PPSR Registration Mistakes to Avoid: Protecting Your Security Interests

Erin Prout

Principal LawyerAitken PartnersView Profile

A PPSR registration can provide valuable protection when a customer becomes insolvent, but even a small administrative error may undermine that protection. This article outlines some of the most common PPSR registration mistakes and the steps businesses can take to avoid them.

The Personal Property Securities Register (PPSR) is designed to give effect to a registerable security interest and to provide an open and unambiguous warning to third-parties with an interest in the assets. However, the system is unforgiving: even minor administrative errors can strip a secured party of its rights entirely. As insolvency activity increases, the accuracy and timing of PPSR registrations have never been more critical. Below is a practical guide to the most common PPSR mistakes, and how to avoid them.

Late Registrations: Missing the 20 Business Day Window or the Month Pre Critical Time Period

Under section 588FL of the Corporations Act, timing is everything. The PPSR regime draws a very firm line around when a security interest must be perfected, and it does not give secured parties much room for error. The legislation requires perfection:

• Within 20 business days of signing the security agreement; or
• Within 6 months before the “critical time”, usually the point at which the company enters administration or liquidation.

If a registration falls outside these windows, the consequences are blunt. The security interest automatically vests in the company when insolvency hits. In practical terms:

• The secured party loses its proprietary rights.
• The asset becomes part of the pool available to unsecured creditors.
• The security interest cannot be enforced against the liquidator.

This is one of the most common traps we see in practice.

Incorrect Grantor Details: Misidentifying Companies, Trusts, or Individuals

A PPSR registration only protects a secured party if the grantor is identified correctly. This is a straightforward step, but it is also one of the most common reasons registrations fail. When the wrong identifier is used, the registration can be treated as seriously misleading and may be ineffective, even if the underlying security agreement is binding.

There are a few rules that must be followed:

• Companies must be registered using their ACN.
• Trusts must be registered using the ABN.
• Individuals must be registered using their exact legal name as it appears on official identification.

In some circumstances, defects can addressed. However, there have been cases, such as OneSteel Manufacturing Pty Limited (administrators appointed) [2017] NSWSC 21 where new registrations were sought to amend the original registrations but the effect was nonetheless that the secured party lost the effect of the registration as it had vested in the administrator.

Serial Number Errors for Serial‑Numbered Goods

Certain types of collateral, such as motor vehicles, watercraft, aircraft and other serial‑numbered goods, must be registered using the correct serial number. This is a strict requirement under the PPSR and one that often causes problems in practice.

Common mistakes include:

• Entering an incorrect VIN or HIN.
• Using a chassis number instead of the prescribed serial number.
• Registering the goods under a general collateral class rather than the serial‑numbered class.

The consequences are significant:

• The registration will be ineffective for those goods.
• A buyer who acquires the goods in good faith may take them free of the security interest.
• The person whose serial number was incorrectly used may request removal of the registration, and there is a risk that the secured party may be responsible for the costs of correcting the error.

PPSR registrations can be difficult to navigate and the effect of an error or defect can be dire. If you need assistance registering on the PPSR or enforcing a security interest, please contact one of our experienced lawyers, including Erin Prout in Brisbane on (07) 3544 5659 or our Melbourne office on (03) 8600 6000.