Q. Our back office updated our Ontario
PPSA1 search on our borrower and found a registration
registered after the bank's registration where the secured
party has checked all the collateral classification boxes as if it
holds a general security agreement. Our borrower assures me
the registration actually relates to an equipment lease and is a
permitted encumbrance under our credit agreement. Is there anything
that can be done to make that secured party fix its
A: Yes, the PPSA does provide a remedy for
having a registration scaled back in situations where the secured
party has been a little over zealous in selecting the collateral
classification boxes in filing its PPSA financing statement
applicable to its security agreement.
Under Section 56(2.2) of the PPSA, your borrower can require
that other secured party to remove from its financing statement
those collateral classifications in which the secured party has not
actually acquired a security interest. Specifically, your
borrower can deliver a written notice to the secured party
demanding that the secured party register a financing change
statement to correct the collateral classifications by removing any
collateral classification in which the secured party has not
acquired a security interest. In this case, the notice sent to
the secured party would demand the financing change statement
remove "inventory" and "accounts" (and perhaps
"motor vehicles", if applicable) from the registration,
so that the amended registration only relates to
"equipment" and "other" for typical equipment
If the secured party fails to register the required financing
change statement within 10 days after receiving the written demand,
the secured party is required to pay the borrower $500 plus any
damages resulting from the failure.
Only your borrower is entitled to send this kind of demand for
an amendment. The bank cannot send it independently.
It should be noted that similar remedies are available to
debtors under Sections 56(2.1) and 56(2.3) to require a secured
party to correct an overly inclusive general collateral description
not reflecting the security interest actually granted to it, and to
require a secured party to add a general collateral description
where one has not previously been included but should have been in
order to limit the scope of assets within a particular collateral
1 Personal Property Security Act, R.S.O. 1990, c.
P. 10, as amended [the "PPSA"]
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.
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The Supreme Court of Canada has provided guidance to financial institutions holding otherwise "highly sensitive" information to determine when that information is somewhat less sensitive, such that it can be disclosed.
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