Personal Property Securities Register – what, when and why?
The Personal Properties Securities Register (PPSR) is a single, online national noticeboard which shows whether a person is claiming a security interest in personal property.
On the noticeboard, you can:
- register a notice to show that you have rights over personal property which secure a debt or obligation that someone owes you, and
- do a search to see if someone has registered an interest over personal property you want to buy or lease.
What can be registered and who can register?
Common examples of security interests which may arise for some of your clients, include:
- clauses which provide for earn out amounts under which moneys due may be retained pending compliance with another obligation
- the supply of products or assets on retention of title terms or on hire purchase, and
- a ‘PPS lease’ is a lease or bailment of goods for a term of, or reasonably likely to be, more than two years, or 90 days if the goods are aircraft, motor vehicles, or watercraft. In our experience, this is a concept which gives rise to the most mistakes under the PPSR. This concept includes arrangements where property is sold on retention of title terms, or where a contractor’s plant and equipment is used on a principal’s site. It also includes the hiring and leasing out of goods.
Anyone can make registrations on behalf of a secured party once a client account with the PPSR is set up.
When do you need to register?
The best possible priority and protection will be gained by registration immediately when the relevant agreement giving rise to the security interest is signed, and particularly before giving possession of goods over to a third party.
Companies and individuals
Generally, a security interest granted by a company is required to be registered within 20 business days of the date the document giving rise to the security interest is signed. If a registration is made after the 20 business days, the security interest will not be effective for six months – meaning that the secured party will be treated as an unsecured creditor (on insolvency of the grantor) until six months after the registration date.
There is no specific time limit for registration over an individual; however, for the best protection, a registration should again be made immediately when the right to any security interest arises.
Purchase money security interests
The general position does not apply in respect of a ‘purchase money security interest’ (PMSI) which gives a secured party ‘super priority’ over other secured creditors in certain circumstances.
A PMSI is only created in limited circumstances, for example where a hire agreement has a retention of title arrangement, or the interest of a lessor or bailor under a ‘PPS lease’ which is described above.
A PMSI will not gain ‘super priority’ unless registered within 15 business days of the possession being handed over, or if the property is classed as inventory, the registration must be made before possession is given. If the security interest is registered outside the required time frame, then the registration will not obtain ‘super priority’, and will rank behind other security interests which cover the same property.
A table setting out the timing with respect to registrations is below:
|If the collateral is inventory||Registration must be made on the PPSR prior to the grantor taking possession of the inventory.|
|If the collateral is not inventory (which is the general position)||Registration must be made before the expiry of 15 business days after the grantor takes possession, or executes the security agreement, whichever is earlier.|
|Non-PMSI Interests (for corporations)|
|If the collateral is or is not inventory||Registration must be made on the PPSR within 20 business days after the date of execution of the security agreement.|
A party with an unregistered or incorrectly registered security interest will, in the event of insolvency, be treated as an unsecured creditor. As such, we are best placed to assist with the registration process and also, if necessary, advise on any difficulties that may arise in the situation of an unregistered or incorrectly registered security interest.
This publication covers legal and technical issues in a general way. It is not designed to express opinions on specific cases. It is intended for information purposes only and should not be regarded as legal advice. Further advice should be obtained before taking action on any issue dealt with in this publication.