Collateral Account Control Agreement Template for Canada

A Collateral Account Control Agreement (CACA) is a tripartite legal document that establishes how a secured party can exercise control over a borrower's deposit accounts held at a financial institution. Under Canadian law, this agreement is essential for perfecting security interests in deposit accounts and ensuring priority rights in secured lending transactions.

When do you need this document?

You need a Collateral Account Control Agreement when entering into secured lending arrangements where deposit accounts serve as collateral. This document is particularly crucial in project finance deals where lenders require control over project accounts, corporate credit facilities backed by operating accounts, and structured finance transactions involving multiple account relationships. The agreement becomes essential when you want to ensure that your security interest in deposit accounts takes priority over other creditors' claims, especially in insolvency scenarios.

Key legal considerations

The agreement must clearly define the control mechanism that allows the secured party to direct the deposit bank regarding account operations. Critical clauses include the control notice provisions that specify when and how the secured party can assume exclusive control, the deposit bank's acknowledgment of the security interest, and the account holder's continued access rights until control is exercised. You should pay particular attention to the termination provisions, which outline when control rights end, and the liability limitations that protect the deposit bank from conflicting instructions. The agreement must also address the treatment of account proceeds, set-off rights, and the priority of claims against the deposit account.

Legal requirements in Canada

Under Canadian law, the Collateral Account Control Agreement must comply with both federal and provincial legislation. The Personal Property Security Act (PPSA) in each province governs the creation and perfection of security interests in deposit accounts, requiring that control be established through an agreement between all three parties. Federal Bank Act requirements apply when dealing with Canadian chartered banks, imposing specific obligations regarding account operations and regulatory compliance. The agreement must also consider the Bankruptcy and Insolvency Act provisions that may affect priority rights in insolvency proceedings. Additionally, financial institutions must comply with anti-money laundering requirements under the Proceeds of Crime (Money Laundering) and Terrorist Financing Act, which may impact account control and transfer procedures. Provincial Securities Transfer Acts may also apply depending on the nature of the accounts and assets involved.