A PPSR Surprise

As we plunge headfirst into FY27 and hit refresh, you may be considering seeking finance or refinancing, planning a sale, or simply tidying up your business affairs.

One area that is easily overlooked, but can hit you with a nasty surprise, is your business's Personal Property Securities Register (PPSR) profile.

History of the PPSR

The PPSR was introduced in Australia in 2012 under the Personal Property Securities Act 2009 (Cth). It established a national register of debts or other obligations that are secured by personal property.

The introduction of the PPSR replaced a large number of state-based systems, as well as the ASIC Register of Company Charges, merging them into one unified register.

Lenders, financiers and lessors, known as secured parties, register their interests on the PPSR to protect their priority position. In practical terms, this can determine who gets paid first if a debtor defaults or becomes insolvent.

Problems begin to arise when secured parties neglect to remove their registrations after the underlying obligation, such as a loan, equipment finance arrangement or supply on credit, is discharged or comes to an end.

Registrations can sit on the PPSR long after a loan is repaid, a lease expires or a commercial relationship ceases.

The historic registration problem

For businesses that have been operating for years, the PPSR can accumulate a trail of security interests that no longer reflect any live obligations but remain active on the register. Some may even have migrated across from previous systems.

These can include:

• paid-out equipment finance;
• expired hire or lease arrangements;
• trade finance facilities that were refinanced or repaid; or
• registrations by former suppliers or service providers.

Most businesses do not check the PPSR regularly. There is not usually an expectation to do so, and problems do not generally arise during day-to-day operations.

Through no fault of the business, the issues often only surface when a new financier runs its own search, or when preparations commence for a business sale.

Whose registration is it anyway?

Historic registrations are not the only potential hurdle that is often overlooked.

PPSR searches can be run against a business name, ACN or ABN, or by using other identifiers depending on the entity type.

But what happens if the results do not belong to your business?

A financier searching your business name may be alerted to a registration that was made against a previously deregistered business that once operated under the same name. Depending on how the search is conducted, it may also throw up registrations against a closely similar name.

Suddenly, your business is called upon to investigate and justify the registration or demonstrate that it has nothing to do with your business.

It is an unwelcome distraction and, in a time-sensitive transaction, can cause just as much disruption as a legitimate historic registration.

Concerns for financiers

A particular concern for prospective lenders, when they identify a historic registration, is priority.

The key question is whether a third party could assert a claim ahead of them. Until that question is answered, many lenders will not proceed.

A purchaser will also be reluctant to proceed with a business or share sale unless key assets are clear of security interests.

This can put the business in the uncomfortable position of having to chase down secured parties.

Those secured parties may be the victim of defective migration from old systems to the PPSR and may lack useful contact information. They may also no longer be in business, have merged, or simply be unresponsive.

There is a process for requesting the Registrar of the Personal Property Securities Register to remove “zombie” registrations, but that process will ordinarily take two to three months.

If you are seeking finance with a settlement deadline, or preparing a business for sale, time is rarely something businesses have in abundance.

Do it early: we can help

The greatest advantage businesses have is starting early. Do not wait until a deadline is set.

A PPSR search against your own business costs very little and takes only minutes.

Running one well before you approach a lender gives you visibility over registrations and time to work through any removal process without the pressure of a ticking clock.

If you would like us to run a PPSR search against your business and manage the removal of any historic or incorrect registrations on your behalf, please get in touch with our team.

It is a straightforward process when handled proactively.

Zahara Bedewi-Hayes
D +61 3 8602 9209
E [email protected]