The PPSA is provincial legislation that governs how security interests in personal property, equipment, receivables, and inventory are created, registered, and enforced by lenders in Canada.

When a lender takes security over business assets other than real estate, that security interest must be registered under the relevant provincial PPSA to be effective against third parties. An unregistered security interest may be valid between the lender and borrower but can be defeated by a subsequent registered creditor, meaning the lender who failed to register may find itself unsecured in an insolvency.

For business owners, the PPSA matters in two practical contexts. First, when security is granted to a lender, it is important to understand what assets are encumbered and what that means for flexibility to sell or pledge those assets in the future. Second, when goods are sold on credit or equipment is taken back as security, PPSA registration protects that interest against the buyer’s other creditors. Ignoring PPSA registration in a commercial transaction is a risk that surfaces only in distress, usually too late to remedy.

PPSA registrations affect financial flexibility in ways that are not always visible until a transaction creates a conflict. See how Wefinx approaches Virtual CFO services.

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