In this post we discuss how and why you may want to do a PPSA Registration. We are assuming that you, the reader, are a holder of a “security interest” in property.
Very simply, a security interest is one legal expression describing your economic right to the value in someone else’s property. If someone borrows money from your company to purchase a car, you may get a security interest in, and file a lien on the vehicle. If your company invests in another company using convertible debt, in the agreement you sign, that company may grant your company a right to the economic value in its intellectual property through a security agreement.
In the examples above, if you are able to secure your interests properly using the Personal Property Security Act (the “PPSA”), if the debtor can’t repay you, your claim against the secured assets (the car, the Intellectual Property) will get preference over other claimants that do not have such a registration. The PPSA provides a framework for the registration, recognition and enforcement of these secured interests and provides rules for a pecking order between the different registered secured interests. Each Canadian province has its own PPSA rules and regulations which are broadly similar.
So, if you/your company hold a security interest in a personal property you must register promptly under the PPSA to ensure that the priority of your claim on a property. Otherwise, some other party with a security interest, such as a purchaser or creditor may have priority over you. If you fail to register or ‘perfect’ your interest as required by the Act, then your claim may be left behind jostling with all creditors that didn’t have a security interest. The rest of this post will leave behind how a security interest arises and will focus simply on the mechanics of searching for or registering security interests in Ontario.
Personal Property Security Registration System
A PPSA Registration serves as a notice to all third parties that there is a security interest held by you (the secured party) against the borrower. The Personal Property Security Registration System (the “PPRS”) is a system where information submitted by registrants is stored on a computer database and this information can be accessed by members of the public.
The system is made up of a Central Registration Branch (“CRB”) and 49 branch registry offices. The CRB serves as a collection point for all statements that are mailed in, and is located in Toronto.
If you are purchasing some property personal property or you are looking to lend money and take security in some property you may want to see whether that the seller or borrower has not already pledged the property as security and that the property is not subject to any non-possessory liens. The PPRS is public information. Any individual can search, register, or amend a PPSA request. A name search in the PPRS against an individual or business’s name will bring up any registrations that have been recorded in the System and indexed under the lender or borrower’s name. You can also do a search against the vehicle identification number (VIN) of a motor vehicle.1
Having done your search, if you want to register your interest, you can do it either in paper form or electronically. Paper forms may be tendered for registration by personal delivery at any branch registry office OR may be mailed directly to the CRB. When the registration form is received, each ‘statement‘ will have a registration number that includes the time of registration.
You can search and register security interests by yourself. There are four forms available for registration in the System. Form 1C: Financing Statement/Claim for Lien Form 2C: Financing Change Statement/Change Statement Form 3C: Financing Change Statement/Change Statement (and Verification Statement) Form 4C: Motor Vehicle Schedule. Click here to see an example of a completed registration form.2
For partially or fully discharging or removing a security you may need the assistance of a lawyer or commercial third party providers. If you are planning to do it yourself, you can do it quickly through ServiceOntario’s online portal (http://www.ontario.ca/home-and-community/register-security-interest-or-search-lien-access-now) and their in-depth guide here. Remember, it will be your responsibility to ensure that the information entered in the system is up to date.
We hope this short post has given you some insight into what a security interest is and why and how you can register your security interests in Ontario. If you have any follow-up questions on the information on this or any of our other blog posts, please feel free to contact us at firstname.lastname@example.org. We look forward to hearing from you!
2 See the Guide above.