As an organisation that looks after the finance needs of all sorts of businesses across a broad range of sectors, we often see situations with clients where they could be better protected when it comes to control and security of their business assets. Considering the gloomy outlook for this year and the possibility of more businesses failing, we want to ensure that our clients are well informed about how to protect themselves.

As an example of what can go wrong for a company if it doesn't take steps to protect its assets, a construction subcontractor could find themselves in trouble if the business they contract with enters into liquidation. It may be necessary for a liquidator to lock up the subcontractor's tools of trade and equipment on the building site until ownership can be proven.

While situations like this are commonplace and can result in lost opportunity or worse case, loss of assets, they are potentially avoidable if a business manages this risk and protects their assets by using the Personal Property Securities Register (PPSR) to register and safeguard assets. The PPSR is a publicly available centralised Government controlled online registry where you can:

• register a legal claim to personal property, to ensure your rights to that property are protected; and
• check if there is any debt or obligation attached to goods you may wish to buy; this helps to avoid paying for an asset but then having another party having claim to the goods.

The PPSR is a vital tool for all financiers to register their financial interest in assets where finance is provided, but it is equally important for businesses to protect their assets. If you are buying, selling, leasing or hiring out goods, or selling goods on consignment without registering your interest in them, you could put your business or an investment at risk. This can include equipment, inventory, and intellectual property.

It is important to protect yourself with the PPSR for the following reasons:

• Priority and Security: Registering security interests on the PPSR provides a business with a legal advantage. In cases of insolvency or bankruptcy, a business with registered security interests has priority over unregistered creditors (any party owed money). This ensures a greater chance of recovering assets, reducing potential losses, and preserving business continuity.
• Fraud Prevention and Asset Verification: The PPSR acts as a critical tool for preventing fraudulent activities. By checking the PPSR, a business can verify if an asset has existing security interests against it. This verification process mitigates the risk of unknowingly acquiring an asset with undisclosed claims, protecting a business from costly legal disputes and potential asset loss.
• Comprehensive Asset Coverage: The PPSR covers a wide range of personal property, ensuring that businesses can protect various assets, including equipment, inventory, and motor vehicles to intellectual property and land. This versatility allows businesses from a diverse range of industries to secure their assets effectively, regardless of the asset type.
• Enhanced Borrowing Opportunities: Utilising the PPSR can improve a business's ability to secure financing. Lenders often consider the presence of registered security interests as a positive factor in assessing creditworthiness because it demonstrates good business practice and risk management. With PPSR registration contributing to a business’s financial stability, it can also translate into a greater lender confidence to provide support to your business.
• Ease of Use and Time Efficiency: The PPSR is a relatively easy to use tool that allows Business owners to register their security interests, manage registrations, and make amendments as needed. It has a user interface that has been designed to promote time efficiency, allowing businesses to focus on core operations while proactively protecting their assets.
• Legal Compliance and Risk Management: In NZ, the PPSR is a legal requirement for securing certain assets and protecting security interests. Compliance with PPSR regulations ensures that businesses maintain legal standing and fulfil their obligations. By embracing the PPSR, business owners can mitigate potential risks and demonstrate responsible business practices to stakeholders and investors.

The PPSR website is part of the Companies Office website, so you can find more information by clicking here.

Our focus at Finance New Zealand is to ensure the wellbeing and sustainability of everyone we work with; we always recommend that customers are well informed. For this reason, we hope you consider how well secured your business is and while this is an area we do not provide advice in, we have a vested interest in understanding this to enable us to best advocate for all our clients when negotiating on their behalf with lenders.

More on the PPSR

https://financenz.co.nz/news/asset-finance-or-how-the-ppsr-works

https://financenz.co.nz/news/protect-your-business-with-the-ppsr