Q: Can a corporation own
"consumer goods" in Ontario?
A: It is generally
understood that a corporation cannot hold or own "consumer
goods" as currently defined under the Ontario
"Consumer Goods" is one of the collateral
classifications included on financing statements registered under
Ontario's "check the box" registration system for
perfecting security interests. The PPSA defines
"consumer goods" as goods that are used or acquired for
use primarily for personal, family or household
purposes.2 In adopting a plain meaning
interpretation of these words, Ontario courts have held that a
corporate debtor cannot own "consumer goods" as
It is important to note that the Ontario PPSA imposes several
special rules for security interests claimed in consumer
goods. For example, pre-registration is not available for
financing statements perfecting a security interest in consumer
goods4, and financing statements cannot be registered
for periods longer than five years5. Moreover, a
secured party is not permitted to shelter or perfect more than one
security agreement under a single registration6.
There are also special provisions for mandatory discharges of
financing statements7 and other debtor-friendly terms
which can trip up a lender.
Due to these special provisions and extra compliance hurdles for
lenders financing consumer goods, you will frequently see
carve-outs relating to consumer goods in security agreements
signed by corporate debtors and related legal opinions purely out
of an abundance of caution. Despite the existing case law,
most lenders and their legal counsel wish to make absolutely
certain that the collateral secured by their corporate agreements
does not include "consumer goods".
1 Personal Property Security Act, RSO 1990, c
P.10, as amended [Ontario PPSA]
2 Ontario PPSA, Section 1(1).
3 533812 Ontario Ltd, Re, 1985CarswellOnt 219
(Ont Bkcy), affirmed 1987 CarswellOnt 175 (Ont. C.A.) at para.
4 Ontario PPSA, Section 45(2).
5 Ontario PPSA, Section 51(5).
6 Ontario PPSA, Section 45(4).
7 Ontario PPSA, Section 57(1).
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