The general rule under the PPSA is that security interests continue in collateral when collateral is either sold or leased to another person and the transfer generates proceeds, unless one of the ten (10) extinguishment rules (see Chapter 21 (The Extinguishment Rules)) applies to extinguish the security interest for the benefit of the buyer or lessee. This means that, unless buyers or lessees of personal property are very careful to bring themselves within one of the ten (10) extinguishment rules and obtain the benefit of having security interests over the personal property they buy or lease extinguished, secured parties can enforce their security interests against buyers or lessees and potentially repossess property from them.

Practically, in large transactions, purchasers, lessees and financiers to them should insist that any outgoing secured parties to any seller or lessor entities provide unconditional releases of security over any property acquired, rather than rely on the extinguishment rules.

Security interests will not continue in collateral disposed if the secured party has expressly or impliedly consented to the disposal, or agreed that their security interest will be extinguished upon disposals¹. This will be the case, for example, for circulating assets disposed of in the ordinary course of business of the grantor. This is essentially the territory of the circulating security interest (floating charge equivalent under the PPSA).