The PPSR is a forgotten trap in many business owners’ minds when they come to sell their business. It’s a very good idea to keep ahead of the game and make sure you check the register from time to time to see what, if any, registrations exist. Many of them are old and need to be removed.
What is the PPSR?
The PPSR was established in 2012 and is an online government register of security interests in personal property.
How does the PPSR impact a business owner who intends to sell a business?
If you operate a business, personally or through a company, it is very likely that you have PPSR security interests registered against you or the entity running the business. You probably granted these security interests to financiers and suppliers to secure their interests in commercial agreements or loans to you.
If you are thinking about selling your business, the buyer will typically require the seller to sell the business assets without any encumbrances. A security interest registered on the PPSR is an encumbrance. A search of the PPSR will be required to check whether there are security interests lodged, and against what property.
When should you check the PPSR?
It is wise to consider an annual review of the PPSR register as part of an annual check up of your business. A reminder might be set for the time when you talk to your accountant to prepare your annual financial statements and tax returns.
This gives you the opportunity to review any security interest that are suitable for discharge and to arrange to do so with your financier or other secured party.
Why do you need to consider the PPSR early when selling?
PPSR security interests can take some time to be discharged. The seller has the responsibility of ensuring that the PPSR security interests are discharged prior to settlement of the business sale. As a seller, you need to consider your proposed timelines for settlement, as delays in arranging for a discharge of PPSR security interests can negatively impact these timelines.
As a seller of a business, if you have carried out your annual register checks, you will know what interests need to be discharged at settlement. If you haven’t been carrying out annual checks, you will need to undertake PPSR searches early so that you can get a head start on attending to the necessary PPSR discharges to avoid potential delays down the track.
How do you conduct PPSR searches?
You can conduct PPSR searches on the PPSR website.
- The link above is in the context of a search run against an organisation grantor.
- You will need to populate the necessary details about your entity (e.g. ABN/ACN) to undertake the search.
- The search presently costs $2.00 and has not increased for some time.
- The search result will reveal if any PPSR securities have been lodged against your entity.
- If the search result shows PPSR securities granted in favour of third parties, you should consider whether:
- the PPSR security interests are current;
- you are able to start arranging for PPSR discharges (to remove interests that have no current basis (e.g. where a loan has been repaid).
Need help navigating PPSR searches?
If it all seems too confusing, don’t worry, feel free to contact Snedden Hall & Gallop and we can provide all the assistance and advice you need.
