Why It Is Important for SME’s to Register Personal Property

When small and mid-size enterprises (SME’s) are started, business owners are often required to provide a substantial amount of their own money upfront for various expenses including entering leases and purchasing plant and equipment.

Given this money is often the product of personal savings, a personal loan or money redrawn on a mortgage, it is important to ensure interests are protected should the business fold.

What is the PPSR?

The Personal Property Securities Register (PPSR) is an online government noticeboard of security interests in personal property. Registering a personal investment in a business this way lets others know when you have retained interest in goods supplied or leased, serving as a formal, documented loan.

Personal property is covered under the Personal Property Securities Act 2009 (Cth) and includes things such as:

  • Tools and machinery
  • Motor vehicles
  • Stock
  • Intellectual property
  • Private commercial licences
  • Shares and other financial property
  • Jewellery, artworks and other goods
  • Scaffolding and temporary fencing

Notably, this does not does not include land, buildings and fixtures to land.

Why register personal property?

SME businesses generally offer little to no protection for owners from their own business’s structure and it is important to note that a written agreement is often not enough alone to protect owners.

Comparatively, registering an interest on the PPSR creates a secured loan with priority on what owners can recover in the liquidation process set out in section 556(1) of the Corporations Act 2001 (Cth). This means owners will be in the best position to recover some or all of their funds should a customer not pay or they go out of business.

The position of a secured creditor also offers greater bargaining power and less costs throughout the insolvency process, allowing owners to seek advice early and work together with banks and private financiers.

Despite this, it is often the case that business owners fail to register their interests on the PPSR either because they have not sought legal advice before starting a business or because the advice suggests that noting the loan in writing is sufficient.

Seeking a lawyer to prepare documents and register an interest on the PPSR may be more expensive initially, but will save owners a substantial amount of time and money, being best placed to recover funds should the business fold.

If you would like to speak to an experienced business lawyer, call us on (02) 4929 7002, email us or complete an enquiry form.