An effective security interest relies on a valid financing statement registered on the Personal Property Securities Register (PPSR).
Defects in the financing statement could result in a secured party losing out to other creditors. A recent case1 is a reminder of the need for creditors to take care with financing statements.
Polymers International Limited (Polymers) supplied product on credit to Interworld Plastics N Z Limited (Interworld). As security for payment, Interworld granted a security interest to Polymers, which registered a financing statement on the PPSR.
- the failure to leave a gap between the “N” and the “Z” in Interworld’s name
- the omission of Interworld’s unique incorporation number, and
- the failure to classify Interworld as a “company”.
It is not clear, from the Court’s decision, why the issues with Polymers’ financing statement needed to be resolved. The decision records that the liquidators issued a report in which they “did not recognise Polymers as a secured creditor”, but the lack of a valid registration does not invalidate the security itself. An unregistered or unperfected security interest is valid against a liquidator. Registration affects priority, not validity.
This case is a reminder to creditors to check carefully the data contained in new and existing financing statements. The onus is on a creditor to make sure its financing statement is correct.