8 November 2018
All it takes is a simple error like entering an incorrect serial number to invalidate your PPSR registration. Chances are you won’t even realise you’ve made a mistake. We’ve had countless businesses come to us assuming they are PPSA compliant only to find out that their registration is worthless.
Making a mistake when registering on the Personal Property Securities Register (PPSR) can have severe financial consequences.
Imagine if a customer defaults on payment or becomes insolvent. You’d want to recover the goods you’ve sold or leased immediately.
The problem is that a defective PPS registration will significantly weaken – or worse still, void – your security interest in the goods that are in your customer’s possession. It could mean saying goodbye to millions of dollars of assets or collateral.
To register incorrectly is tantamount to not registering at all. You’re simply not protected when things go wrong.
The Top 8 PPSR Mistakes to Avoid
If you’ve had a go at registering, you’ll probably agree that there’s an incredible amount of jargon and unfamiliar terminology to get your head around. Our clients often tell us that the Register asks them to answer questions they can’t understand, let alone know how to respond.
The registration process leaves you in the position of not knowing whether you’ve ticked the right boxes and completed the form correctly. Even though you may well have completed the registration, incorrect answers will leave your business exposed to risk.
Here are the types of mistakes we come across all the time when we help businesses clean up their PPS registrations.
1. Claiming a security interest is transitional when it is not
Likely outcome: Your registration will be ineffective.
2. Claiming a Purchase Money Security Interest (PMSI) when there is none
Likely outcome: Your registration will be ineffective.
3. Failure to claim a PMSI when the security interest is a PMSI
Likely outcome: The super-priority of the PMSI will be lost and priority will be determined by other rules (most often the first to register).
4. Registration of PMSIs outside of specified time limits
Likely outcome: The super-priority of the PMSI will be lost and priority will be determined by other rules (most often the first to register).
5. Registration of security interest more than 20 business days after the security agreement was created
Likely outcome: Your registration will be set aside if the grantor becomes insolvent within six months of the date of registration.
6. Error in the serial number of a serial numbered good
Likely outcome: Your registration will be ineffective.
7. Selection of incorrect collateral class
Likely outcome: Your registration may be ineffective, more so if a serial numbered good has been registered under the wrong collateral class.
8. Failure to identify grantor in the required manner (e.g. using company name or ABN instead of the required ACN, and/or the treatment of trading trusts).
Likely outcome: registration will be ineffective.
We’ve seen so many things go wrong with PPS registrations and we know how easy it can be for a registration to become invalid. It’s for this reason that we advise companies to run a fine-tooth comb over their existing registrations – because a lot can go wrong if you don’t get it right.
Our PPSR Specialists can help with this process. We know it can be daunting to find compliance issues and fix any problems, especially when there are many registrations. Email us to find out more about our PPSR checks, or to get in touch with a PPSR Specialist.
Disclaimer: The information contained in this article is general in nature and does not take into account your personal objectives, financial situation or needs. Therefore, you should consider whether the information is appropriate to your circumstance before acting on it, and where appropriate, seek professional advice from a finance professional such as an adviser.