Do you let your customers take delivery of your products prior to payment? How do you protect your ownership of these assets in the event of non-payment? How do I protect myself with a major item I have purchased?
The PPSR (Personal Property Securities Register) is an on-line register created by the the NZ government to assist you with protecting your business assets. It is an important tool for managing aspects of your business risk. Without registering your assets on the PPSR you severely impair your ability to recover the asset should a debtor/customer/lessee default in payments or enters into liquidation. The PPSR registration at least converts you to a secured creditor status instead of being part of the unsecured creditor pool where recovery is materially impaired. The exposure to a bad debt write off in any business can be large and while they unfortunately occur from time to time, the cost to the unsuspecting business without PPSR security protection is significant.
- You hire/lease equipment to a business that subsequently enters liquidation. Despite having a lease agreement and/or a Romalpa clause, without PPSR registration your leased asset is unsecured.
- You have charged a debtor/customer for a significant product/item that is due payable post delivery e.g. payable on the 20thof the month following. In the event the debtor/customer then enters liquidation before payment is made the asset is now unsecured without PPSR registration. Your company policy should perhaps be any debtor > an amount ie $5,000, then need to PPSR register that product(s) sold to that customer to ensure it is secured until payment is received.
- You buy a second hand asset for your business but a finance company has a secured PPSR interest on the said asset because the seller owes money on the asset & now the finance company seeks repossession.
- The PPSR can be used as a customer credit check tool – enquiring and assessing what registered secured interests are logged against it.
- If you have stock held on consignment outside the business premises or on contract warehousing then this is another example of the need to register the assets on the PPSR