(1) For the purposes of this Act, if a grantor grants a security interest in personal property to a secured party, the personal property is a circulating asset if:
(a) the personal property is covered by subsection (5) (unless subsection (2) or (3) applies); or
(b) in any other case--the secured party has given the grantor express or implied authority for any transfer of the personal property to be made, in the ordinary course of the grantor's business, free of the security interest.
(2) Despite paragraph (1)(a), personal property covered by subsection (5) is not a circulating asset if:
(a) an effective registration with respect to the property, in relation to the grantor, discloses, in accordance with the regulations, that the secured party has control of the personal property; and
(b) the secured party has control of the personal property.
Note: For the meaning of control in this subsection, see section 341.
(3) Despite subsection (1), personal property covered by subsection (5) is not a circulating asset if:
(a) the personal property is goods; and
(b) the security interest is perfected by possession.
(4) For the purposes of paragraph (1)(b), personal property is not a circulating asset merely because the secured party has given express authority to transfer specific personal property, or a specific class of personal property, free of a security interest.
(4A) Despite subsection (1), if a grantor grants a security interest provided for by a transfer of an account or chattel paper, the account or chattel paper is not a circulating asset in relation to the security interest.
(5) This subsection covers the following personal property:
(a) an account that arises from granting a right, or providing services, in the ordinary course of a business of granting rights or providing services of that kind (whether or not the account debtor is the person to whom the right is granted or the services are provided);
(b) an account that is the proceeds of inventory;
(c) an ADI account (other than a term deposit);
(f) a negotiable instrument.
Example: An example of an account mentioned in paragraph (a) is an account that is a credit card receivable.
Note: For the meaning of inventory in this subsection, see section 341.