What happens if a lender forgets to register its security interest under the PPSA?

A security interest that attaches but is never registered still exists between the lender and the borrower — the borrower generally can't argue the debt or the security agreement itself is invalid just because it wasn't registered. The real damage is to the lender's position against everyone else. An unperfected security interest is generally vulnerable to being outranked by another creditor who does register a security interest in the same collateral, even if that other creditor's loan came later.

The consequences become severe if the corporation becomes insolvent. An unperfected security interest is generally treated as unenforceable against a trustee in bankruptcy, meaning the lender can effectively be reduced to the position of an unsecured creditor for a debt it thought was fully secured. This is one of the costliest, most avoidable mistakes in secured lending, since registering is a straightforward filing, not a complex legal step. If you're a lender who discovers a registration was missed, that gap should be fixed immediately, and it's worth getting legal advice on what exposure exists for the period the interest went unregistered, especially if other creditors may have registered in the meantime.