Security Account Control Agreement Template for Canada

A Security Account Control Agreement is a specialized legal document that establishes a secured party's control over securities accounts in Canadian lending transactions. Under Canada's Personal Property Security Act (PPSA) framework, obtaining "control" over investment accounts is crucial for perfecting a security interest in securities and ensuring priority over other creditors. This agreement creates a three-party relationship between the secured party (lender), debtor (account holder), and securities intermediary (bank or broker-dealer).

When do you need this document?

You need a Security Account Control Agreement whenever securities accounts form part of the collateral in a lending transaction. This commonly occurs in corporate credit facilities where companies pledge their investment portfolios, margin lending arrangements where investors borrow against their securities holdings, and asset-based lending where investment accounts supplement traditional collateral. The agreement is also essential in syndicated loan facilities involving multiple lenders, acquisition financing where target company accounts are pledged, and restructuring scenarios where existing security interests need to be restructured or enhanced.

Key legal considerations

The agreement must clearly establish the secured party's control under PPSA requirements, which means the securities intermediary agrees to comply with the secured party's instructions without further consent from the debtor. Key provisions include the scope of control instructions, procedures for account operations during normal course business, and triggers for exclusive control activation. The agreement should address the debtor's remaining rights to trade and receive distributions, notification requirements for account changes, and coordination with other security documents. Priority considerations are crucial, as proper control generally provides priority over unperfected security interests and certain statutory liens. The document must also address enforcement procedures, including the secured party's rights upon default and methods for liquidating securities.

Legal requirements in Canada

Canadian Security Account Control Agreements must comply with both federal and provincial legislation. The Personal Property Security Act in each province governs the creation and perfection of security interests, with largely harmonized but province-specific requirements. The federal Bank Act regulates banking institutions and their ability to maintain controlled accounts and take security interests. Provincial Securities Transfer Acts establish rules for securities transfers and security entitlements, while the Civil Code of Quebec applies special rules for Quebec-based accounts. The agreement must include proper identification of all parties, clear definitions of controlled accounts and collateral, and specific acknowledgments from the securities intermediary. Federal Bankruptcy and Insolvency Act considerations affect priority and enforcement rights, requiring careful drafting to ensure security interests survive insolvency proceedings and maintain priority over competing claims.