Postponement agreement
A postponement agreement is one in which a secured creditor agrees to rank its security interest behind another interest. Provincial personal property security Acts, including British Columbia’s, Alberta’s and Ontario’s, let a secured party subordinate its interest, effective according to its terms.
It can arise where a seller who is owed money after closing holds security and the buyer’s lender asks the seller to rank behind it. The seller would then agree to rank its security interest behind the lender’s. The answer on subordinating a vendor take-back explains the effect on the seller.
What the statutes say
British Columbia’s section 40 is headed “Subordination or postponement of right to security interests” and lets a secured party, in a security agreement or otherwise, subordinate its security interest to any other interest. The subordination is effective according to its terms between the parties and may be enforced by a third party it was intended to benefit. Alberta’s section 40 is to the same effect. Ontario’s section 38 lets a secured party, in the security agreement or otherwise, subordinate its security interest to any other security interest, effective according to its terms. Other provinces have their own Acts; check the one that applies.
What to check
- Whose security interest ranks behind whose, and over which assets.
- Whether the agreement is a separate document or part of the intercreditor agreement.
- Whether it affects security interest registrations.
Sources
This definition is checked against primary sources. Links were last confirmed on the dates shown.
- 01Government of British Columbia (BC Laws)GovernmentPersonal Property Security Act, RSBC 1996, c. 359
- 02Government of OntarioGovernmentPersonal Property Security Act, R.S.O. 1990, c. P.10
- 03Alberta King’s PrinterGovernmentPersonal Property Security Act, RSA 2000, c. P-7
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