Discharging a registered security interest means removing or amending the public registration a lender filed against a debtor’s assets once the secured obligation is satisfied — and until that happens, the registration keeps showing on a search even after the underlying debt is long paid off, which is exactly the gap a buyer’s diligence exists to catch.
Every common-law province runs this through its own personal property security regime, registered against the debtor’s name rather than against a specific asset. British Columbia’s Personal Property Security Act puts the mechanics under Part 4 — Registration: s. 43 governs registering the original financing statement, s. 48 governs registry searches, and s. 50, “Amendment or discharge of registrations,” is the provision that lets a registration be amended or discharged once the secured party no longer claims an interest. The practical consequence for a diligence team is that the registry is never self-cleaning — a registration a lender was supposed to discharge years ago stays visible on a search until someone actually files the discharge, whether or not the debt behind it still exists.
That same idea shows up on the other end of the spectrum, in a distressed sale. Under the CCAA, a court “may authorize a sale or disposition free and clear of any security, charge or other restriction,” with any security simply attaching to the sale proceeds instead of the asset — a court order doing in one step, for every registered interest at once, what an ordinary closing does interest-by-interest through payout letters and registered discharges. Either route, the buyer’s objective is identical: the assets it is paying for need to arrive unencumbered, and “the seller says it’s paid off” is not the same fact as a discharge actually registered against the debtor’s name.
A PPSA search against a target ahead of an asset purchase turns up three registrations: two are equipment leases the target closed out and forgot to have discharged, and the third is a bank’s general security agreement securing a term loan the seller insists was repaid eighteen months ago. Counsel does not accept the seller’s word for any of the three. Closing is conditioned on the seller obtaining and registering discharges for the two dormant leases, and on the bank providing a payout statement plus a registered discharge (or, at minimum, an executed discharge held in escrow pending funds transfer) for the general security agreement — so the buyer’s own post-closing search comes back clean rather than showing a registration the seller merely promised was dead.
See also: PPSA registration search · Bulk sales legislation · Asset purchase agreement.
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