PPSA Registrations In Asset Purchase Transactions: When Are They Necessary?

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 Act applies.