Originally published in Blakes Bulletin on Financial
Services, November 2010
On August 1, 2007, the Ontario government inadvertently repealed
the section of the Ontario Personal Property Security Act
(the PPSA) that provided that a collateral description could limit
the scope of a collateral classification in a financing statement
to perfect a security interest only in the collateral described.
The repeal of this subsection (section 46(3)) led to uncertainty as
to whether a subsequent secured party could rely on a collateral
description in a financing statement and led to many secured
parties requiring estoppel letters or other comfort on filings that
would not have been an issue previously.
Former section 46(3) has thankfully now been reinstated. Ontario
Bill 68 (An Act to promote Ontario as open for business by
amending or repealing certain Acts) (the Act) received Royal
Assent on October 25, 2010. New section 46(2.1) of the PPSA (which
reinstates former section 46(3)), is deemed to be effective as of
August 1, 2007, and reads as follows:
Except with respect to rights to proceeds, where a financing
statement or financing change statement sets out a classification
of collateral and also contains words that appear to limit the
scope of the classification, then, unless otherwise indicated in
the financing statement or financing change statement, the secured
party may claim a security interest perfected by registration only
in the class as limited.
This amendment will restore some certainty regarding the effect
of a collateral description in a financing statement.
By way of background, the PPSA permits a secured party to
include a general collateral description in a financing statement,
which is intended to provide additional details on the nature of
the collateral classifications that had been marked.
New section 46(2.1) provides that words entered into the
collateral description area of a financing statement (i.e., lines
13 to 15) could limit the scope of collateral that would be
perfected by such financing statement. For example, if a secured
party marks "Equipment" in its PPSA registration, then,
absent anything further, one must assume that the secured party has
a security interest in all equipment of the debtor. As such, if you
are taking a security interest in or purchasing equipment (whether
some or all), you would want to get an estoppel letter or other
comfort from the prior secured party confirming the scope of its
If, however, there is a collateral description referring, for
example, to only one type of equipment (e.g., one photocopier
serial number 12345), one can now again rely on the fact that the
financing statement would only perfect a security interest in that
particular item of equipment and not other items of equipment.
Based on that general collateral description, you could conclude
that an estoppel letter is not required.
The content of this article is intended to provide a general
guide to the subject matter. Specialist advice should be sought
about your specific circumstances.
To print this article, all you need is to be registered on Mondaq.com.
Click to Login as an existing user or Register so you can print this article.
Please join members of the Blakes Commercial Real Estate group as they discuss five key provisions of a commercial real estate purchase agreement that are often the subject of much negotiation but are sometimes misunderstood.
Emotional culture is influenced in great part by the mindset and actions of leadership, although employees also play more of a role than they may realize in creating the culture that exists in the group.
The session will be led by Dr. Robert Brooks, an award-winning author and psychologist. In his presentation, Dr. Brooks will describe the mindset and realistic practices of leaders and staff that help to nurture and sustain a culture characterized by positive emotions, satisfying, respectful relationships, a sense of meaning and ownership for one’s work, and enhanced job performance. Examples will be offered to illustrate strategies for developing a positive emotional culture in an organization.
Join leading lawyers from the Blakes Pensions, Benefits & Executive Compensation group as they discuss recent updates and legal developments in pension and employee benefits law as well as strategies to identify and minimize common risks.
The Canadian Office of the Superintendent of Financial Institutions ("OSFI") recently ruled that a bank cannot promote comprehensive credit insurance ("CCI") within its Canadian branches under the Insurance Business (Banks and Bank Holdings Companies) Regulations (the "Regulations").
Register for Access and our Free Biweekly Alert for
This service is completely free. Access 250,000 archived articles from 100+ countries and get a personalised email twice a week covering developments (and yes, our lawyers like to think you’ve read our Disclaimer).