finPOWER and the NZ PPSR FAQ's
The New Zealand Personal Property Securities Act (PPSA) 1999 meant major changes to the registration of Security Interests.
The PPSA requires the Registrar of Personal Property Securities to keep an electronic register that is operated at all times – this is the Personal Property Securities Register (PPSR). There are to be no paper files kept. The only paper documents that can be received to be included on the register will be court orders, and these will have to be imaged and attached electronically to the relevant financing statement.
The PPSR replaced four old registers, three of which were run by the Companies Office in the Business and Registries Branch (Motor Vehicle Securities Register, company charges registers and the registers of charges under the Industrial and Provident Societies Act 1908). The Department for Courts was responsible for the Chattels Securities registers and that was held in most of their High Court Registries.
- The Personal Property Securities Act 1999 (PPSA) established the basis for the Personal Property Securities Register (PPSR). This Act reformed the law relating to security interests in personal property and contains rules for determining the priority between security interests in the same personal property.
- The PPSR is a centralised, electronic register that is available for registrations and searching 24 hours a day, 7 days a week.
- All registrations on the PPSR are filed in electronic form.
- The PPSR replaced four old registers:
- Motor Vehicle Securities Register
- Company Charges registers
- Registers under the Chattels Transfer Act 1924; and
- Industrial and Provident Societies Charges registers
For more information Ministry of Economic Development's PPSR website http://www.ppsr.govt.nz/.
A security interest 'attaches' when the secured party (ie the creditor) has given value (eg advances money), the debtor acquires an interest in the collateral (it does not need to be an ownership interest) and there is a written security agreement in respect of that collateral.
Attachment is not sufficient to protect the interest of the creditor. The attached security interest must then be 'Perfected'.
This is Personal Property that is subject to the security interest.
The collateral may be physical (eg a motor vehicle, DVD player or herd of dairy cows), or intangible (eg a trademark or patent), a specific item(s) (the DVD player, or the inventory of a shop) or include the future property of the debtor (eg all current and after acquired property).
There are many different sorts of collateral ranging from goods that have regulated serial numbers (e.g. motor vehicles and aircraft), and personal property such as a chattel paper, document of title, goods, intangibles, investment securities, money and negotiable instruments. Valid Collateral Types are:
- Goods – Motor Vehicles
- Goods – Aircraft
- Goods – Livestock
- Goods – Crops
- Goods – Other
- Documents of Title, eg bills of lading, warehouse receipts.
- Chattel Paper, eg hire purchase agreements.
- Investment Securities, eg shares, options.
- Negotiable Instruments, eg a promissory note, a letter of credit.
- Money, eg NZ dollars, Japanese yen.
- Intangibles, eg trademarks, patents and copyright, accounts receivable.
- All present and after acquired personal property
- All present and after acquired personal property except, then a list of Property
A person or organisation to whom a debt is owed. In the PPSA and PPSR, the creditor is always referred to as the Secured Party.
A borrower (and can be a person or an organisation). The person or organisation that owes payment or performance of an obligation.
The personal identification number that a debtor or interested party is required to enter before lodging an interested party change demand on the register.
Failure to pay or fulfil an obligation; or when an event occurs that gives the secured party the right under the security agreement to enforce the security.
A release of obligations. On the PPSR, the discharge of a registration means its cancellation. The secured party is required by the PPSA to discharge a Financing Statement within 15 working days where the collateral is a consumer good and the debtor has fully discharged their obligations.
Unless renewed, a security interest registered on the PPSR will automatically expire after five years (or at an earlier date where a lesser term has been specified in the financing statement). It can be renewed prior to the expiry date.
The information required to be registered to make an amendment to any information on the PPSR. This can be used to renew, discharge, or subordinate a financing statement, or amend information in the financing statement itself.
The information required to register notice of a security interest on the PPSR. The Financing Statement includes details of the Secured Parties, the Debtor (or Debtors) and the Collateral registering.
A debtor or a person with an interest in the collateral described in the financing statement may, in certain circumstances, give a written demand to the secured party requiring registration of the financing change statement.
A status of a security interest under the PPSA that may enable a secured party to enforce the security agreement against a third party. Can be achieved by registration of a financing statement or possession of the collateral.
The PPSA introduces the concept of "perfection". A key requirement for perfection is either registration or possession of the collateral by the secured party (the person who holds the security interest) or someone acting on their behalf. Seizure or repossession of the collateral does not count as possession for perfection. Therefore, registration on the PPSR becomes an important step for a secured party in securing their interest in collateral.
The consequences for a secured party of not registering notice of their interest on the PPSR include:
- not being able to enforce the security if the collateral is sold or leased to a third party for value and without that third parties knowledge of the secured party's interest in the collateral.
- affecting priority between interests over the same collateral, as a perfected interest generally takes priority over an unperfected one.
Personal property is almost all property except for land. Examples of personal property include money, goods, livestock, motor vehicles, investment securities and documents of title.
Under the PPSA, the general priority rule is that between competing security interests in the same personal property, priority goes to the first party to register a financing statement. There are however some exceptions to this rule detailed in the legislation.
The Priority Date is the normally the date the Finance Statement is first registered. However this may be the original date of registration if the collateral is re-registered during the transitional period.
Security interests that have been registered in accordance with the PPSA. The maximum term of a registration is 5 years, but it can be renewed at any time before the expiry of the term.
A person or organisation that holds a security interest for their own or another's benefit, ie the person or organisation generally lending the money and holding the security interest. Can include a trustee. See also Creditor.
An interest by one person in the collateral of another given to secure the performance of an obligation or payment. The collateral does not need to be owned by the person who is giving the security. Examples of security interests include a hire purchase agreement, a conditional sale agreement, a consignment, a chattel security and a fixed charge.
A written agreement that creates or provides for a security interest over collateral.
Subordinations occur when two or more parties with security interests in the same collateral agree amongst themselves to alter the priority of their interests in that collateral.
For example, where there are five ranked secured parties attached to a security interest, a prior secured party, (ranked third), may agree that a subsequent secured party, (ranked fifth), can be paid or partly paid out of the proceeds of the debtor's collateral before them.
A six month period from the date the PPSA comes into effect (ie becomes operational). During this period all existing registered securities will need to be registered on the PPSR in order to retain their existing priority date.
The information that is sent to the registering party confirming the registration of a financing statement or financing change statement, and also contains the financing statement registration number and the debtor PIN.
The PPSR is a real-time internet based Register.
- Financing Statement Registrations are entered online via the internet.
- Confirmation of Registration is sent to the Secured Party via email.
- The confirmation includes the Financing Statement's Registration Number and PIN. These are used to uniquely identify the Financing Statement, and to reference it for later changes and discharge.
- Confirmation is also sent to the Debtor if the Debtor's email address has been provided on the financing statement.
- Finance Statements may be rejected because information is missing or has failed validation checks.
- It may also be rejected if the Secured Party's payment is rejected.
- If it has been rejected the Finance Statement remains in a "pending" database and may be edited again.
- This will allow users to stop and continue entering information if interrupted.
- Pending Financing Statements have no legal status.
- Information in the "pending" database will be removed after a fixed period of time.
- As an alternative to online data entry the PPSR also offers a Business-to-Business connection.
- This is intended for high volume users and allows the user's computer to "talk" directly with the PPSR using the internet and XML technologies.
- This avoids the need for high volume users to have people keying the data into the Financing Statement form before submitting it for registration.
The PPSA requires the Secured Party to provide the Debtor with a copy of the verification statement within 15 working days of receiving the verification statement, unless the debtor has waived their right to receive this. This obligation will not be relieved by the PPSR emailing a copy to the Debtor where their email address is provided on the financing statement.
Details on some of the Information required for a Financing Statement are listed below.
- Mandatory information for the Debtor includes:
- Debtor Type; either "Person" or "Organisation".
- For an "Person"
- Name (split into First, Middle and Last Names), Address and Date of Birth are mandatory.
- The Name must be entered as their full name as stated on official documentation, eg Birth Certificate, Drivers Licence.
- The First and Last Names must be at least two characters. If stated the Middle Name(s) must be entered.
- Date of birth is validated and must be at least 16 years but no more than 120 years.
- For a Married woman who uses both her Married Name and Maiden Name she may be listed under both names in the Financing Statement.
- If you sight two forms of identification and they have two different Names you may enter both Names as Debtors in the Financing Statement – much like the Married woman scenario.
- Name, Address and Type of Organisation (eg Partnership, Company, Incorporated Society, Charitable Trust, Family Trust), Name (split into First and Last Names and optionally Middle Names) and Address of Person Acting on their behalf are mandatory.
- Note that both the Name and Address of the Organisation and the Person Acting are required.
- If the Type of Organisation is Incorporated then the Incorporation Number is mandatory.
- One of the addresses must be entered.
- There must be a valid Country entered (defaults to New Zealand).
- A City/Town must be entered.
- Something must be entered as the address, ie the street address.
- Collateral is the property subject to the Security Interest.
- Collateral may be physical or intangible in nature and may also include the future property of a Debtor.
- Require a collateral type, eg "Goods - Motor Vehicle", "Chattel Paper", "Goods - Other", "all present and after acquired personal property".
- Motor Vehicles will still require mandatory information such as Registration Number, Make, Model and VIN (where available).
- Serial Number field is available for "Goods - Other" and "all present and after acquired personal property except" types.
- All types may include a Description. The description is mandatory for all types except "Goods - Motor Vehicles", "Goods - Aircraft" and "all present and after acquired personal property".
Secured Parties have ensure their Business Documentation includes additional information required under the PPSA, such as the Debtor's Full Name, Birth Date and Company Incorporation Number.