Commonwealth Consolidated Acts Commonwealth Consolidated ActsSecurity interests to which vesting rule does not apply
(1) Subsection 267(2) and section 267A (security interests vested in grantor) do not apply to the following security interests:
(a) a security interest provided for by any of the following transactions, if the interest does not secure the payment or performance of an obligation:
(i) a transfer of an account or chattel paper;
(iii) a commercial consignment;
(aa) a security interest for which perfection, and the effect of perfection or non - perfection, is governed by the law of a foreign jurisdiction at the time mentioned in paragraph 267(1)(b);
(b) a security interest covered by subsection (2) of this section.
Security interests and subordinated debts
(2) This subsection covers a security interest in an account if all of the following conditions are satisfied:
(a) a person (the obligor ) owes money to another person (the senior creditor );
(b) the obligor also owes money to a third person (the junior creditor );
(c) an agreement between the senior creditor and the junior creditor provides (in substance):
(i) for the postponement or subordination of the obligor's debt to the junior creditor, to the obligor's debt to the senior creditor; and
(ii) in the event of the obligor's debt to the junior creditor being discharged (whether wholly or partly) by the obligor transferring personal property to the junior creditor--for the junior creditor to transfer the property, or proceeds of the property, to the senior creditor to the value of the amount owed by the obligor to the senior creditor; and
(iii) in the event that the property or proceeds are not transferred--for the junior creditor to hold the property or proceeds on trust for the senior creditor to that value; and
(iv) in the event of such a trust arising--for a security interest to be granted by the junior creditor to the senior creditor over the personal property or proceeds securing payment of the obligor's debt to the senior creditor;
(d) the security interest is a security interest granted under the agreement, in the circumstances described in subparagraph (c)(iv).