Any business that leases goods, sells goods on consignment or on terms, or otherwise uses goods to secure debt, needs to be familiar with the Personal Property Securities Register (PPSR).
On one hand, the PPSR seems easy to use - anyone can create an account and register their security interest. However, there is a significant risk that a “DIY” approach may result in invalid registrations, loss of priority, or costly legal battles to vindicate your interests.
It’s easy for businesses to make simple mistakes during the registration process which can have big consequences in the future.
Remember: just because the PPSR lets you do something, doesn’t mean it’s correct!
Typos: the simplest mistake is also the most common. Especially when entering many repetitive registrations, it is easy to mistype a name or a number (e.g. in a vehicle’s VIN or a company’s ACN).
If a typo means that a search does not reveal the interest, then the registration is likely to be invalid.
- Using the wrong identifiers for grantor, secured party, or collateral: the PPS Regulations set out, in great detail, precisely how the parties and goods must be described. For example, companies must generally be described by their ACN, trusts by their ABN, and individuals by their name as it appears on their drivers licence. However, there are always exceptions to exceptions to exceptions. This is an easy mistake to make, because the PPSR will not stop you from using the wrong identifier. For example, it is possible to use a company’s name instead of its ACN, or to describe a vehicle by its make and model instead of its VIN number. Such mistakes are likely to invalidate a registration.
- Timing: some clients forget to register their interests until the other party faces significant financial trouble – then it is a rush to register before they go under! But early registration is always better for the following reasons.
Firstly, priority between security interests is generally determined by the time of registration. If you forget to register, then someone else may jump the line ahead of you, even if their interest was created later.
Secondly, if the grantor is a company, then the security interest must be registered within 20 business days of it arising (usually the date of the relevant contract, e.g. the hire agreement). If it is not done within this time, then the security interest is invalid if the company enters liquidation in the next 6 months.
Thirdly, Purchase Money Security Interests (see below) generally trump all other interests, but only if they are registered strictly within the timeframes set out in the legislation.
- Purchase Money Security Interests (PMSI): PMSIs are a specific type of security interest that, if registered correctly, enjoy “super-priority” over all others – they can even trump earlier interests. The most common PMSIs are leases for one year or more, and retention of title arrangements (where goods are given to a buyer but not owned until paid for).
If your interest is a PMSI but you don’t tick the right box, you won’t get super-priority. However, if you mark a non-PMSI as a PMSI, you risk invalidating your whole registration!
The PPSR looks simple, but is based on highly technical legislation. Liquidators will often try to invalidate as many registrations as possible to increase the property available to them. Don’t give them a reason to go after your interest – register early, register correctly and, if in doubt, see a lawyer.