3- Security Flashcards
What is security?
a guarantee that the creditor requires from the debtor as protection in case the latter becomes insolvent
___ is a commitment by a third party toward the creditor to perform the debtor’s obligation if the
latter is in default
Personal security
is the right a creditor has over an asset belonging to the debtor. This type of security involves a thing as opposed to a person
Real security
The first prior claim is for
legal costs and expenses incurred in the common interest of the creditors
The second prior claim is that of
an unpaid seller of movable property to an individual
The third prior claim is that of
creditors who have a right to retain movable property related to their claim
The fourth prior claim is that of
the State for amounts owing under tax laws.
The fifth prior claim is that of
municipalities and school boards for payment of property and school taxes
The Civil Code of Québec recognizes two types of hypothecs:
- legal hypothecs, which exist by virtue of the law and do not require consent from the debtor.
- conventional hypothecs, which require consent from the debtor in favour of the creditor
The State and public corporations are protected by a ___ to secure their tax claims or any other claim under special laws
legal hypothec
Architects, engineers, materials suppliers, workers, contractors and sub-contractors are protected by a legal hypothec based on ___
work done on immovable property ordered by its owner.
The legal hypothec for construction is an exceptional case in that
it ranks ahead of all other hypothecs already published against the immovable.
Creditors who obtained a favourable ruling in court ordering the debtor to pay an amount are protected by ___
a Legal hypothec
___ result from a contract. They are granted to by the debtor to a creditor to secure the payment of a debt
Conventional hypothecs
___ is the person who consents to the hypothec.
The grantor
possible to hypothec one’s property to secure another person’s
debt
A movable hypothec with delivery is also known as a “__.”
pledge
Any person can grant a pledge on one of his or her corporeal assets, by ___
delivering the property to the creditor
when can you use a MOVABLE HYPOTHEC WITHOUT DELIVERY
when operating a business. can grant a movable hypothec on the enterprise’s movable property, while retaining possession of this property.
Hypothecs without delivery must be published in the ___ to ensure that they may be set up against a third party.
Register of Personal and Movable Real Rights
An immovable hypothec must be granted by notarial act and include: (3)
- an attestation as to the identity, quality and legal capacity of the parties
- a statement that the act is in conformity with their intention
- a declaration that the title of the hypothecary debtor is validly published
The Bank Act prohibits banks from accepting a hypothec on an immovable if it is to secure an amount greater than __ % of its value.
80
Pursuant to the National Housing Act, the financial institution can, however, accept the hypothec if
it is protected by insurance
When the creditor is ready to exercise his or her right, he or she must give prior notice describing: (5)
- the default
- the right to remedy it
- the amount of the claim
- a description of the charged property
- the nature of the hypothecary right
This notice must be served on the debtor, the grantor or the person against whom the right is being exercised
PRIOR NOTICE
The debtor or any person with an interest in the hypothec who has received a prior notice has a period of time known as ___ to remedy the default as described in the notice, or to undertake other action.
period of surrender
Four rights are available to the hypothecary creditor
- Taking in payment
- Sale by judicial authority
- Sale by the creditor
- Taking possession for the purposes of administration
term sale by which the creditor reserves ownership of the property until full payment of the sale price.
instalment sale
An instalment sale must be published in __ in order to be set up against third parties and subsequent purchasers.
the Register of Personal and Movable Real Rights
instalment sale - the right of repossession cannot be exercised without the court’s consent if the debtor has performed over __ of his obligation.
one-half
Chartered banks can accept security pursuant to section 427 of the Bank Act when they lend money or make advances to: (5)
- a dealer
- a manufacturer
- a farmer
- an aquaculturist
- a forestry producer
In Canada, ___ creates a compulsory registration system for commercial and pleasure boats with a gross tonnage of over 15 tons.
the Canada Shipping Act (CSA)
Registering a ship under the CSA allows it to be used as
a security for a mortgage on a ship.
Can charges other than a mortgage on a ship be registered under the CSA?
No
__ is a contract whereby a person, the___ , binds him or herself toward a creditor to perform the obligation of the debtor if the latter fails to fulfil it
Suretyship
surety
Four principal rights are granted to the surety by the Civil code of Québec
obligation of information.
benefit of discussion
benefit of division.
subrogation.
entails the creditor’s obligation to provide the surety, at his or her request, with any useful information
concerning the content and terms and conditions of the principal obligation and the progress made in its
performance
obligation of information.
right of the surety to require that the creditor exhaust all recourses against the property of the
principal debtor before requiring the surety to perform his or her obligation.
benefit of discussion
invoked in situations where there are several sureties. The sureties may then require the
creditor to divide his or her action proportionally among them.
benefit of division.
allows the surety who pays the creditor the amounts due by the principal debtor of the obligation to
step into the rights of the creditor against the principal debtor in the attempt to obtain payment.
subrogation.
The surety’s death ends the suretyship for future and current debts. True or false?
False. only future debts.
When the borrowers are solidarily liable, each borrower is obligated for ___
the full debt
liability is solidary only if
clearly indicated in the contract
The system of publication of rights involves two registers:
- The Land Register;
- The Register of Personal and Movable Real Rights
All rights in immovable property, including the creation, modification, transmission or extinction of these rights, require publication at the ___
land register.
rights published against a given asset rank according to the moment they have been entered in the
appropriate register. main exceptions to this rule are (5)
Immovable hypothecs (date of ownership)
Movable hypothecs (date registered)
Legal hypothecs for construction (rank ahead all other)
Hypothecs on securities or security entitlements
Floating hypothec
If a creditor’s rank is superior, this creditor can agree to exchange this rank with another creditor.
Floating hypothec
The financial institution that holds a security interest on a client’s property has two options
- request that the trustee turn the property over to it
- file a proof of claim in the bankruptcy as a secured creditor
Bankruptcy and Insolvency Act
certain creditors have preferences when their debtor is bankrupt.
preferred creditors (5)
- funeral and testamentary fees, if the bankrupt dies
- the trustee, for legal and administrative fees
- salaries and commissions owed to employees for services provided in the six months immediately preceding bankruptcy
- municipal taxes or the two years preceding the bankruptcy
- landlords, for any unpaid rent over the three months preceding the bankruptcy and for a maximum period of three additional months
