Canada Small Business Financing Regulations (SOR/99-141)

16 (1) The lender may, in respect of a loan, release primary security in an asset if

• (a) the loan is in good standing; and

• (b) the outstanding amount of the loan has been reduced by the amount of the original cost of the asset that is to be released.

(2) The lender may also release primary security in an asset at any time if

• (a) the asset is sold by the borrower to a person at arm’s length from the borrower and all of the proceeds of sale are applied to reduce the outstanding amount of the loan; or

• (b) the asset is sold by the borrower to a person not at arm’s length from the borrower and

  • (i) the borrower provides to the lender an appraisal of the value of the asset made at any time within 180 days before the date of the sale by an appraiser who at that time met the professional qualifications and arm’s length requirements of subsection 9(1) or (2), as the case may be, and

  • (ii) the outstanding amount of the loan is reduced by the greater of the proceeds of the sale and the appraised value of the asset.