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How to secure your debts

When can you secure your debts?

The Personal Property Securities Register (‘PPSR’) is an electronic record of any security held against personal property (except land) owned by an individual or organisation.

To register a security interest over property a creditor needs to have proprietary rights in the property.
 

Purpose of the PPSR

If someone owes you money ("the debtor") for personal property that you have provided to them and you have complied with the requirement of the Personal Property Securities Act 1999, then you are a secured party and have a security interest in that property. Your security interest attaches to that property for the purposes of the Personal Property Securities Act 1999, if you have given value to the debtor and the debtor has rights in that property. For example, an electrician installs lighting into a shop and the shop-owner fails to pay for it. The electrician has given 'value' to the shop-owner (the lighting) and the shop-owner has 'rights' in the lighting because they own it. Therefore, the electrician has a security interest in the lighting. 

Your security interest will only be enforceable against a competing creditor if you are either in possession of the secured property or the debtor has signed or assented to entering into a “security agreement” with you. 

Priority of secured parties

The goods that you have a security interest in may also be subject to a security interest from another party. By registering a security interest on the PPSR, you are granted priority over other unregistered security interests. If all security interests are registered, generally speaking priority is given in order of the date of registration.  Please note there are exceptions to this general rule.   As you can see, when it comes to registering a security interest against goods, time is of the essence.

It is also crucial to register a financing statement on the PPSR if you lease your personal property to another person.  The lessee can grant security interests in your personal property even though they do not own it.  In an insolvency scenario, the lessee’s secured creditors will prevail over your rights as owner if you have not used the provisions in the PPSA to protect your rights as an owner.

Registering your security interest

In order for you to register an interest on the PPSR, you must register a financing statement. The cost for registering a financing statement is $20 and the process for doing so is as follows:

You must set up a Secured Party Group ID ("group ID") the first time you access the Register. All future registrations are made under this group ID. Once you have set up your group ID then you are able to register a financing statement against your debtor.

The following details are necessary in order to register a financing statement:

  • If a debtor is an individual; their full name, date of birth and address.

  • If a debtor is an organisation; the type of organisation i.e. company, partnership or trust and the organisation's contact address.

It is imperative to retrieve this information from a debtor when entering into a security agreement with them as the fields are mandatory and a financing statement cannot be registered without it.
You must also enter information about the collateral (personal property) including the type (e.g. goods) and a description.

Searching the PPSR

The PPSR can also be searched by anyone at a fee of $3. The following searches are all available:

  • Debtor Person Search
  • Debtor Organisation Search
  • Motor Vehicle Search
  • Aircraft Serial Number Search
  • Financing Statement Number Search
It is advisable to search the PPSR before entering into an agreement to sell, supply or buy in order to determine who the other party’s secured creditors are.