“PPSR” – perhaps you have heard the term but don’t really know what it means or how it can benefit your business. If so, then this guide may help you; we’ll go through what the PPSR is, what it does and just why it matters to you as a business owner.
Just what is the PPSR?
Why should business owners care about the PPSR?
What can be registered on the PPSR?
What if I have a Retention Of Title (ROT) clause with the debtor?
Why do so many businesses still fail to register with the PPSR?
You can use the PPSR as a customer credit check tool
How Do You Register a Security Interest?
Just What Is The PPSR?
“PPSR” stands for “Personal Property Securities Register”.
It came about from the Personal Property Securities Act 1999 and is a website run by the New Zealand Government. Coming into force on the first day of May in 2002, the purpose of this website is to enable people to register personal property security interests (that don’t include land) in order to protect those assets from loss should the debtor go out of business. It replaced 3 other existing registers at the time and created a simplified and more streamlined security interests register for personal property. A “one-stop-shop” as it were.
Why Should Business Owners Care About The PPSR?
Every year in New Zealand 2- 3000 businesses fail, leaving behind millions of dollars in unpaid bills! It’s a sad statistic but is a reality.
What generally happens to the people and businesses who are owed money when a business collapses, is that they never see one cent of it.
If you or your business is in this unenviable position you are known as an “unsecured creditor”. Even if you are a company that supplied goods to the business on credit and the liquidator sells off those goods, you won’t see the money as it all goes to the “secured creditors” – i.e. those who have officially registered a security over the property of the failed company.
So, if you’re in the business of supplying loans or goods to another business on credit, then you should register those interests with the PPSR as soon as possible, just in case that business goes belly up leaving unpaid debts in its wake and you out of pocket.
Registering your security interests on the PPSR gives you the very best chance of being paid back some or all of the money when the liquidator moves in and starts selling off any assets of that bankrupt and failed company.
What Are The Benefits Of PPSR?
Other benefits of PPSR include:
- Repossession of Goods
- Claim on Work in Progress
- Claim on Book Debts
- Tracking of Proceeds
- Settlement on Business Sale
- Voidable Preference Defence
Read about more benefits at: www.ppsr.govt.nz
What Can Be Registered On The PPSR?
A logical question is what can actually be registered on the PPSR website? Is it just monetary loans?
No, it’s not. It applies to a variety of ways that credit is offered to a business, company or customer and is certainly in no way limited only to monetary loans. Some examples are:
- Business lease agreements. If the lease a business signed with you was for at least one year, then you have a claim to receiving money for at least a portion of the unpaid rent, so long as you registered the interest with the PPSR.
- Your business supplies goods or products to another business on terms. You might supply a certain business on 90-day terms, meaning they don’t have to pay the invoice for 3 months. In this case, if they go out of business before their invoice is due, you won’t be paid unless you registered those goods on the PPSR.
- Leasing of equipment is another instance of supplying “credit” and is, therefore, an interest that can be registered with the PPSR website.
If all these interests are registered with the PPSR, then you stand a chance of receiving the money you are owed. If you don’t register, then the liquidator will sell off your goods and the money will go to another business that is registered.
Try CreditWorks’ PPSR+ Portal
What If I Have A Retention Of Title (ROT) Clause With The Debtor?
While you think this may protect you, it means very little once a company has gone out of business, unless you have registered your security interests with the PPSR. If your contract with the debtor had a ROT clause AND you’ve registered with the PPSR, then you’ll have priority over other creditors, but the ROT means very little otherwise. In fact, without PPSR registration, that ROT is pretty much worthless.
Why Do So Many Businesses Still Fail To Register With The PPSR?
One key reason is that some people are simply not aware of the PPSR and what it does. Or, they’ve heard of it, but have never really understood what the advantages were to registering security interests with them.
Another reason is that without researching what can be registered with the PPSR, some business owners erroneously think their line of “credit” to a debtor is not eligible to be registered as a security interest.
When people think of credit in a general sense, they naturally conjure up monetary loans and credit cards, whereas the kind of debts that can be registered with the PPSR encompass many forms of business credit.
Another possible reason is that people believe it might be a drawn-out and complicated process to register or is very costly, and therefore simply don’t bother, hoping that they never encounter a problem with their debtors.
You Can Use The PPSR As A Customer Credit Check Tool
Another advantage of the PPSR website that’s worth noting is you can use it to check if a debtor is a high risk before offering them any goods or services on credit. Essentially you can run a credit check on them to determine their viability and assess their credit-worthiness. The website allows you to see what other security interests have been registered against the debtor.
How Do You Register A Security Interest?
Your first step in the process is to create a user account on the PPSR website. All the details of how to do it are there on the site. After creating an account, you will then need to register the Security Party Group. Once this is established, you can then go ahead and register your security interests via a financing statement.
Here are a few key points this statement must include:
- An expiry date
- Details of the debtor
- Collateral details
- The Secured Party Group details
Using the Government’s PPSR system will give you priority over other creditors, placing your business in the best position possible in the event a debtor goes into liquidation or goes bankrupt.
It’s well worth registering your security interests with the PPSR website. It can potentially save you some financial headaches down the track and give you more peace of mind.
If you use CreditWorks’ PPSR+ portal, it’s even easier and more affordable. Otherwise, if you would like it all done for you with little or no fuss, contact CreditWorks at (09) 520 0626, and talk to them about their fully managed service.