September 2009

Protection for Creditors

The Personal Property Securities Register (‘the Register’) is an electronic record of any debt security interests held against any personal property (except land) owned by an individual or organisation. In order to register a security interest over property a creditor needs to have ownership rights in the property.

Purpose of Register

If someone owes you money (“the debtor”) for personal property that you have provided to them, then you are a secured party and have a security interest in that property. Your security interest attaches to that property for the purposes of the Personal Property Securities Act 1999, if you have given value to the debtor and the debtor has rights in that property. For example, an electrician installs lighting into a shop and the shop-owner fails to pay for it. The electrician has given ‘value’ to the shop-owner (the lighting) and the shop-owner has ‘rights’ in the lighting because they own it. Therefore, the electrician has a security interest in the lighting.

The purpose of the Register however, is to allow you to further protect your security interest by registering it. This enables you to enforce your security interest against a third party. For example, a debtor may sell property that you have a security interest in to a third party. If your security interest is registered then you are able to enforce your interest against that third party.

Priority of secured parties

The goods that you have a security interest in may also be subject to a security interest from another party. By registering a security interest on the Register, you are granted priority over other unregistered security interests. If all security interests are registered, then priority is given in order of the date of registration. Therefore, when it comes to registering a security interest against goods, time is of the essence.

The Register

To get the benefits from the Register, you must register a financing statement. We can assist you with this process. The Register can also be searched by anyone. The following searches are all available on the Register:

• Debtor Person
• Debtor Organisation
• Motor Vehicle
• Aircraft Serial Number
• Financing Statement Number

It is advisable to search the Register before entering into an agreement to sell, supply or buy in order to avoid people that repeatedly do not pay their debts.

This process can be extremely useful but requires a creditor to obtain sufficient details from a debtor before any credit is given.