Can I repossess a business after the buyer defaults on payments?

A seller who financed part of the price expects to be able to take the business back if the payments stop. In practice the security taken at closing decides what the seller can do, not how unfair the default feels. Ontario’s approach is described here, and other provinces run their own personal property security systems.

The security taken at closing sets the remedy

Where a vendor take-back is secured by a registration under Ontario’s Personal Property Security Act against the buyer’s equipment, inventory or other personal property, the seller generally has the remedies of a secured creditor, which include seizing the collateral and selling it, subject to notice requirements. Where the note was unsecured, the seller generally has a claim to be paid, not a right to reclaim specific assets.

Registration is public and priority matters

British Columbia’s Personal Property Registry records security interests and liens against personal property belonging to businesses and individuals, and New Brunswick says anyone can search its registry for security interests. A seller’s registration competes with other lenders’ registrations over the same assets, so a bank that financed the buyer may rank ahead of the seller.

If the buyer is insolvent

Federal insolvency law adds steps. A secured creditor who intends to enforce security on all or substantially all of the inventory, accounts receivable or other property an insolvent person uses in a business must send a notice of intention in the prescribed form, and cannot enforce until a waiting period ends unless the insolvent person consents earlier. A court may also appoint a receiver on a secured creditor’s application.

Recovering assets is not recovering the business

Enforcing security usually returns assets, not a working business. Goodwill, customer relationships, licences, permits and the lease do not automatically come back to the seller, and taking back assets without following the security agreement and the notice process can expose the seller to its own liability. The related answer on a missed vendor take-back payment covers the earlier stages.