Damien Grant: Scheme may be dull but businesses need it

Opinion

Imagine you are in the business of supplying surfboards. Cool business to be in and you have a fine new range of surfboards made in Bali you want to get to market.

You take your collection of surfboards to a local retailer and let him take 10 on consignment. If the retailer sells them he will pay you. If he does not, you can go back to the store, collect your surfboards and maybe move them to a new store.

A few weeks later the store goes into receivership. Shame, you think, but no problem, you will simply talk to the friendly receiver and ask for your surfboards back. Right?

Despite the fact the Personal Properties Security Register (PPSR) is 10 years old many New Zealand company directors will tell you they would be able to collect those surfboards.They're wrong.

The receiver will sell the surfboards and give the money to the General Security Agreement (GSA) holder (a debenture holder, in old terminology) who placed the company into receivership.

Typically, this will be the bank. If the company is in liquidation and someone has a GSA, the liquidator will also keep the surfboards.

Put simply, if you lease or supply goods to a company and you do not register that fact on the PPSR (www.ppsr.govt.nz) you will most likely lose your goods if the company fails.

The PPSR is a boring topic. Merely putting the acronym anywhere in the body of a text guarantees people will not read it, which is proving to be great business for those who know what it is and how it works.

Usually, the company director will find out the importance of the PPSR when an insolvency practitioner tells them they have lost their asset.

If your business sells goods, leases goods, or provides consignment stock and you do not know what the PPSR is, you should hang your head in shame.

There is no excuse for not being informed about this regime and if you are not using it then you may as well leave your assets on the street and hope for the best.

The PPSR is like safe sex. Inconvenient and a little dull but something you may come to wish dearly you had practiced if things go wrong.

damien@waterstone.co.nz