What is a control agreement and when does a lender need one over a corporation's securities account?

A control agreement is an arrangement among a corporation (the debtor), a lender, and the securities intermediary that holds the corporation's investment securities — such as a brokerage or custodian — giving the lender a defined level of control over that securities account. It's a specific perfection method available under Ontario's Personal Property Security Act for investment property, separate from perfecting by simple registration.

A lender generally wants a control agreement, rather than relying on registration alone, when the collateral is investment property like shares or bonds held through an intermediary and the lender wants the strongest and most reliable priority position available, since perfection by control is generally treated as producing a stronger claim than registration for this type of collateral. The control agreement typically sets out what the intermediary will do if the lender asserts control following a default — for example, following the lender's instructions regarding the account rather than the corporation's — without needing to rely solely on the corporation's continued cooperation. For financing secured against significant investment holdings, expect the lender to require this in addition to, or instead of, a straightforward PPSA registration.