You might have heard of the it, but what is the the Personal Property Security Register (PPSR)? It is a critical but often overlooked tool for protecting business’ assets in New Zealand. Despite being in operation for over a decade many creditors and debtors remain unaware of its function and significance. Understanding the PPSR can be the difference between recovering your goods or losing them entirely in the event of insolvency.
What is the PPSR?
The PPSR is an online register where businesses and individuals can record a legal claim over personal property. This includes movable assets such as goods, equipment, vehicles, and inventory. The PPSR does not cover land, buildings, or other forms of real estate, which are governed by separate property laws.
What can the PPSR do for you?
Establishes a legal priority
The PPSR operates on a first-come, first-serve basis meaning the timing of when a security interest is registered plays an important role in determining priority in a dispute or insolvency. If multiple lenders have competing claims over the same asset, the first registered generally has priority and the strongest legal position. Even if another party has a long-standing relationship or larger financial stake their claim may be lesser if registered later.
Protects your assets through insolvency
One place where the PPSR offers protection is in the event of insolvency. When a business you’ve supplied goods to enters liquidation or receivership your ability to recover those goods depends not on ownership but on whether a security interest has been registered on the PPSR. Many suppliers assume as they still ‘own’ the goods, they can simply reclaim them. However, without a registered interest, those goods are legally treated as a part of the Company’s assets and can be sold to repay secured creditors. In this situation, you will be deemed as an unsecured creditor, therefore, last in line for repayment, likely to receive little or no compensation, and unable to reclaim any goods even if they have not been paid for.
Once insolvency proceedings have begun legal avenues for recovery are limited.
Risk Management
The PPSR is also a useful risk management tool. It provides a simple, low-cost way to protect yourself or your business from the financial consequences of insolvency or disputes. By registering a security interest, you create a legal claim over the goods and or assets you’ve provided.
Conclusion
The Personal Property Security Register (PPSR) offers a place to record and secure your interests. By registering a security interest, you gain priority over other creditors, improve your chances of recovery in the case of insolvency and reduce risk over lending or providing goods to businesses.
It may be the difference between total loss or a full recovery.
