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McDonald Vague strongly recommends that businesses register their security interests on the Personal Property Securities Register ("PPSR"), and increase their awareness of the consequences of non-registration. Failure to utilise the PPSR can be a doubly expensive process in the event that their debtor company becomes insolvent.
Many companies are not aware that the legislation applies to suppliers of goods on retention of title terms, leases of more than one year (or indefinite terms), and consignment goods.
Jonathan Barrett, an Associate with McDonald Vague, says valid terms and conditions of trade, as well as registration of a Financing Statement on the PPSR, are absolutely essential if businesses want to recover goods or the proceeds of sale of those goods.
Jonathan regularly deals with businesses placed into liquidation or receivership. When it comes to determining priorities for a distribution from asset realisations, there are almost always a number of competing securities, some valid and others improperly registered.
Generally speaking, businesses that fully utilise the PPSR gain priority over other creditors and can substantially increase their entitlement to return of goods or payment of proceeds.
For instance, a supplier with a valid retention of title ("ROT") clause who registers on the PPSR will usually rank ahead of a General Security Agreement ("GSA") holder, and preferential creditors. Without this registration, the ROT clause is usually worthless, as the supplier ranks behind the GSA holder and preferential creditors.
Despite the Personal Property Securities Act coming into force around a decade ago, we still routinely encounter situations where creditors have failed to register (for instance in respect of leases or retention of title clauses) and as a result lose their priority and recover nothing.
Registration is a very cheap process compared to the potential costs of non-registration. For instance, the cost of registering a Financing Statement is currently just $3.07.
We strongly recommend creditors visit www.ppsr.govt.nz. We are happy to provide further information and assistance on this subject.
This article is intended to provide general information and should not be construed as legal advice. Parties who require clarification on issues raised in this article should take their own legal advice.
This article is intended to provide general information and should not be construed as advice of any kind. Parties who require clarification on issues raised in this article should take their own advice.