The Personal Property Security Register (PPSR), is a searchable online database of financing statements. If your business supplies customers with equipment or stock on credit or consignment basis, your interest should be registered against each of those customers. When a customer is insolvent, or when you are trying to collect a debt, it is often too late to secure your position. We would recommend all clients consider the benefits of PPSR registrations for their business at an early stage.
There are many aspects to utilising the PPSR and ensuring that your company's position is as protected as possible. Below are a few key tips and points to check and review:
- Terms of trade – your terms and conditions of trade are a first step to entitle you to register on the PPSR. A financing statement that is registered is a notice of a potential interest. For this interest to be valid, there must be terms of trade sitting behind it that create a "security interest" and give you the right to register it. These need to be signed by every customer, before you register against them.
- Timing to register – if you are supplying stock/inventory then you need to register before it is delivered and the customer is in possession of it. If you are supplying equipment, you need to register within 10 days of delivery.
- Must be searchable – the correct debtor name, company number and other searchable details (in some cases including serial numbers/registration details) must be accurately recorded. A small typo may mean that the registration is not searchable and may not be valid.
- Keep up to date – if a customer company amalgamates or changes its name, you generally only have 15 working days to amend your financing statement to ensure you do not loose priority. You need to keep a record of the registrations and have a policy to ensure that changes are updated regularly.
- Check no finance or competing registration – if you are buying a second hand vehicle, you can use the PPSR search function to ensure there is no outstanding finance registered over it or a risk that someone else may have registered or have priority to it or that it could be repossessed from you.
- Check creditworthiness of a new customer – if there are a significant number of registrations against them and their assets, or a registration in relation to the asset you want security over this may be a risk check in setting up new credit accounts.
- Yourself or company search – you can check who has registered against you, whether these are current and correct. Be aware of the information other people can search in relation to you and your assets.
- Retention of title – traditionally a retention of title clause in your terms of trade may have protected you when supplying goods. However, where you should be registered on the PPSR but are not, you may lose priority to your own goods. Alternatively, if you do register on the PPSR, you may have "PMSI" super priority over other security holders
- Insolvency – if your customer becomes insolvent, the receivers or liquidators appointed will use the PPSR position as the starting point for who is entitled to recover what stock, cash or other assets and the priority of any payments.
For the small fee payable to register a financing statement (currently $16.10), you should consider registering against all customers at the time of setting up their accounts to manage risk in your business.
The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.