Anonymised, illustrative composite. The equipment was paid for. The registration against it was not, and the buyer’s own lender would not fund until that was fixed.
At a glance
A sponsor was financing a manufacturing acquisition in part through a senior secured facility against the target’s owned equipment, alongside the deal’s cash consideration. As part of standard closing mechanics, the buyer’s lender ran its own personal property registry search against the target in British Columbia to confirm the equipment was free of prior registrations before advancing funds against it as collateral.
The search came back with an active registration: a specific piece of production equipment, registered by name to an equipment finance company the target had used years earlier. The target’s own records showed that loan had been paid off in full, with a final payment made more than three years before the sale process began.
A registration under the personal property security regime does not expire simply because the debt it secures is repaid. The registration stays on the registry, and stays visible to anyone searching against the debtor’s name or the specific collateral, until the secured party files a discharge or the registration’s own term lapses on the registry’s own clock — whichever comes first, and neither happens automatically on repayment.
The original equipment finance company had since been acquired and folded into a different lender’s loan book, and nobody on either side had gone back afterward to file the discharge. Until the registration was cleared, a search against the equipment showed a live security interest that, on the face of the registry, ranked ahead of the buyer’s new lender.
One registration, three years stale, against equipment representing a meaningful share of the collateral pool the buyer’s lender was relying on for the acquisition facility — small enough in dollar terms that nobody had flagged it as a risk item, large enough on the registry that the lender would not fund around it.
Tracking down the successor entity, confirming it as the legal successor to the original secured party, and obtaining the discharge took roughly ten business days once the search flagged the issue — inside the closing timeline, but only because it was found during confirmatory diligence rather than during the funding conditions review the week of closing.
British Columbia’s Personal Property Security Act governs registration and discharge of security interests against personal property in the province, and Part 4 — Registration — ends with s. 50, Amendment or discharge of registrations. It is worth reading precisely, because it does more than confirm that clearing a registration is an affirmative filing step rather than something that happens the day the last payment posts.
Section 50(3)(a) provides that where a financing statement is registered and “all of the obligations under the security agreement to which it relates have been performed,” the debtor — or “any person with an interest in property that falls within the collateral description on the financing statement” — may give a written demand to the secured party. Section 50(4) then requires the secured party to “register a financing change statement amending or discharging the registration not later than 40 days after the demand is given.” And s. 50(5) is the part that decides who actually holds the leverage: if the secured party does not file, the person who gave the demand may register the discharge themselves, on proof satisfactory to the registrar that the demand was given, unless in the meantime the secured party registers a court order maintaining the registration.
That matters to the sequencing here. The automatic one-month discharge obligation in s. 50(2) applies only where a registration relates exclusively to consumer goods, so it was no help against a production-equipment registration. But the s. 50(3) demand route was available from the moment the target could show the loan had been performed, and it does not depend on the successor lender choosing to cooperate. The deal team pursued the cooperative route because forty days plus a self-filing was slower than a phone call to a lender that had no reason to object — not because the registry left them at the successor’s mercy.
An acquisition due diligence checklist that only checks whether equipment carries current financing, without separately confirming any registered interest has actually been discharged, misses exactly this pattern. One publicly circulated first-time-buyer’s checklist, published by a Canadian business-listing marketplace, is typical: it asks about “any outstanding loans, leases, or liens against business assets” as a financial question, but never sets out a registry search as its own step — which is precisely why the buyer’s lender ran its own, independent of the deal team’s general diligence, and why that search is what actually caught the problem here.
The fix ran through the successor lender, not the target: counsel identified the entity that had acquired the original secured party’s loan book, obtained written confirmation the specific loan had been paid in full, and had the successor file the discharge against the registration. Only once the registry search came back clean did the buyer’s lender release funds against the equipment as collateral.
Had the buyer’s lender funded against the equipment without running its own search, or accepted the target’s word that the loan was repaid without independent confirmation, the registered interest would have kept its priority on the public record regardless of what had actually happened commercially. A later dispute — whether from the successor lender itself, or from a different creditor relying on the same stale registration — would have forced the buyer’s lender to prove, after the fact and potentially in litigation, a fact a discharge filed before funding would have put beyond argument. The ten business days it took to run down the successor entity and obtain the discharge were, against that alternative, cheap.
The same pattern is worth generalizing past this one deal. A registry search returns whatever is still on file, not whatever is still owed — and the gap between those two things grows every time a lender is acquired, renamed, or simply stops actively managing its own loan book after a facility is repaid. Diligence that treats a clean search result as confirmation the asset is unencumbered, without checking whether an active-looking registration still reflects a live debt, is checking the wrong question.
The underlying registry mechanics are covered in PPSA registration search and discharge of a security interest.
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