Secured parties reviewing Ontario Personal Property Security Act (PPSA) searches can now rely upon an appropriate collateral description to limit the scope of a collateral classification to perfect only the collateral described.
As described in an earlier entry on our blog, on August 1, 2007 section 46(3) of the PPSA was inadvertently repealed as part of former Bill 152 which contained a number of amendments to the Act. The repealed section 46(3) provided that a collateral description could limit the scope of a collateral classification in a financing statement to perfect only the collateral described.
Ontario Bill 68 (An Act to promote Ontario as open for business by amending or repealing certain Acts) received Royal Assent on October 25, 2010. Schedule 5 of the legislation provides for the reinstatement of the old section 46(3) as a new section 46(2.1), 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.
Further, the legislation deems this amendment to have come into force as of August 1, 2007, the date that the original provision was inadvertently removed.
This amendment will restore some certainty regarding the effect of a collateral description in a financing statement. It will also reduce transaction costs where a prospective secured party chooses not to obtain acknowledgements or subordinations due to the limited nature of certain prior registrations.