When purchasing a business in NSW, there’s a critical step that could save you from losing assets you’ve already paid for. The Personal Property Securities Register (PPSR) might not be something you’ve heard of, but understanding it could protect your investment and prevent costly surprises down the track.
Almost anything can serve as security for a loan these days. While most people are familiar with using a house as security for a mortgage or a car for vehicle finance, business assets work similarly but with added complexity that buyers need to understand.
What is the Personal Property Securities Register?
The PPSR is essentially a national register that lists security interests (or encumbrances) registered against personal property. This includes business assets, equipment, vehicles, and other moveable property that someone has used as security for credit or loans.
When a creditor registers their interest on the PPSR, they “perfect” their security interest. This gives them legal priority over that asset, much like a mortgage gives a bank priority over your home until the loan is repaid.
Why This Matters When Buying a Business
Here’s where it gets concerning for business buyers: if you purchase equipment or assets that have been used as security by the previous owner, you could find yourself facing repossession claims from creditors, even though you’ve legitimately purchased and paid for these items.
Common Scenarios to Watch For
All Assets Security Agreement: Many business loans include clauses where the borrower agrees to use all their present and future assets as security. This means equipment purchased after the loan agreement could still be caught by the security interest.
Specific Equipment Finance: Individual items like vehicles, machinery, or equipment might have specific security interests registered against them, using serial numbers or other identifying details.
How to Protect Yourself
Conduct PPSR Searches
Your solicitor should always conduct comprehensive PPSR searches as part of any business purchase. This involves:
Entity-wide searches against the seller’s name or business to identify any general security interests
Asset-specific searches using serial numbers, registration details, or other identifiers for specific equipment you’re acquiring
What If You Find a Entry?
Don’t panic if searches reveal PPSR entries. In our experience representing business buyers, we often discover that debts have been fully repaid, but creditors simply haven’t removed their entries from the register. This is more common than you might think.
The solution is usually straightforward: require the seller to arrange for former creditors to discharge their entries before settlement. This protects you from future claims while ensuring the transaction can proceed smoothly.
Specific Equipment Considerations
If your business purchase includes specific equipment that’s essential to operations, obtaining serial and model numbers for individual PPSR searches is crucial. Equipment finance is common in business, and these security interests travel with the assets regardless of ownership changes.
Don’t Sign Before You Check
The PPSR represents exactly why thorough legal due diligence is essential in business transactions. What might seem like a straightforward asset purchase can become complicated when security interests haven’t been properly managed or disclosed.
We’ve helped numerous Penrith businesses navigate these challenges, turning potential problems into manageable steps in the purchase process. The key is identifying issues early, when they can still be resolved as part of your transaction terms.
Ready to buy a business or concerned about PPSR issues in a current transaction? Contact our experienced business law team for a consultation. We’ll ensure your purchase is properly protected and help you navigate any complications with confidence.
