The writing which evidences a security agreement does not strictly need to describe proceeds for the security interest to attach to proceeds upon them arising (because there is automatic attachment to proceeds).

However, security interests must be perfected against proceeds. Secured parties are well advised to include proceeds in the descriptions of collateral covered by their security agreements, if only to serve as a reminder to them and their advisors to register against proceeds.

To recap, security interests can be perfected against proceeds either:

(a) by a registration against original collateral that covers the class of collateral into which proceeds fall, or

(b) by registration or otherwise by taking possession or control of the proceeds within five (5) business days once generated.

There are exceptions for proceeds which take the form of money deposited into ADI accounts, currency, cheques or insurance indemnity payments for damage to collateral – there is automatic perfection against these forms of proceeds provided a registration covered and adequately perfected against the original collateral¹.