You may or may not have heard of the Personal Property Security Register (otherwise known as the PPSR).

As a business owner, it’s important to know what the PPSR is, how it works and how it is relevant to your business.

Read on and we’ll break it down for you.

The Purpose Of The PPSR

The PPSR is the official government register for security interests over personal property.

The PPSR came into existence in 2012 under the Personal Property Securities Act 2009 (Cth).

The introduction of the PPSR removed all 35 separate registers that existed before 2012. Previous registers included state vehicle registers and the national ASIC Register of Company Charges.

Now, the PPSR is your business’ one-stop, online shop to register your security interests.

The purpose of having the PPSR is to let the rest of the world know that you have a registered security interest over certain personal property.

Personal property includes:

  • Cars and other motor vehicles such as a motorbike
  • Boats and planes
  • Bank accounts, debts, commercial licences and intellectual property
  • Shares, cash, cheques
  • Goods (this includes rented or hired out goods)

What personal property does not include is: 

  • Land
  • Buildings
  • Fixtures (for example, an oven or toilet in a house)

Registering a security interest on the PPSR allows others to search that security interest. This is particularly useful when a person is buying something off of another person or lending money.

Checking the PPSR allows the purchaser to know that the personal property they are buying is debt-free, not stolen and has no other competing security interests.

Let’s consider the example below.

EXAMPLE: 
John is selling a car to Bill.
Bill searches the PPSR to check that the car has no debt owing on it, it has not been stolen and it has not been written off.
Fortunately for Bill, the car has no debt, has not been stolen and has not been written off.
Bill purchases the car from John.
Once he has purchased the car, Bill goes to register his security interest over the car on the PPSR.

Note: It costs $2 to search a registered security interest online.

How Is The PPSR Relevant To My Business?

Understanding and utilising the PPSR can be vital to the optimal functioning of your business.

According to the PPSR Business Guide, the PPSR is especially relevant to you and your business if you engage in:

  • Wholesaling or selling on credit terms
  • Hiring, renting or leasing out goods
  • Are in the building, agriculture, automotive or supply industry
  • Buying and selling valuable second-hand goods or assets
  • Raising finance using stock or other assets as collateral
  • Selling art or other goods on consignment
    • Consignment is where your business pays a seller for merchandise after the item sells

So, it is highly likely that the PPSR is relevant to you and your business.

As a business owner it is important you understand the PPSR in order to protect your business and its security interests.

The PPSR can help protect your business by:

  • Providing information on whether the goods you wish to purchase are free from possible repossession and existing financial debt,
  • Ensuring you get your goods or money back if a customer goes broke
EXAMPLE 
You are considering purchasing equipment for your business. You search the PPSR to ensure that the equipment does not have money owing on it.
Fortunately, there is no money owing on the equipment.
You purchase the equipment.
You then register a security interest over your purchased equipment on the PPSR.
You decide to lease the equipment to Fred.
Fred unfortunately goes broke.
As you have a registered security interest over the property, you are in the best position to get the equipment back.

I Have A Contract. Do I Still Need To Register My Security Interest On The PPSR?

Absolutely.

Your contracts must always be backed up by registering your interest on the PPSR.

You may have a contract in place with a retention of title clause that states that you remain the owner of the goods you lease to clients. In accordance with this clause, if your client goes broke, the equipment is to be returned to you.

Despite having a retention of title clause in your contracts, you still must register your security interest on the PPSR.

While it is extremely important to have a contract in place with your clients, it is vital that you also register your security interest on the PPSR. This is so that you avoid somebody else registering a security interest over your property.

Priority Rules

Under the PPSR it generally stands that the first security interest to be registered on the PSSR is the first in line to have the goods or value of the goods returned to them.

As such, an unregistered security interest loses out to a registered security interest on the PSSR. This is why it is so important to register your security interest!

So, first in time = first in line. EXCEPT when it comes to a purchase money security interest (PMSI)

Purchase Money Security Interests

A PMSI exists when you have lent money or credit to another individual for the purpose of enabling them to acquire particular collateral.

Common examples of a PMSI include:

  • A secured property loan
    • Where you enter into an agreement to lend money to enable the purchase of specific goods.
      • Example: You lend money to Bill so that Bill can purchase a car.
  • Supplying goods on credit
    • Where you supply goods on credit terms with payment at a later date secured by the goods.
      • Example: You lend equipment to Bill and he pays you back 30 days later.

A PMSI may also arise through a lease, consignment or bailment of goods.

To see if your security interest is a PMSI, click here.

If you have a registered PMSI, then you gain super-priority. This means that even if you registered your security interest in the property last, you will jump ahead of the queue and be first to receive collateral or its proceeds.

Be sure to determine whether or not you have a PMSI as it may result in you having super priority.

How Do I Register My Security Interest On The PPSR?

To register a security interest you must set up a PPSR account here.

Following this, you will login to your account and create a secured party group that details the person or organisation that has interest in the property you are registering.

Now, you are ready to create a new registration.

To register an interest you must have the following information:

Fees for registration include:

Duration Cost 
Up to 7 years$6.00
7-25 years$25.00
No end date$115.00

Perfection

When registering your security interest, it is vital that it is perfected. This will make sure that your security interest has the best priority and effectiveness if it is required to be enforced in the future.

To perfect your security interest, you must take care when registering your interest on the PPSR. This means making sure that all details are correct and the correct boxes are ticked.

For example, if you are registering a PMSI, you must tick the box indicating that you are registering a PMSI.

Timing

Time is of the essence.

When it comes to priority rules, generally, first registered = first priority.

If you are registering a PMSI, note the following:

  1. Supplying goods that are a part of customer’s inventory
    1. If you are supplying goods as part of your customers inventory (such as stocks) you need to register your security interest before those goods are delivered
  1. Supplying goods not part of customers inventory
    1. For goods being used as equipment and not inventory, you must register within 15 business days of delivery.
    2. Note that you can register your interest as soon as you enter into dealing with a new customer, regardless of whether the goods have been delivered or not.

Benefits Of The PPSR

The PPSR helps protect your business and its security interests.

The PSSR is beneficial as it:

  • Ensure thats your registered security interests will take priority if a customer goes into liquidation
  • Is an effective risk management tool, protecting your business against negative effects of a customer’s liquidation
  • Helps you obtain lending, as the financier can easily register an interest on assets if you’re securing your loan with assets on the PPSR
  • Protects your business from purchasing property that has remaining debt, has been stolen or could be repossessed
  • Avoids contractual issues, especially relating to retention of title clauses

The PPSR can be extremely beneficial to your business. It is important that you engage with the PSSR correctly for it to be effective.

Need More Help?

The PSSR is extremely effective in protecting your business and ensuring that it operates at its optimal capacity.

Ensuring that you understand and utilise the PPSR is vital to the functioning of your business and its security interests.

What’s more, including a well drafted clause on title and the PPSR in your business contracts, for example hire contracts, consignment or asset sale agreements is vital in protecting your assets.

If you have any concerns about using the PPSR effectively or have any questions, we are here to help!
Reach out to our team for a free, no-obligations chat at team@sprintlaw.com.au or 1800 730 617.

About Sprintlaw

Sprintlaw is a new type of law firm that operates completely online and on a fixed-fee basis. We’re on a mission to make quality legal services faster, simpler and more affordable for small business owners and entrepreneurs.

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