Canada’s Securities Transfer Act legislation has been adopted in largely a uniform manner by all provinces and territories except Prince Edward Island. Yukon legislation is not yet in force but was assented to in November 2010. The legislation is based on the Uniform Securities Transfer Act developed by the Canadian Securities Administrators, as well as the revised Article 8 of the United States’ model Uniform Commercial Code, entitled Investment Securities. The Securities Transfer Act legislation is reflective of the changing environment for securities transfers in Canada.
Nova Scotia’s Securities Transfer Act, S.N.S. 2010, c. 8 [STA] came into force in September of 2010. The STA recognizes that the bulk of modern securities transfers are in electronic or book-based form and without paper certificates evidencing title. More often than not, there are not direct relationships between issuers and purchasers of securities. Instead, intermediaries (investment managers, for example) act as a depository. To accommodate this reality, the STA recognizes the concept of a “securities entitlement”, which can be understood as a bundle of rights able to be exercised against the securities intermediary, while the investor has no direct rights against the issuer of the securities.
The STA brings with it consequential amendments to the Personal Property Security Act, S.N.S. 1995-96, c. 13 [PPSA], and the Companies Act, R.S.N.S. 1989, c. 81. One of the amendments made to the PPSA as a result of the Securities Transfer Act is the addition of an alternative, taking control, to the perfection steps of registration or possession for security interests used as collateral in relation to security interests in investment property. The STA provides a detailed definition of “control” at sections 23 through 26, which has evolved from the notion of physical delivery and possession of paper security certificates, and replaces, in the case of book-based securities, deemed delivery and possession with a more functional approach. The concept of taking control can equally be applied to securities evidenced by paper certificates and electronic or book-based securities. The PPSA also underwent amendments to provide clarification to the conflict of laws provisions specifying which jurisdiction’s laws govern the interest in a security.
The STA also affects the Nova Scotia Companies Act, which now reflects that transfers of securities will generally be governed by the STA. While the STA is largely uniform throughout Canada, some customization was required in Nova Scotia, due to the fact that restriction on transfer conditions attaching to securities in Nova Scotia are often set out in the Memorandum of Association or the Articles of Association as opposed to attached to the security certificate itself. Consequential amendments to the Companies Act also relate to the transfer of securities of a person under a legal disability or those of a deceased shareholder.
Please note that the above information is of a general nature only and each situation brings with it its own particular facts. For specific legal information and advice pertaining to your situation, you should consult with an experienced business law lawyer.