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The Personal Property Securities Act (PPSA) has made life easier for businesses all around New Zealand. It has consolidated years of case law regarding personal property securities into one act. This act clearly defines who gets what in a liquidation scenario. The PPSA states the priority rules during a dispute and what a security interest is. One of the main features of the PPSA is the Personal Property Securities Register (PPSR). The PPSR has revolutionised how businesses treat personal property security and creates a transparent database for all companies. This article will outline what the PPSR is and how it works.

What Is the PPSA?

The PPSA has created a consistent system for the governance of personal property securities. This means that anybody can look to the PPSA for guidance. This way, you do not need to be a lawyer to understand it. The PPSA is especially important for small businesses in New Zealand. This is because they are the ones that are most likely to go into liquidation. As such, it determines which creditors get what in that situation. The PPSA also defines a security interest as a security interest that can sometimes be a lease or a bailment.

What Was the Reason for the PPSA?

The New Zealand government created the PPSA because the previous law made it hard for businesses to understand and identify security interest creation. When a business becomes insolvent, there has to be a procedure to determine how assets will be distributed to stakeholders. The PPSA determines this. The New Zealand PPSA is modelled on the Australian one and there are many similarities.

The government enacted the PPSA so that any purchaser of personal property would not be deprived of title to that good because of the existence of a security interest. The PPSA also created the PPSR, so customers can search if the good they bought or leased has a security interest over it.

Important Clauses of the PPSA

Section 16

Section 16 defines all terms of the PPSA. This is especially important when determining what a security interest is. The PPSA defines what a security interest is and counts a lease in certain circumstances as a security interest.

Section 66

Section 66 tells us what the priority rules are when dealing with security interests. The court considers an interest that you register on the PPSR as a perfected security interest. This means it has higher priority over an imperfect security interest.

Furthermore, section 66 also tells us that if you perfect both security interests, the one you register on the PPSR first will be the one that has priority. 

How Does the Personal Property Securities Register Work?

The PPSR is an online database that is publicly available for anyone to view. Anyone can register their security interest on the PPSR, and y
ou should do this. This is so that your security interest is perfected, and you have the best chance of getting your goods back if the business goes insolvent. You can register most things on the PPSR as you can use almost anything to secure the performance of an obligation. It is also a great tool for people to check whether there is a security interest over any goods you are looking to buy. 

You can also use the PPSR to check whether you can trust someone with buying something on credit. Selling something to someone who is not creditworthy could be detrimental to your business and force you to write off payments as bad debts if they cannot uphold their obligations. 

The PPSR also makes certain clauses, such as retention of title clauses, redundant. Even if you have a retention of title clause, you must register it to get the full benefits of having a security interest. Otherwise, your security interest will be in the back of the queue. 

Key Takeaways

The Personal Property Securities Act has changed the way that businesses think about personal property securities. This is mainly due to the creation of the Personal Property Securities Register. This allows people to register their security interests on a public database. When you register a security interest, it becomes perfected and has a high priority listing when a business becomes insolvent. The PPSR also allows businesses and members of the public to search the register and make sure that any goods they buy are free from security interests. Otherwise, you could be dispossessed of the good. The public nature of the PPSR also means that businesses must be honest and transparent.

If you need any legal assistance with the Personal Property Securities Register, LegalVision’s experienced contract lawyers can help. Call us today on 0800 005 570 or fill out the form on this page.

Frequently Asked Questions

Can anyone register a security interest on the PPSA?

Yes, anyone can register a security interest, and it is recommended that you do this to avoid losing your item to someone with a perfected security interest.

Who can access the PPSR?

The PPSR is free for anyone to access and is designed so that members of the public can view it.  All you need to do is set up an account.

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