Can a bank’s security registration stop me from selling business assets?

A registration is a public notice, not the restriction itself. It tells anyone who searches that a lender has a claim, and a careful buyer will not complete until that claim is dealt with. What actually binds you is the security agreement you signed with the lender, and the registration is the notice of it. For a seller, the practical task is to know what the bank is owed and to plan how it is cleared.

What the registration tells a buyer

Ontario’s registry guidance explains that a search may show a seller has obtained a loan and that the lender may have rights in the goods. If a lender has rights and no search is done, the goods could later be seized if the borrower fails to repay. That is why a buyer who finds your bank’s registration will usually contact the bank and ask for the claim to be dealt with before the sale closes.

What your agreement may require

Read the security agreement for any clause about selling, leasing or moving the assets it covers, and about what you must do with the sale proceeds. Whether the bank’s consent is needed is a question the agreement answers, not the registry. Also ask whether the registration covers more than the assets you plan to sell, and whether the bank will release only those assets.

How a seller usually clears the claim

Ontario’s guidance says that where a loan is outstanding, the buyer may require the seller to arrange payment of the loan and registration of a discharge. BDC notes that a seller may need to repay outstanding financing, and it lists any penalty for early repayment among the costs of selling. Ask the bank early for a payout figure, check the loan terms for a prepayment charge, and agree how the discharge will be registered at closing. British Columbia’s registry describes how a registration can be changed, renewed or discharged.