As a business owner, you may lend equipment to another business – or borrow their equipment for your own business. To do this, you may have heard of the Personal Property Securities Act (PPSA) and the Personal Property Securities Register (PPSR). But what exactly are they? And how can they help protect you? Here’s what you should know.
What is PPS and who needs it?
Personal Property Security, or PPS, is when a creditor or lender holds a security interest in property which secures an obligation. For example, when a bank holds interest in the borrower’s property until the home loan has been repaid. Or if a company lends equipment to another company under a finance purchase arrangement.
To secure it, they need a PPS registration. If the borrower goes into liquidation, they can take the PPS registration to show the equipment is theirs. Under the PPSA, this acts as security for the creditor or lender in the case that property isn’t returned or a finance isn’t repaid as agreed, and helps ensure your rights are protected. But you’ll need to register your security interest on the PPSR first.
What is the PPSR and how do I use it?
The Personal Property Securities Register (PPSR) has been in use since 2012, and has become a centralised national register. It replaced REVS, ASIC Register of Company Charges, and other state-based registers. As a business that’s acting as a lender or a borrower, you can register your security interests on the PPSR. This is the official government register, and is accessible to the general public under certain limited conditions.
Registering your security agreement to the PPSR means lodging a financing statement that shows your ownership of the assets. But there’s a lot of confusion around the correct wording to use, and this can lead to disputes if you’re not careful. If part of your statement is considered misleading, you may find yourself in hot water. That’s why it’s important to know exactly what you need to include, and have an expert look over your documents or statements before you register them.
Things you need to be careful with when it comes to PPS
The law is quite particular about PPS. If you’re not thorough and careful in your registration, you could run into some issues. Simple mistakes can mean your registration isn’t valid, which is why it’s so important to know exactly what you need to include and how.
A common trap that many fall into is putting their Australian Business Numbers (ABN) instead of their Australian Company Number (ACN), rendering the PPS void. This means you’d lose the right to reclaim equipment – as you can imagine, not the position you want to find yourself in!
You also need to make sure your registrations are current, as an expired registration won’t be valid, and is therefore useless.
Do you have to create a new registration when your T&Cs change?
If having to create a new registration every single time you update your T&Cs sounds time-intensive and exhausting, that’s because it is. But did you know there are ways to mitigate this? We can show you how to ensure you’re not overcomplicating PPS matters while still complying with the laws.
At Lakis & Knight, we help prepare and register PPS security interests for clients, making sure all the necessary PPS regulations are satisfied, so you can avoid trouble later down the track. To find out how we can help you with your PPS registration, get in touch with us today.
