What Is PPSR + How Can It Help My Business?
Written by: Gabrielle Andersen | Insight Team
Welcome to our Insight Close-Up series, where we delve into the most common commercial and business law services we offer our Canny Group business clients.
This series will focus on the following topics relevant to most business owners, and will be released monthly throughout this year:
- Service Agreements + Terms and Conditions
- Independent Contractors and Subcontractors – What’s the difference?
- Employees + Employment Agreement
- Protecting Your IP and Business Know-how
- Do I Need A Policy For That? What Exactly Is Compliance?
- Do We Need A Business Prenup?
- What is the PPSR, and how can it help my business?
- Dealing with disagreements with customers
If any of this sounds interesting, stay tuned, as we’ll be letting you know when each Insight Close-Up instalment drops. But if you simply can’t wait or need advice on any of these topics today, contact our Canny Insight team.
What Is The Personal Properties Securities Register?
PPSR stands for the Personal Properties Securities Register. It is the official Commonwealth Government database of security interests registered against goods or assets. As it is online and applied nation-wide, it is easy to search and provides the assurance that all searches are reliable.
The PPSR is helpful in not only confirming to the world at the large you hold a secured interest in certain goods or assets, but it also enables anyone to search for any goods they are considering purchasing in order to confirm that item is encumbrance-free.
Having a secured interest in property means you become a secured creditor in respect of the registered property, which puts you ahead of the other creditors in enabling either repayment of the loan, or return of the good itself. Think of it as being similar to when you purchase land, and the bank registers the mortgage on the title to that land. Having their security interest registered on the title places the bank first in line as a creditor in relation to that land, and lets the world at large know that there is a debt owned in relation to that land.
Anyone can search the PPSR, and searches cost $2. The reason searching the PPSR can be an important step prior to purchasing a valuable asset is mainly because if you purchase an asset that actually has a security interest registered over it, you’re at risk of that asset being repossessed even if you have become the legal owner of it.
What Can Be Registered On The PPSR?
The first criteria for registering on the PPSR is that the property you wish to register falls within the legal definition of “personal property” under the Personal Property Securities Act 2009 (Cth).
This is any property that is not land, buildings or fixtures and includes:
- Goods;
- Stock, if you’re a manufacturer. Examples can include wine, clothing and furniture;
- Motor vehicles, such as cars, trucks, tractors and trailers;
- Planes;
- Boats;
- Crops and livestock;
- Machinery;
- Tools;
- Scaffolding and temporary fencing;
- Building materials (before they become fixed to the build);
- Equipment;
- Jewellery and artworks;
- Intellectual property (such as copyrights, patents and designs), bank accounts and debts;
- Shares and other financial property; and
- Private commercial licenses.
Once you have confirmed the property is personal property, you need to establish whether you hold a security interest over the personal property.
Understanding A Security Interest
A security interest is a particular type of legal right in personal property.
It is usually contained within a written agreement that specifically secures the repayment of a debt or performance of some sort of an obligation. Examples include:
- A fixed or floating change or chattel mortgage;
- Loan agreements – for example, secured car loans;
- Hire – purchase agreements;
- A General or Specific Security Agreement over company assets;
- Retention of title agreements where goods are supplied on credit (and ownership of those goods transfers once the debt is paid); and/or
- Leases or hire agreements.
The key factor is that the agreement includes clauses explicitly confirming that any payments to be made by a party are secured by a security interest in the property of that party.
Registering on the PPSR does not in itself create a security interest. Usually, a written agreement is needed to confirm the existence of the security interest. But, registering on the PPSR “perfects” the security interest, which means that it is publicly confirmed and, therefore, becomes an enforceable right that you hold against that particular property.
How Does Registering On The PPSR Help My Business?
The PPSR is most relevant to businesses that are:
- Selling, hiring, renting or leasing on terms;
- Buying or selling valuable secondhand goods; and/or
- Wanting to raise finance using stock or other personal property as collateral.
You can make a registration on the PPSR to show that you have retained an interest in the goods that you are supplying. An example of this is in the case of dry hire of equipment, which we look at below.
The way that a registration on the PPSR of your leased or rented goods can help your business is that if that particular customer doesn’t pay, or an insolvency event occurs involving their company while they hold your goods, you will easily be able to prove your ownership of those goods on their property.
For example, if you had an excavator sitting at someone else’s business premises under a dry hire arrangement, and their company was being wound up, you will be able to prove to the liquidator that you are the legal owner of that excavator.
Another way the PPSR can help business owners is if you are purchasing a valuable second-hand piece of machinery or equipment, you can check that item on the PPSR to see if any other registrations exist. Without conducting a PPSR search, you might find that something you have paid a lot of money for, which had a security interest registered against it due to an undischarged loan of the previous owner, could be repossessed by the lender.
Can I Register Goods I’m Hiring Out?
Many businesses operate commercial dry-hire of their equipment or machinery, and we are often asked whether these can be registered on the PPSR.
In order to register such equipment or machinery on the PPSR, you need to meet the following criteria:
- You must have a written agreement securing the repayment of a debt or performance of an obligation – for a scenario involving a dry-hire, this would be a dry-hire agreement. However, it would need to contain clauses specifically confirming the right to a secured interest in that property.
- You must be regularly engaged in the business of leasing or bailing. For example:
- Lease – hiring out an excavator to another company for a fee to use in their commercial business.
- Bailment – a storage or warehousing facility holding your goods until they are ready for sale, and importantly, you must provide a fee for such storage or warehousing.
- The agreement to lease/hire must be for a term of more than two years, or if less than two years, it must have options to renew that will exceed two years.
Many dry-hire agreements will run for shorter periods than two years and so cannot be registered on the PPSR. It is important to have dry-hire arrangements prepared by a lawyer so that you are aware of these additional rights to create a PPSR lease as they may apply to – and benefit – your business. Canny Insight can help in preparing hire or lease agreements for a range of businesses, and can provide specific advice on whether you have an interest that can be registered on the PPSR.
How Do I Register On The PPSR?
Registering on the PPSR requires the following steps:
- Confirm you meet the criteria to register – (1) it is personal property, and (2) you hold a security interest in that personal property. You will usually need a lawyer to prepare a written agreement to confirm your security interest.
- Create an account on the PPSR website.
- Register your security interest by following the steps online. In order to do this, you will need information about the type of security you are claiming, such as whether this property is used for commercial or individual purposes, your details (known as the secured party group), the class of collateral (type of property), the duration of the registration, and the details for the person or company granting the security interest.
There are various fees for registering a security interest, which depend on the time frame you wish the item to be registered for. Currently, for a registration of less than seven years, the fee is $6; for a registration of less than 25 years, the fee is $25; and for a registration to have no set end date, the fee is $115.
These are the fees for registration only. However, there may be other costs involved, for example, legal fees in preparing the security agreement – the written agreement confirming the security interest, as outlined above.
How Canny Insight Can Help Your Business
Canny Insight is a customised legal service that meets the specific needs of your business.
If you’re a start-up, or gearing up for growth and expansion, we’ll come up with a legal services package aimed specifically at your business needs.
Whether you need to secure your interests by way of a loan agreement, a general security agreement, or a dry-hire agreement, or advice and guidance on registering on the PPSR, our business law-focused Insight team will provide you with straightforward and reliable advice and contracts.
Get in touch with our team today to see how we can help your business!
The content of this article is for general guidance purposes only. Specialist legal advice relevant to your circumstances should be sought if required.