Anonymised, illustrative composite. The search was run against the name on the invoices. The regulation requires registration against the incorporated name and makes the trading style optional, so the search could only ever return part of the picture — and it returned two of seven registrations.
At a glance
The target was a structural steel fabricator north of Hamilton that had traded for nineteen years as Northline Fabrication. Its invoices, its signage, its website, its bank statements and every document in the data room carried that name. Its legal name was a numbered Ontario company. The buyer was acquiring the assets for $3,200,000, with a $250,000 holdback for twelve months.
The buyer's law clerk ran the PPSA search against Northline Fabrication and returned a clean two-page certificate: two registrations, both from a well-known equipment finance company, both matching facilities that appeared in the vendor's debt schedule and were being paid out at closing. The search went into the file and the closing agenda moved on.
Six days before closing the buyer's lender ran its own search, as lenders do, against the numbered company. It returned seven registrations. Five of them the buyer had never seen: a general security agreement in favour of the vendor's operating bank, a $340,000 equipment facility from a second finance company, two supplier registrations against inventory and accounts, and a stale registration from a 2016 factoring arrangement.
Nothing had been hidden. The vendor had disclosed all seven facilities in the disclosure schedule. The searcher had simply asked the register a question it does not answer.
Two registrations found; seven existing; five missed, including a general security agreement over everything and a $340,000 equipment facility — $1,410,000 of secured debt against a $3,200,000 asset purchase, none of it on the closing agenda. Six business days to closing.
The name is prescribed; the trading style is optional. PPSA s.46(1) requires that a financing statement to be registered “shall contain the required information presented in a required format.” R.R.O. 1990, Reg. 912, s.16(4) sets the name for each kind of artificial body, and for a corporation it is one line: “If the artificial body is a corporation, the incorporated name of the corporation.”
Section 16(5) covers the trading style and is permissive: “If a person is identified to the public by a name or style other than the person's own name, the name may be set out in the financing statement on the appropriate line for business debtor.” May, not shall — and in addition to the incorporated name, not instead of it. A style search is therefore incomplete by design: it returns only registrants who chose to add the style.
When a defective registration is still good. The test is s.46(4), and the subsection matters — s.46(1) is about format. Section 46(4) provides that a financing statement “is not invalidated nor is its effect impaired by reason only of an error or omission therein or in its execution or registration unless a reasonable person is likely to be misled materially by the error or omission.” It cuts both ways: a buyer is occasionally protected against a registration it never has to clear.
The two motor-vehicle provisions, and what they actually do. This is where files go wrong, because the two sections point in opposite directions and both are commonly summarised as "the VIN rule".
For a business acquisition that is the opposite of the usual summary. A target's trucks and forklifts are equipment or inventory, so an omitted VIN is outside s.46.2 and a buyer cannot argue invalidity on that ground. A VIN can still decide a buyer's position, but through s.28(5) — taking free, not validity — the subject of buying the business instead of buying from it.
One more provision explains why a missed registration is not cured by innocence. Section 46(5) provides that registration “does not constitute constructive notice or knowledge to or by third parties”. A buyer who searched badly is not fixed with notice — and is not helped either, because the priority contests under the Act do not turn on whether the buyer knew.
The closing moved by nine days. Discharges or payout letters were obtained for six of the seven registrations; the seventh, a 2016 factoring registration, was cleared on demand. The $250,000 holdback was unchanged, since the disclosure schedule had been accurate and the failure was the buyer's own.
The lasting change was the search protocol: take the name from the articles rather than from any document the vendor produced, run the trading style and predecessor names as additional searches, and reconcile the certificate against the disclosure schedule line by line. That reconciliation needs no legal analysis and would have caught this on day one.
Closing on the two-registration search would have taken the assets subject to a general security agreement and a $340,000 equipment facility nobody had paid out. The $250,000 holdback would not have covered $1,410,000, and the vendor's answer — correctly — would have been that every facility was in the schedule the buyer signed.
The tell is a search certificate shorter than the debt schedule. Two registrations against seven disclosed facilities is a reconciliation failure needing no knowledge of the Act. The second tell is the search subject itself: if it reads as a trading name rather than a numbered or incorporated name, the search asked the wrong question. See what a buyer takes subject to.
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