Understanding the Australian Personal Property Securities Register

In the dynamic landscape of Australian business, securing assets and managing risks is paramount. Small businesses, in particular, face unique challenges in safeguarding their property interests while navigating the complexities of commerce. Enter the Australian
Personal Property Securities Register (PPSR), where applicable, a vital tool offering a streamlined approach to asset protection and financing arrangements.

What is the PPSR?

Established under the Personal Property Securities Act 2009, the PPSR is a centralised online register that enables individuals and businesses to register their security interests in personal property. Personal property encompasses a wide range of assets, including
vehicles, equipment, inventory, and intellectual property rights. By registering on the PPSR, creditors can establish priority over competing claims in the event of insolvency or default.

Example
Jolly Good Jeans Pty Ltd delivers $10,000 of clothing to a retail outlet, Dan’s Dacks. Jolly Good Jeans has a retention of title clause in its terms of trade which Dan’s Dacks has acknowledged by signing the terms of trade. This means that Jolly Good Jeans retains ownership of the goods transferred to the Dan’s Dacks store until Dan’s Dacks pays for the goods.

If Dan’s Dacks becomes insolvent, Jolly Good Jeans risks losing the clothing it still owns that has been delivered to the Dan’s Dacks store. The property in the goods might pass to Dan’s Dacks on becoming insolvent or other creditors (e.g. a bank) might claim ownership under security that the bank has over the assets of Dan’s Dacks.

This is where the PPSR can help. If Jolly Good Jeans has registered its interest on the PPSR in the correct manner and in the correct time frame, it can defeat the claims of other parties to the goods it still owns because Dan’s Dacks has not paid for the inventory.

Benefits for Small Businesses

For small businesses, leveraging the PPSR can yield significant advantages in several key areas:

Asset Protection: Small businesses often rely heavily on tangible and intangible assets to operate. By registering security interests on the PPSR, businesses can protect their assets from being seized or repossessed by creditors in the event of default. This provides assurance to both creditors and stakeholders of the small business that financial failings of customers of the business won’t affect the financial stability of the business.

Financing Opportunities: Access to financing is crucial for small businesses seeking to expand operations or manage cash flow. By using the PPSR to register security interests, businesses can offer lenders greater confidence in the security of their loans. This can lead
to more favorable lending terms, lower interest rates, and increased access to capital.

Risk Management: Uncertainty is an inherent aspect of business, but effective risk management can mitigate potential losses. By proactively registering security interests on the PPSR, small businesses can identify and address potential risks associated with their
assets.

Intra group financing and assets

The PPSR can be useful within commonly owned group structures. One entity in a family group of entities may have, for example, the use of certain equipment owned by another entity in the group. In order to protect the asset from being seized by creditors of the entity
that is using the asset, the entity owning the asset can register its interest on the PPSR.

If you are not familiar with the PPSR and you think it may be of use, speak to an appropriately qualified legal adviser. Getting into the habit of registering assets on the PPSR could, one day, save you the grief of having assets you own taken from you.