The Primerus Paradigm - Spring 2016 Page 30

T H E P R I M E R U S P A R A D I G M

Your Collateral Needs Security Too:
A Brief Introduction to the Personal Property
Security Act (Ontario)

Ontario, like many other jurisdictions,
has a system that allows parties to register
a security interest over another person's
personal property. This affords a creditor
greater protection than relying solely on a
security agreement.
The governing legislation in Ontario
that guides the operation of this system is
the (Ontario) Personal Property Security
Act (the PPSA). Most other provinces
and all of the territories have their own
version of the PPSA, each with certain
differences. It is imperative to consult
legal counsel to determine how and in
which jurisdiction a security interest may
need to be registered.

The PPSA registry system encourages
lending, the giving of guarantees,
purchasing on credit and facilitates
business in general. Therefore, the PPSA
is important, and registering your security
interest is a key component of conducting
business in Ontario.
The PPSA is similar to Article 9 of the
Uniform Commercial Code (UCC) in the
United States and should not be a source
of intimidation to solicitors in the United
States whose clients may have dealings
in Canada.

The Basics

In order to register a security interest
under the PPSA, a person must first
ensure that he/she has a bona fide security
interest.
A security interest is by definition an
interest in personal property that secures
payment or performance of an obligation.
To determine if your agreement creates
a security interest in personal property
under the PPSA, you need to look at the
overall effect of the agreement and the
intention of the parties.
A security agreement must include the
following:

1. an accurate description of the parties;

2. an accurate description of the

collateral;

3. the financial and other obligations of

the debtor to the secured party; and

4. the rights of the secured party in case

of default.

The PPSA does not apply to every
form of transaction. For example, the

PPSA does not apply to an absolute sale
(when something is fully paid for at the
time of the sale), real estate (generally)
and various statutory liens. If you are in
doubt as to whether the PPSA applies, we
recommend you contact legal counsel.

The Key to a Successful
Registration: Accuracy

Financing Statements

To register a security interest, the secured
party must file a financing statement in
the registry system and deliver a copy
of the financing statement to the debtor
within 30 days of filing.
The registration system in Ontario
is computerized and only accessible
electronically.
At a minimum, the financing statement
will provide basic information regarding
the debtor, the collateral and the duration
of the registration. Minor errors in the
financing statement can lead to big
problems, such as the registration being
held invalid and losing priority status
among creditors.
The test to determine if an error or
omission will invalidate the financing
statement is whether a reasonable person
is likely to be misled materially by the
error or omission.

Names

Since the PPSA registry is searched by
name, inputting debtor names correctly is
of paramount importance.
If the debtor is an individual, we
recommend obtaining that person's
passport or birth certificate (a driver's

North America Canada

Alexander Levy

is an associate at Houser Henry

& Syron LLP. His practice focuses on advising
private companies and their owners in a range
of corporate matters with a particular emphasis
on mergers and acquisitions. His other areas
of expertise include employment law and wills
and estates.

Houser Henry & Syron LLP
Suite 2701 (27th Floor)
145 King Street West
Toronto, Ontario M5H 1J8

647.694.1180 Phone
416.362.3757 Fax

alevy@houserhenry.com
houserhenry.com

Alexander Levy