Seller of Goods to Register Security Interest in PPSR

Seller of Goods as Secured Creditor

The Personal Property Securities Act 2009 (Cth) (“PPSA”) created the Personal Property Securities Register, which from 30 January 2012 replaced many other registers. When a grantor grants a security interest in personal property to a secured party to secure a debt owed the former then may register it as a security interest on the PPS register and thus obtain rights as a secured creditor.

Under the PPSA, sellers of goods have an opportunity to ensure that their contractual terms provide for a security interest in their favour. Together with appropriate registration of that security interest, a seller can be elevated to the rank of secured creditor. Section 151 PPSA stipulates that a person can apply to register a financing statement if the person believes on reasonable grounds that they will become a secured party in relation to the collateral.

The best practice will be for a seller to register their security interest before parting with possession. It would be wise for a seller to ensure that agreements for the sale of goods grant a security interest to the seller, for example, retention of title interest, that the agreement constitute a written security agreement as per s 20 PPSA, the security interest is perfected by registration as per s21 PPSA,  and the security interest is registered as a Purchase Money Security Interest. In that way in a case of insolvency, the seller is a secured creditor and has priority over unsecured creditors.

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