Business is tough, and it seems to be getting tougher. Protecting your interests and managing risks are paramount. One effective tool for business owners to safeguard their assets and ensure they are not left vulnerable is the Personal Property Securities Register (PPSR). This Australian Government register plays a crucial role in protecting businesses from potential financial losses, especially when dealing with customers, suppliers, financiers and partners. 

What is the PPSR? 

If you have ever bought a used car and gone and checked to see if there is any finance owing, it’s likely you’ve gone and looked on the PPSR. 

The Personal Property Securities Register (PPSR) is an Australian Government national online register where details of security interests in personal property can be registered and searched. The PPSR allows businesses to register their security interests in the personal property of their clients, providing a layer of protection if those clients default or go bankrupt. 

How the PPSR Protects Business Owners 

When businesses engage in transactions involving personal property, such as selling goods on credit or leasing equipment, they face the risk of their clients defaulting on payments. By registering these transactions on the PPSR, businesses can protect their interests and ensure they have a legal claim over the assets involved. This protection extends to various scenarios: 

1. Securing Loans and Credit: If a client defaults on a loan or fails to pay for goods or services, the registered security interest on the PPSR ensures that the business has a legal claim to the specified property. For instance, in the case of a vehicle financed by a loan, the financier registers the loan on the PPSR. If the vehicle is sold without settling the loan, the financier can repossess it, even if the buyer paid cash. 

2. Protecting Against Insolvency: In the unfortunate event that a client goes into liquidation or some other insolvency arrangement, the PPSR registration determines the priority of claims among creditors. Registered creditors are considered secured and have a higher priority in the distribution of the debtor’s assets. This means businesses that have registered their interests are more likely to recover some or all of their debts compared to unsecured creditors. 

3. Retention of Title Clauses: Traditional retention of title clauses, which state that ownership of goods does not transfer until full payment is received, have been largely replaced by the PPSR. Without registration on the PPSR, businesses relying on such clauses are treated as unsecured creditors in insolvency proceedings. 

Practical Steps for Business Owners 

To effectively use the PPSR for risk management, business owners should take the following steps: 

1. Regular Checks: It is essential to regularly check the PPSR to see if there are any registrations against your business or your clients. This can help identify potential risks early and take necessary actions to mitigate them. 

2. Register Security Interests: When providing goods or services on credit, ensure that you register your security interests on the PPSR. This simple step can protect your business from significant financial losses. 

3. Review Terms and Conditions: Update your terms and conditions to include clauses that allow you to register security interests on the PPSR. This might require legal assistance to ensure compliance and effectiveness. 

4. Cost-Effective Protection: Registering on the PPSR is relatively inexpensive compared to the potential losses incurred if a client defaults. It provides a legal safety net that can be crucial in recovering debts. 

5. Seek Professional Assistance: Consider consulting with advisors or legal professionals to understand the PPSR's intricacies and how it can best be utilized for your specific business needs. 

Final thoughts  

The PPSR is a vital tool for business owners looking to protect their assets and manage risks effectively. By understanding and utilising this register, businesses can ensure they are not left unprotected in the face of client defaults or insolvency. Regular checks, strategic registrations, and updated terms can go a long way in safeguarding your business interests. At FPSS Advisory, we help our clients navigate these complexities, ensuring they have robust risk management strategies in place to protect their family wealth and business operations. 

To learn more, check out our video or contact us for more support. 

Disclaimer

This is general advice. You will need to take specialist advice that takes account of your own personal circumstances.