Personal Property Securities

Does your business’s asset protection structure still work?

Introduction of the personal property securities (PPS) scheme in 2012 brought in the biggest change to business law in many years. In simple terms, the scheme:

  • establishes a single, national, public, electronic register of “security interests” in most property other than land.
  • introduces a new system to determine priorities between competing security interests in the same personal property.

Registration is critical. It may seem unfair, but a supplier who leases goods to a customer, or sells them on a retention of title basis (i.e. that they retain ownership until paid in full), can lose those goods to the customer’s bank if that supplier has not registered its interest in the goods on the PPS register.

We think the PPS scheme might especially catch business-owners unaware where they have previously set up their business structures for asset protection, with the plant and equipment used in the business held in an entity separate from the operating entity – e.g., a family trust may own the trucks in a transport business, which are then leased to a related company which is the operating entity.

Now, for that structure to remain effective, there must be a written, properly-worded lease agreement in place between the asset-owning entity and the operating entity, and the owner must register its security interest over the plant and equipment on the PPS register within the strict time period.

Without doing these things, if the operating entity becomes insolvent, the plant and equipment may be taken by the bank (who will undoubtedly itself have a proper agreement and PPS registration in place), even though it is not owned by the operating entity. The asset protection structure will have been undermined.

We can help businesses protect their valuable assets by putting a written agreement in place, and arranging PPS registration. Please contact us if you would like advice.

Author: Kent Mallinson

Published: 3 November 2016


The information in this article is general in nature and is not to be relied upon as legal advice. As always, we recommend you seek thorough legal advice to consider your own circumstances and determine whether the information contained in this article is applicable to you.  This article is current as at the date of publishing but will not be updated as circumstances change.