Your business might regularly enter transactions and is concerned about the other party not performing their obligations. For example, you might supply goods, lease equipment or loan money to other parties. In these circumstances, you may wish to take a “security interest” in the other party’s property, registered on the Personal Property Securities Register (PPSR). This article outlines what a security interest is and how to register it on the PPSR.
What is the PPSR?
The PPSR is a “public noticeboard” that acts as the official government register of security interests in personal property. The Personal Property Securities (PPS) register provides a single online place for people around Australia to:
- register their security interests in personal property to protect those interests; and
- search to see if a security interest covers certain personal property. This may mean, for example, that it can be repossessed.
Additionally, the Personal Property Securities Act 2009 (the Act) governs the rules for creating and registering security interests in personal property. Personal property can include items such as:
- cars;
- boats;
- furniture; and
- machinery (almost anything except land and buildings).
The Australian Government introduced the PPSR in 2012 to solve the problem of a person or organisation granting security over the one asset to multiple parties. Previously, such practice made it difficult to determine who was first in line to receive the benefit. The purpose of the PPSR is for creditors to let the world know that they have taken security over a piece of property.
What is a Security Interest?
A security interest under the Act is an interest in personal property provided for by a transaction that, in substance, secures payment or performance of an obligation. For example, a seller will have a security interest in goods sold on a retention of title basis until the buyer pays the seller. Furthermore, a hirer of goods will have a security interest in the goods subject to the hire arrangement. A further example is where a lender loans money and takes an interest in the borrower’s property to secure the borrower’s payment obligations under the loan.
If you are taking security over the other party’s personal property, you must document this interest in a separate agreement. Often this will be in the form of a:
- general security agreement – a security over all assets (except their land); or
- specific security agreement – a security over some assets or a specific asset.
Why is Registering My Security Interest on the PPSR Important?
If you are taking security over personal property, it is not enough to have a security agreement in place. Generally, you must “perfect” the interest by registering it on the PPSR. This will make it enforceable against third parties. Being the first to register security over a piece of property means you will have priority over:
- all unsecured creditors; and
- any other secured creditors who register a security interest over the same piece of property after you.
The PPSA has various rules on the priority of security interests. Indeed, the timing of when you register your security interest on the PPSR can be very important. Typically, you must register within 20 working days after signing a security interest.
If, for example, the security interest is a “purchase money security interest,” it has priority over any other security interest in the same property if it is registered on the PPS register in specific timeframes. Namely, if it is:
- inventory, you must register the PMSI before the other person obtains possession of the property; and
- is not inventory, you must register the PMSI within 15 business days of the other person obtaining possession of the property.
How Do I Register a Security Interest on the PPSR?
Registering a security interest on the PPSR can be broadly broken down into three steps.
1. Create a PPSR Account
The first step is to create an account. This will involve filling out details about you, your business or your company. Notably, ensure you fill this out with the relevant entity (i.e. consider whether it is you or your company who has been granted security, and fill in the details as required).
2. Create a Secured Party Group
The second step is creating a secured party group. A secured party group is either the individual or organisation with the interest in the property. You can do this by:
- going to the “Secured party groups” tab on your PPSR dashboard;
- selecting “Create secured party group”; and
- following the steps.
3. Register Your Security
Once you are ready to register your security interest, you need to select “Create a new registration” from the “Registrations” tab. During the application process you will need to provide the following information about the security:
- collateral type – how you use the secured property. You must choose between commercial (property used by a business) or consumer (property used by an individual);
- transitional status – an interest is only transitional if it existed before 30 January 2012. Most registrations will be not transitional;
- secured party group details – you will need to enter your secured party group number and access code;
- collateral class – you will need to choose from this list of collateral classes. This choice will relate to what the property is;
- duration – how long you want your registration to last. This will determine the fee that you pay for the registration. Currently, the fee is $6.50 for up to 7 years, $25 for 7-25 years, and $115 for no end date; and
- grantor details (if applicable) – depending on the type of property, you may need to provide details about the person granting the security.
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Key Takeaways
If you are entering into a contract where you are concerned the other party may not perform their obligations, taking security is a way to ensure you can recover what you are owed ahead of other creditors. To do this, you must document the arrangement in a separate security agreement and register it on the PPSR to ensure you can enforce rights in that property and in priority to others.
If you have any questions regarding your business or how to register a security interest, our experienced business lawyers can assist as part of our LegalVision membership. For a low monthly fee, you will have unlimited access to lawyers to answer your questions and draft and review your documents. Call us today on 1300 544 755 or visit our membership page.
Frequently Asked Questions
The Personal Property Securities Register (PPSR) is a “public noticeboard” that acts as the official government register of security interests in personal property.
To register a security interest on the PPSR, you need to create an account, create a secured party group, and register your security.
Personal property includes items such as cars, boats, furniture and machinery. It encompasses almost anything except land and buildings.
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