How a Deed of Charge Secures Australian Business Debt

If you’re running a startup or small business, there’s a good chance you’ll be asked to provide “security” at some point - whether that’s for a loan, trade credit, equipment finance, or even a commercial arrangement where you need to back your promises with an asset.

One document that often comes up in these situations is a deed of charge.

For many founders, the first time they see the words “charge”, “security interest”, or “PPSR” is when a lender or supplier puts it in front of them and asks you to sign. It can feel like just another piece of paperwork - but it’s actually a document that can significantly affect your business assets, cashflow, and your options if things change later (like refinancing, raising investment, or selling the business).

In this guide, we’ll walk you through what a deed of charge is, why you might be asked to sign one, what it usually covers, and the practical steps you can take to protect your business before you agree to it.

What Is A Deed Of Charge?

A deed of charge is a legal document where you (or your business) grant another party a charge over certain assets to secure a debt or obligation.

In plain English: it’s a way of saying, “If we don’t pay you or meet our obligations, you can enforce your rights against these assets.”

It’s commonly used when:

• a lender gives you a business loan and wants security;
• a supplier gives you goods on credit and wants extra protection;
• a financier provides equipment finance or inventory finance; or
• your business enters into a high-value commercial arrangement and the other party wants reassurance you can perform.

A deed of charge is usually used because “deeds” generally have certain legal advantages over ordinary contracts (for example, they typically don’t require “consideration” in the same way a contract does). Practically, though, what matters most for you is what security you are granting, how broad it is, and how it can be enforced.

What Does “Charge” Mean?

A “charge” is a type of security interest over property. It doesn’t necessarily mean the other party owns your asset - it means they may be able to take steps to recover what they’re owed using that asset if you default.

Charges are commonly granted over “personal property” (in the legal sense), which is broader than most people expect.

What Counts As “Personal Property” In Australia?

In Australia, “personal property” can include many business assets, such as:

• equipment and machinery;
• vehicles;
• inventory / stock;
• accounts receivable (your unpaid invoices);
• intellectual property (like trade marks and copyrights);
• bank accounts (depending on structure and drafting); and
• other contractual rights.

This links closely with the Personal Property Securities Register (PPSR) system, which we’ll cover below.

When Would Your Business Need A Deed Of Charge?

You may come across a deed of charge in more situations than just a “traditional loan”. For many startups, it appears in early growth stages where cashflow is tight and external funding is essential.

Here are common scenarios where a deed of charge can appear.

1. Business Lending And Working Capital

If you’re borrowing money (including a line of credit or working capital facility), lenders often want security to reduce risk. That security may be documented in a deed of charge (sometimes as part of a broader security deed or general security agreement).

If you’re considering taking on funding, it’s also worth thinking early about your cap table and internal governance. For example, if you have co-founders, a Shareholders Agreement can help set decision-making rules for big commitments like granting security over key assets.

2. Supplier Credit And Trade Finance

Some suppliers will offer “buy now, pay later” terms for stock or materials. If you’re not paying upfront, they may request a deed of charge to protect themselves if you don’t pay on time.

Sometimes, the supplier may instead rely on a retention of title clause (where they claim ownership of goods until you’ve paid). But for higher-risk arrangements, they might ask for both.

3. Equipment Finance And Asset Purchases

If you’re buying equipment, vehicles, or specialised machinery via finance, you’ll often be asked to provide security - commonly over the financed asset and potentially other business assets too.

4. Leases And Property Arrangements

While commercial landlords more commonly request bank guarantees or personal guarantees, some arrangements may involve security over property or other assets, especially for fit-out contributions or incentives.

5. High-Risk Commercial Deals

If you’re entering a major project (for example, a large supply contract, distribution deal, or services agreement), the other party may want security that you’ll meet your obligations.

This is where it becomes crucial to check whether the deed of charge is “limited” to the specific transaction or whether it becomes a general security over your whole business.

What Terms Should You Look For In A Deed Of Charge?

A deed of charge can range from narrow and straightforward to extremely broad. Before you sign, you’ll want to slow down and check what you’re actually agreeing to.

These are some key clauses and commercial points that typically matter the most.

What Assets Are Covered?

Some deeds of charge are specific (for example, only over a particular piece of equipment). Others create a security interest over all present and after-acquired property of the business.

That “all assets” language can be a big deal for startups because it may restrict:

• your ability to raise further finance;
• your ability to grant security to a new lender (because they’ll want priority);
• your ability to sell key assets without consent; and
• certain investment or M&A pathways.

Is It A Fixed Or Floating Charge?

Traditionally, charges were described as:

• fixed charges (over specific assets, with more restrictions on dealing with them); and
• floating charges (over a changing pool of assets like stock or receivables, which “crystallise” on default).

Today, many business security arrangements are structured and dealt with as “security interests” under the PPSA, and documents may still use fixed/floating language as shorthand. The real-world effect often depends on the drafting, the type of collateral, and how (and when) the security interest is registered and “perfected” under the PPSA.

What Counts As A Default Event?

Default isn’t always limited to “you didn’t pay”. Deeds of charge can include broad default triggers, such as:

• breaching another agreement with the creditor (cross-default);
• insolvency events (including “likely to become insolvent” language);
• failure to maintain insurance;
• failure to provide financial reporting; or
• change of control (important if you’re raising investment or selling).

For startups, “change of control” clauses are particularly worth checking because equity raises and share transfers can happen frequently. If you’re planning to restructure ownership, even something as simple as transferring shares can have unexpected consequences if you’ve already granted security with consent requirements.

Are There Ongoing Restrictions (Covenants)?

A deed of charge may include promises that you’ll:

• not sell or dispose of charged assets without consent;
• not create other security interests;
• keep assets in good repair and insured;
• provide regular financial information; and
• comply with laws and maintain registrations.

These are not always unreasonable - but they should be workable for how your business actually operates.

What Enforcement Rights Does The Creditor Have?

If there’s a default, a deed of charge may allow the creditor to take steps such as:

• appoint a controller or receiver;
• take possession of assets;
• sell assets;
• collect receivables (i.e. redirect your customers to pay them); or
• require you to do certain things to assist enforcement.

The exact mechanisms vary, and enforcement can be complex - but it’s important to understand that the deed is not just “paperwork”. It’s a pathway to real enforcement if things go wrong.

How Does A Deed Of Charge Work With The PPSR?

In Australia, many security interests over business assets are managed under the Personal Property Securities Act 2009 (Cth) (PPSA) and recorded on the Personal Property Securities Register (PPSR).

If a deed of charge creates a “security interest” under the PPSA (which many do), the secured party will often register it on the PPSR to protect their priority position against other creditors.

If you’re dealing with any form of secured finance, it helps to have a working understanding of the PPSR system and why it matters in a practical sense. The basics are covered in PPSR explainers and broader guides like PPSR in Australia.

Why PPSR Registration Matters For Your Business

From your perspective as a business owner, PPSR registration matters because it affects:

• priority (who gets paid first if assets are sold or the business fails);
• due diligence (investors and buyers often run PPSR checks);
• refinancing (new lenders will ask what security is already in place);
• your ability to sell assets (buyers may want comfort there are no security interests attached).

Even if you’re not the one registering, you should assume the other party may register their interest - and the wording of the deed of charge may authorise them to do so.

Should You Run A PPSR Check?

If you’re buying equipment, vehicles, or other assets from another business (or even from a private seller who used it for business), running a PPSR check can help you see if someone else has a security interest registered over it. This can be especially important if you’re paying significant money for an asset you need to operate.

A PPSR check is done on the national PPSR (it isn’t state-based), and it’s typically a low-cost search that can save a lot of pain later. For more details on how checks work in practice, see our guide on PPSR checks.

Can A PPSR Registration Affect Raising Investment?

It can.

Investors don’t usually panic just because a business has secured debt - but they will want to understand:

• what assets are encumbered;
• whether there are restrictions on issuing shares or changing control;
• whether the security holder has enforcement rights that could disrupt operations; and
• whether the security will be released or subordinated at some point.

That’s why it’s worth approaching a deed of charge as part of your broader “investment readiness” and governance picture, not just a one-off financing document.

Deed Of Charge vs Other Security Documents (And Why The Name Can Be Confusing)

In the real world, “deed of charge” is sometimes used as a catch-all label - but different documents can create similar legal effects.

Here are a few related documents you might see (and how they generally differ).

Deed Of Charge vs General Security Agreement

A “general security agreement” (GSA) is a common type of security document that grants a security interest over a broad pool of assets (often “all present and after-acquired property”).

Sometimes people refer to a “deed of charge” when they mean a GSA (or a broader “security deed”). Because naming isn’t consistent, the key is to check what the document actually covers and how it’s enforced.

Deed Of Charge vs Personal Guarantee

A personal guarantee is different - it’s where an individual (like a director or founder) promises to pay if the business doesn’t.

A deed of charge usually focuses on business assets, while a guarantee targets the individual’s liability. Sometimes, a lender will ask for both (especially for early-stage businesses without a long trading history).

Deed Of Charge vs Mortgage

A mortgage usually relates to real property (land). A deed of charge is usually used for personal property (business assets) rather than land - although legal drafting can sometimes include broader concepts depending on the transaction.

Deed Of Charge vs Contractual Set-Off Clauses

Some agreements rely on set-off rights (the ability to offset amounts owed between parties) rather than taking security over assets. Set-off can still be powerful, but it’s a different risk profile to a deed of charge.

The takeaway: don’t focus too much on the label at the top of the document. Focus on what rights it creates, what assets are covered, and what happens if there’s a default.

Practical Steps Before You Sign A Deed Of Charge

If you’re being asked to sign a deed of charge, it’s usually because the other party wants certainty - and that’s not automatically a bad thing. But you should still make sure it’s commercially fair and workable for your business.

Here are practical steps that help most small businesses.

1. Map The Assets You’re Putting At Risk

Start by listing what your business actually owns and uses day-to-day, such as:

• computers, tools, and equipment;
• vehicles;
• inventory;
• your website and brand assets;
• your customer contracts and receivables.

If the deed is drafted broadly, assume it could capture most of these. This helps you understand what could happen in a worst-case scenario and whether you can live with that risk.

2. Check For “All Assets” Security (And Whether You Can Narrow It)

If the deed of charge is intended to secure a specific obligation (for example, a particular supply contract), it may be reasonable to ask whether security can be limited to:

• specific assets;
• a capped amount; or
• a defined set of receivables (rather than everything).

Not every counterparty will agree - but it’s worth asking, especially if your business is likely to take on future funding.

3. Think About Your Business Structure And Authority To Sign

If you operate through a company, check whether your constitution or internal approvals require certain decisions to grant security.

In some cases, what you need is as much governance clarity as legal drafting. Having a properly adopted Company Constitution (and clear board/shareholder approval processes) can make these decisions less stressful and reduce disputes between founders later.

4. Make Sure Your Customer And Supplier Contracts Match Reality

A deed of charge is often part of a broader commercial relationship. If you’re taking on obligations to pay, perform, or deliver, make sure the underlying agreement is clear on things like scope, pricing, delivery timelines, liability, and dispute handling.

If you’re selling goods or services to customers, your own Terms of Trade can reduce uncertainty and help you manage cashflow - which, in turn, reduces the risk of defaulting on secured obligations.

5. Consider The Downstream Effects: Investment, Sale, Or Restructure

Startups rarely stand still. You might be planning to:

• bring on investors;
• sell part of the business;
• spin out a product into a new entity;
• move IP into a holding company; or
• refinance into a better facility later.

A broad deed of charge can complicate these plans if it includes restrictions or requires consent to deal with assets.

It’s much easier to handle this upfront than to scramble later when an investor is ready to proceed and you need urgent releases and consents.

6. Get The Document Reviewed Before You Commit

Deeds of charge are typically drafted to protect the secured party - that’s the point. Your job is to make sure it still makes sense for your business, and that you understand the risks you’re taking on.

Even a short review can help you identify clauses that are out of step with your commercial deal (for example, overly broad default triggers or restrictions that don’t match how you operate).

Key Takeaways

• A deed of charge is a security document that gives another party enforceable rights over certain business assets if you default on a debt or obligation.
• Deeds of charge can be narrow (over a specific asset) or very broad (for example, covering “all present and after-acquired property”), so it’s important to check what assets are actually covered.
• Most deeds of charge interact with the PPSR, and PPSR registrations can affect future funding, investment, and business sale due diligence.
• Key clauses to review include default events, restrictions on dealing with assets, enforcement rights, and any change-of-control terms.
• Before signing, map your assets, consider future growth plans, and make sure your internal approvals and commercial agreements line up with the security being granted.

If you’d like a consultation on a deed of charge (including reviewing one before you sign), you can reach us at 1800 730 617 or team@sprintlaw.com.au for a free, no-obligations chat.