a fleet of construction equipment because it filed their paperwork on day twenty-one instead of day twenty. These aren't rare horror stories—they're happening every week to businesses that thought they understood secured lending. The truth is that security agreements between Canada and the United States look almost identical on the surface. Both countries built their systems on the same foundation, with Canada modeling its Personal Property Security Act, or PPSA, after America's Uniform Commercial Code Article 9. But here's where it gets dangerous—those surface similarities hide critical differences that can destroy your entire security interest without warning. Let's start with the basics of what actually makes a security agreement work in both countries. You need three things to create a valid security interest anywhere in North America. First, you have to provide value, usually through a loan or credit extension. Second, your borrower must own the collateral or have the right to pledge it. And third, you need a written security agreement that describes the collateral, unless you're physically holding onto it like a pawn shop would. When these three elements come together, your security interest attaches to the collateral, making it enforceable against the borrower. But attachment is just the beginning of your journey, not the end. The real protection comes from perfection, and this is where the paths between Canada and the US start to diverge. Perfection means filing a public notice that tells other creditors you've claimed specific collateral. Think of it as planting your flag on the collateral so everyone knows it's spoken for. In America, you file what's called a UCC financing statement. In Canada, you register a PPSA financing statement. Both documents need the exact legal name of your borrower, your name as the secured party, and a description of the collateral. Miss any of these three elements, and you might as well not have filed at all. Now here's where location becomes everything. American lenders file in the state where a company is incorporated, which sounds simple until you realize that means a California company that incorporated in Delaware requires filing in Delaware, not California. For individual borrowers, you file in their state of residence, but people move, and when they do, you've got four months to re-file in their new state or lose your perfection. Canadian rules flip this logic completely. If your borrower is incorporated in British Columbia, Ontario, or Saskatchewan, you only file in that province. But if they're from any other province, you need to file both where they incorporated and where they keep the collateral. That means a Manitoba company with inventory in Alberta needs filings in both provinces. Miss either one, and you've left the door open for other creditors to jump ahead of you. The timing differences between countries seem minor until they bite you. Equipment financing shows this perfectly. In the United States, you get twenty days from when your customer receives equipment to file your UCC and maintain priority over other creditors. Canada gives you just fifteen days for the same transaction. Five days might not sound like much, but when you're dealing with cross-border transactions, holidays, and mail delays, those five days can mean the difference between being first in line and being out of luck. The lifespan of your security interest varies dramatically, too. American UCC filings automatically expire after five years unless you remember to file a continuation statement before the deadline. Miss that deadline by even one day, and you're back to square one, potentially losing priority to creditors who filed after you. Wyoming stands alone with ten-year terms, but everywhere else sticks to five. Canada takes a completely different approach. You can choose how long your security lasts, anywhere from one year to twenty-five years. Some provinces even let you select infinity as your term. No renewal worries, no missed deadlines, just permanent protection. This flexibility helps Canadian lenders avoid the American nightmare of accidentally letting security interests expire. Individual borrowers create their own special headaches. In America, you must verify an individual's name using their unexpired driver's license from their state of residence. Not their passport, not their birth certificate, not any other ID—only the driver's license counts under UCC rules. Use anything else, and your entire security interest could be invalid. Canada requires the individual's birthdate along with their legal name. It sounds simple, but forgetting this birthdate requirement remains one of the most common ways Canadian security interests get destroyed. Corporate lawyers see it happen constantly—everything else perfect, but no birthdate means no valid security. The enforcement powers also differ significantly. Canadian lenders can act when they have reasonable grounds to believe collateral faces danger, damage, or unauthorized sale, even if the borrower's still making payments. American lenders must wait for specific default events outlined in their security agreement, usually missed payments or broken covenants. And then there's Quebec, which rejects the PPSA entirely for its own Civil Code system. Different forms, different rules, different everything. Cross-border lenders often discover this the hard way when their standard security agreements prove worthless in Quebec. Even the paperwork for maintaining your security interests differs. Americans use one form, the UCC3, for all changes. Canadians split this across three different forms—Renewal Statements, Change Statements, and Discharge Statements. Use the wrong form, and you might accidentally terminate your security instead of updating it. These technical differences matter because they determine who gets paid when things go wrong. Understanding them before you structure a deal, rather than discovering them during a default, makes all the difference. Click on the link in the description for more resources on protecting your security interests across borders. Pace Law Firm City: Toronto Address: 191 The West Mall Website: https://pacelawfirm.com