You delivered a load of equipment to an Abbotsford contractor on 60-day credit terms, as you’ve done many times before. Weeks later, you hear the contractor has gone bankrupt. You wonder if you will ever see that money or your equipment again.
You picture the bank stepping in first. Will the bank walk away with everything, leaving you at the back of the line?
Legalbird helps BC suppliers and lenders put the right paperwork in place to reduce such concerns. It’s possible to stay protected if anything goes wrong.
What Does a PPSA Security Interest Cover?
A security interest is a legal claim over a customer’s property. Suppliers and lenders use it to guarantee payment. The property might be equipment, inventory, or a vehicle.
British Columbia’s Personal Property Security Act, often called the PPSA, sets the rules for this type of claim. It covers how you create the claim, register it, and enforce it. If your customer stops paying, a security interest lets you recover the property, or its value, ahead of many other creditors.
How Does a Security Interest Start?
A security interest starts with a written agreement between you and your customer. BC law calls this step “attachment.”
Attachment needs three things in place:
- A signed agreement describing the property;
- Existing ownership, or some other legal claim, that your customer already holds in the property; and
- Something of value changing hands, like goods or a loan.
Once all three pieces fall into place, your security interest legally exists.
Why Does Registering a PPSA Interest Matter So Much?
Attachment alone does not protect you against everyone. To do that, you need to “perfect” your security interest. Most suppliers and lenders do this by registering a financing statement with BC’s Personal Property Registry.
Skip this step, and you can lose out to a buyer who never knew about your claim, or to a faster lender.
Who Wins When Two Creditors Both Have a Claim?
BC generally runs on a race-to-register rule. Say two creditors both hold security interests in the same property. The one who perfects first often wins, even if their loan came later. You should search the registry before extending credit or lending against equipment. That way, you can find out who else has a claim.
Do Suppliers and Lenders Use This in the Same Way?
Suppliers usually register a purchase money security interest (PMSI). This is normally tied to a single delivery or a single piece of equipment sold on credit. Lenders often register a general security agreement instead. This covers nearly everything a business owns, now and in the future.
Both routes use the same registry and the same basic rules. The real difference is scope: A supplier’s claim is narrow and specific, while a lender’s claim is often broad and ongoing.
Which BC Businesses Typically Need a PPSA Security Interest?
Equipment dealers, wholesalers, and building suppliers often deal with PPSA security interests. So do private lenders, leasing companies, and anyone financing a large purchase for a customer. If your business regularly extends credit or lends against property a customer already owns, these rules likely apply to you.
Can You Leap-Frog a Bank’s Earlier Claim?
Say you extend credit so a customer can buy specific equipment or inventory. You may hold a purchase money security interest. Many suppliers don’t realize that a perfected PMSI can take precedence over a bank’s earlier, broader claim, even if the bank registered first.
What Happens If You Never Register at All?
An unregistered or unperfected security interest puts you in a weak position.
Two situations show why:
- If your customer goes bankrupt. Your claim often falls behind the trustee and other registered creditors.
- If your customer sells the property to a buyer in the ordinary course of their business. That buyer can often keep it, free and clear.
You still have the right to pursue your customer yourself, but the property or its value may already be gone.
What Does Registering Actually Involve?
Registering a financing statement in BC is fairly simple, although it can take several business days to process.
A typical registration covers:
- A clear description of the property, like one piece of equipment or a customer’s entire inventory;
- The exact legal names of the debtor and the secured party; and
- A registration period you choose, lasting anywhere from one to 25 years.
A registry search costs about seven dollars. It shows you exactly what claims already exist before you extend credit or lend against someone’s assets.
What Happens Once the Debt Is Paid Off?
Once your customer pays off the debt, you need to discharge your registration. A discharge notifies the registry and anyone searching it that your claim no longer applies.
Leaving an old registration in place can block your customer from getting new financing elsewhere. It can also lead to a complaint if your customer asks you to clear it and you do not.
Talk to Legalbird About Protecting Your Business
If money or property is on the line, you need to know exactly where you stand. These are exactly the kind of issues that Legalbird helps business owners with in the Abbotsford, Surrey, Vancouver, and Delta areas of BC.
We’ve held Three Best Rated® status as civil litigation lawyers in Delta, BC, every year since 2023. Our team can help you protect your business. Start with a free consultation. We can walk through your contracts, registrations, and the options still open to you.
Frequently Asked Questions
Does a PPSA Registration Protect My Business Outside BC?
No, a BC registration only protects you within BC, since each province runs its own separate registry. If your customer or the property moves to another province, you often need to register in that new province as well. Otherwise, you risk losing your priority there.
Can I Register a Security Interest Myself, or Do I Need a Lawyer?
You can register a financing statement yourself through BC Registries and Online Services. However, small errors in the debtor’s legal name or property description can make the registration misleading. That could cost you the priority you were counting on.
What Happens If I Register Against the Wrong Legal Name?
A registration against the wrong legal name can be deemed misleading and lose its effect, even if everything else is correct. Courts and the registry are strict about this, so double-check your customer’s exact legal name against their business papers.
Does My Security Interest Cover Property That My Customer Buys Later?
Often, yes, but only if your original agreement says so in writing. A well-drafted security agreement can include inventory or equipment your customer buys after signing. That usually matters most for ongoing supply deals.
Date Modified:
Reviewed By:
Kawal Atwal
Business Litigation Expertise You Can Trust
Kawal S. Atwal is a civil litigation lawyer in Surrey, Abbotsford, & Vancouver British Columbia with extensive experience in trial and appellate advocacy. He was called to the Bar of Punjab and Haryana in 2013 after completing his legal education in India and practiced for over 8 years before the Punjab and Haryana High Court and the Supreme Court of India. During that time, he drafted and argued hundreds of appellate matters across civil, criminal, constitutional, and family law, building a strong foundation in complex litigation and strategic legal analysis.
After relocating to Canada, Kawal completed his articles at a top-rated construction and civil litigation firm in Surrey and established a practice focused on appellate advocacy before the British Columbia Court of Appeal, as well as foreclosure, bankruptcy, construction, contract, and civil disputes. With early exposure to courtroom advocacy and a background rooted in a family of litigators, Kawal brings disciplined preparation, sharp legal reasoning, and practical litigation strategy to every matter. He also mentors law students and emerging lawyers, contributing to the development of effective courtroom advocacy in British Columbia.
