A Register You Have Probably Never Heard Of

If you own or run a business in Australia, there is a national register that could affect many of the assets you buy, sell, lease or use as security. It is called the Personal Property Securities Register (PPSR).

While many business owners may be unfamiliar with it, the PPSR can play an important role in determining who has a legal claim over equipment, vehicles, stock and other business assets.

Think of the PPSR as a public noticeboard. When a bank, finance company, supplier or lessor has a security interest in personal property, they can register that interest on the PPSR. Businesses and individuals can then search the register to identify registered interests before purchasing assets or lending against them.

 

What Counts as Personal Property?

Under the Personal Property Securities Act 2009 (Cth) (PPSA), personal property generally includes property other than land and certain statutory rights.

For businesses, this can include:

  • Motor vehicles and machinery
  • Office equipment and furniture
  • Stock and inventory
  • Trade debtors (legally known as receivables)
  • Intellectual property, including trade marks and patents
  • Business goodwill

In simple terms, if your business owns or uses an asset that is not real estate, there is a good chance it falls within the PPSA’s definition of personal property.

 

What Is a Security Interest?

A security interest is generally an interest in personal property that secures payment of a debt or the performance of an obligation.

A common example is a car loan. A finance company lends you money to purchase a vehicle and takes a security interest in that vehicle until the loan is repaid.

Importantly, under the PPSA, the substance of an arrangement matters more than what it is called.

Hire purchase agreements, retention of title clauses in supply contracts, finance leases and chattel mortgages can all give rise to security interests. Certain leasing arrangements may also fall within the PPSA even where they do not secure a debt in the traditional sense.

This means businesses can create or become subject to security interests without necessarily realising it.

 

Why Was the PPSR Created?

Before the PPSR commenced in 2012, Australia had more than 70 Commonwealth, State and Territory laws and registers dealing with security interests in personal property.

The system was fragmented, complicated and often expensive to navigate.

The PPSA introduced a single national framework, supported by an online register, designed to make security interests easier to identify, simplify secured lending and provide greater certainty for businesses, buyers and lenders.

 

A Real-World Example

Imagine you are opening a new café and find a second-hand commercial oven at a great price.

You pay the seller, arrange delivery and install it in your kitchen.

A few weeks later, a finance company contacts you. The seller still owes money on the oven, and the financier has a registered security interest over it.

You may now face a dispute over who has the right to the oven.

Depending on the circumstances, the financier’s security interest could continue despite the sale, potentially putting your purchase at risk. However, the PPSA also contains important protections for buyers, so the outcome is not always straightforward.

A PPSR search before purchasing the oven could have alerted you to a registered security interest, allowing you to investigate further and arrange for its release where necessary before completing the purchase.

It is a simple precaution that could save your business considerable time, expense and stress.

 

The Key Takeaway

The PPSR is an important tool for protecting businesses and lenders by making registered security interests visible.

Whether you are purchasing business assets, selling a business, leasing equipment or extending credit, understanding how the PPSR works can help you identify risks and make more informed decisions.

And remember, registering a security interest correctly can be just as important as checking for one.

Need advice about security interests or protecting your business assets? The team at Rankin Business Lawyers can help you understand your obligations and manage potential risks.

Yuanchao Chen
Lawyer

 

Coming next in our PPSR series: Now you know what the PPSR is, but do you know when it could catch your business out? In Article 2, we explore two common scenarios where business owners can get caught off guard.