The single sharpest gap a PPSA search leaves is also the oldest: security a bank takes under section 427 of the Bank Act is registered nowhere a provincial PPSA search reaches, because Parliament has always kept it in a wholly separate federal system that was never merged into the provincial registries.
Key takeaways
SECTION 01 OF 04
Section 427(1) of the Bank Act lets a bank lend against the security of inventory held by wholesalers, retailers, manufacturers, farmers, fishers, aquaculturists and forestry producers — the goods, wares and merchandise those businesses actually hold. It is a federal financing tool built specifically for operating businesses that carry inventory or equipment, which is precisely the kind of target a buyer in this hub is often diligencing.
SECTION 02 OF 04
Section 427(4)(a) is the whole mechanism: a bank’s rights in property taken as s.427 security “are void as against creditors of the person giving the security and as against subsequent purchasers or mortgagees in good faith… unless a notice of intention… was registered in the appropriate agency”. Subsection (5) defines “agency” as, in a province, “the office of the Bank of Canada or its authorized representative but does not include its Ottawa office” — and the appropriate one is tied to the debtor’s own place of business, not the bank’s.
None of that touches a provincial PPSA registry at any point. A buyer’s advisor who runs an Ontario PPSA search, a BC PPSA search, or any combination of the provincial registries covered elsewhere in this series has not looked at this system at all — it is a different filing office, created by a different statute, administered federally.
SECTION 03 OF 04
Subsection 427(4)(d) describes how a person actually checks: “any person desiring to ascertain whether a notice of intention given by a person is registered in an agency may inquire by sending a prepaid telegram or written communication addressed to the agent”, and the agent must reply stating the name of the bank named in any such notice, on payment of the prescribed fee. There is no self-serve online index comparable to a provincial PPSA portal — the statute’s own mechanism is a written inquiry to the relevant regional office, and it can only be aimed correctly once the debtor’s principal place of business is known, because that is what fixes which provincial agency is the right one to ask.
Discharge works the same way in reverse: subsection (4)(b) lets registration be cancelled only by registering a “certificate of release” with that same agency — another filing a PPSA search will never surface either way.
SECTION 04 OF 04
A Bank Act security the PPSA search never held is this mechanic playing out on a real deal: a diligence team ran a textbook-clean provincial PPSA search and closed against a target that had, in fact, given s.427 security years earlier. The related case file consignment stock an Ontario PPSA search cannot see covers a different reason the same registry can look clean over inventory that isn’t safely the seller’s to sell. Section 8 of the public searches a buyer runs before closing flags s.427 as the mechanic small deals most often skip entirely. Treadstone Law’s note on bank security registration covers the same trap from the seller’s side.
No. Section 427 security is registered in a wholly separate federal system administered through Bank of Canada agency offices, never merged into the provincial PPSA registries — a clean PPSA search says nothing about it.
No. There is no self-serve online index — checking means sending a written or telegraphed inquiry to the Bank of Canada agency office tied to the debtor’s home province, and the agent replies naming the bank on any registered notice.
Only specific classes of borrower. Section 427(1) lets a bank lend against inventory held by wholesalers, retailers, manufacturers, farmers, fishers, aquaculturists and forestry producers — exactly the profile of many small acquisition targets.
Sources
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