That article also explains generally what a personal property security is and what the rules of priority are in relation to goods listed on the PPSR.
In this article, we will consider the PPSR specifically in relation to business sale/purchase transactions.
This article will assist if you are selling a business, with assets listed on the PPSR, to take steps to reduce the risk of a PPSR issue delaying the sale. Likewise, this article also will assist if you are buying a business. You do not want to buy property the subject of a security registered on the PPSR, without ensuring the security is removed before the purchase is completed.
What business assets can be registered on the PPSR?
Generally, any item of personal property can have a security interest registered against it on the PPSR, including; motor vehicles, boats, crops, livestock, machinery, intellectual property, debts and bank accounts.
Therefore, no matter what business you are in it is likely that it has certain assets that are capable of being subject to security interest registered on the PPSR.
What does this mean if you are selling a business?
Once you have a purchaser you want to close the deal ASAP.
All prudent purchasers will conduct comprehensive pre-purchase searches on you and your business to ensure that they are getting good title to the business’s assets, without being encumbered by a security interest.
To avoid delay in closing out the deal, get your finances and paper work in order ASAP so you are ready to discharge the security interests without delay.
Please refer to our seller’s ‘Due Diligence Checklist’ for more information about what you need to do if you are selling a business.
What does this mean if you are buying a business?
If you want to ensure that all assets you are purchasing are unencumbered by registered security interest, it is important to undertake a pre-purchase search of the PPSR to determine whether any of the assets of the vendor, or the business, are encumbered by a registered security interest.
It is our standard practice to conduct PPSR searches. The PPSR allows you to conduct searches on companies (by name, ABN, ACN or ARBN) and individuals. You are able to obtain a comprehensive list of all registrations.
If you do not check the PPSR, the risk is that you could end up purchasing a business that has assets that are subject to existing financed debt.
If you purchase goods which have a security interest registered against them and the interest is not satisfied by the vendor (i.e. the vendor stops making repayments), then you are at risk that the secured party (eg a finance company) repossess the goods.
You will not be entitled to receive any payment in respect of the goods if they are repossessed.
How we can help?
We are very familiar with the PPSR and can provide you with advice and assistance in relation to registering and de-registering PPSR charges or conducting searches of the register.