In asset purchase transactions involving the sale of accounts
receivable, questions often arise about whether a registration
under the applicable provincial Personal Property Security Act
(PPSA) will be necessary. The answer
to this questions depends on a number of factors, including where
the seller's accounts receivable are located and whether a
party is the purchaser or the seller of the assets.
If the accounts receivable of a seller located in Ontario are
being sold, an Ontario PPSA financing statement may need
to be filed showing the seller as "debtor" and the
purchaser as "secured party." This is due to section 2(b)
of the Ontario PPSA which stipulates that the
PPSA applies to a "transfer of an account or chattel
paper even though the transfer may not secure payment or
performance of an obligation." On the other hand, section
4(1)(g) of the PPSA excludes the sale of accounts where it
is part of a transaction to which the Ontario Bulk Sales
Irrespective of these provisions, the best approach may depend
on whether a party is purchasing or selling the assets in question.
By making a registration, the purchaser may be able to avoid
arguments with third parties down the road about who has rights in
the accounts receivable. However, sellers may also wish to take a
different approach in order to avoid having a PPSA
registration "cloud" their title to their remaining
When seeking to buy or sell assets, purchasers and sellers
should work closely with legal counsel to make sure that all of the
above considerations are being taken into account.
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general guide to the subject matter. Specialist advice should be
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