Registering ownership of goods a wise precaution

George Owen
George Owen
As the business community braces itself for the possibility of business closures and company failures as a result of Covid-19, records at the Companies Office suggest too many suppliers are not using the Personal Property Security Register (PPSR) to register their ownership over goods they supply.

Reports lodged by receivers for 13 companies that have entered receivership between January and March 2020 show unsecured creditors were owed $3,143,706.

That figure would be far higher if unsecured creditors were added from other companies where the receivers’ report simply states: ‘‘the receivers are not required to address any unsecured claims, accordingly no inquiries have been made to establish the position.’’

It has been 18 years since the PPSR was introduced and it has made it easy for companies to register their ownership over goods they supply.

Companies that cry foul when they find they do not get paid when a company fails need to accept some responsibility.

Businesses that still rely on the Romalpa clause or retention of title clause, are lacking up-to-date knowledge and information and need to get up to speed.

A retention of title clause would only be enforceable if no other suppliers or lenders had registered an interest over the company and its assets on the PPSR, and that is most unlikely.

Companies need to review their paperwork and procedures if they are to minimise the risk of not being paid in the months ahead.

There is no guarantee that everyone will be paid when a company fails, but if you are selling goods rather than just services, then by using the PPSR your company can be ahead of the receiver, the bank and the finance companies in payment priority, and that is where you need to be.

Any goods can be registered on the PPSR, for example a garage registering its ownership on the PPSR over a gear box installed in a company vehicle, to be paid for on a monthly account, will be paid for the gear box by the company receiver, in the event that the company goes into receivership, ahead of the finance company that owns the car, if there is one, or the bank or the receiver.

More and more businesses are getting set up to use the PPSR, and we are suggesting that companies do their registrations immediately and get their paperwork sorted as soon as possible, which is allowed under the Act, the registration can apply to goods supplied today, tomorrow, next week, next month, or next year, for up to five years and costs $14.00 plus GST.

 - George Owen is a director of Debtorinfo NZ Ltd, a national credit management company based in Dunedin.

 

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