PPSA – Know your Security Registration
The Personal Property Security Act (Ontario) (“PPSA”) (the “Act”), offers a complete set of regulations to control creditors’ and debtors’ rights when personal property is used as collateral to secure debt payments.
The Act’s application varies in each province, but the idea remains the same. It is important to know the scope of the PPSA – “ personal property” is divided into the following categories under the Act: goods, instruments, documents of title, chattel paper, leases, conditional sales contracts, securities, money, and intangibles. Liens, interests in annuities and insurance policies, interests in land, including leases, assignments for the general benefit of creditors, and interests in any recompense are all excluded from the Act’s scope.
Two requirements must be met for a security to be considered valid and enforceable: (1) Attachment and (2) Perfection.
Attachment – This means that the security interest must be “attached” to the collateral; simply put, something of value must be given by the secured party to the borrower and the borrower in return must have the rights, interest, and title in the collateral offered to the secured party. The borrower must also sign a security agreement containing the description of such collateral sufficient enough to enable it to be identified properly, or the secured party must have control or possession of such collateral.
Perfection – This means that the attached security to the collateral must be perfected by completing the registration and filing of a PPSA financing statement. Another way of perfecting a collateral is either to have control over it or be in its possession.
Understanding the relative ranks and priority of all security interests in a borrower’s property just by reading a search certificate is difficult since PPSA security interests are not exactly conditional on the date of registration. Similarly, PPSA has its own priority criteria that are not just dependent on the order of registration; some security interests are not recorded at all (e.g. landlord interest, statutory liens); and other security interests might be registered in non-PPSA systems (e.g. Bank Act).
It is important to ensure your interest in the collateral is sufficiently attached and ultimately perfected. We recommend contacting us at Kalfa Law if you require any assistance registering a security. Our corporate- commercial lawyers have extensive experience working with PPSAs.
-Ghazal Hamedani, Associate Lawyer
Ghazal’s practice is focused on corporate-commercial law, including business formations, corporate reorganizations, shareholder agreements, commercial contracts, the purchase and sale of businesses, as well as secured and unsecured lending transactions. After graduating from University of Toronto with distinction, Ghazal completed her law studies with honours at Cardiff Law in 2017. Ghazal is a lawyer licenced to practice law by the Law Society of Ontario. She is also a member of the Canadian Bar Association and Canadian Corporate Counsel Association Ontario.
© Kalfa Law 2021
The above provides information of a general nature only. This does not constitute legal advice. All transactions or circumstances vary, and specified legal advice is required to meet your particular needs. If you have a legal question you should consult with a lawyer.