Jan 2017

Describing the collateral in your PPSR registration

When registering a security interest on the Personal Property Securities Register (PPSR), a user may be given the option to enter a description of the collateral over which security interest is taken.

Whilst it is necessary to enter a description of excepted property when registering a security interest over grantor’s ‘all present and after acquired property – with exceptions’,  it is not otherwise mandatory to enter a description of a collateral for a registration to be effective. Providing the description can, however, be beneficial to a secured party and grantor.  For example, it may limit the amount of enquiries received and reduce the possibility of conflicts which could arise due to uncertainties surrounding what property is secured by the registration, the extent of that security and so on.

Conversely, use of the free text field to describe collateral could potentially cause a number of problems for a secured party. For example, a ‘seriously misleading’ description of collateral may render a registration ineffective; or an overly narrow description may have the effect of excluding certain property from the security interest which was otherwise intended to be included.

As such, it is important to take care when using free text collateral descriptions.

Some things to keep in mind when preparing free text collateral descriptions are:

  1. Ensuring that you provide a proper and complete description of the items, or types of collateral intended to be secured by the registration;
  2. Avoiding including inaccurate or misleading information about the collateral;
  3. Avoiding unnecessarily restricting the scope of the collateral (often the result of providing too much detail); and
  4. Using serial numbers over free text descriptions to describe collateral where possible, especially if the collateral is of significant value and should not be sold or otherwise disposed of by the grantor in the ordinary course of business.

For more information, contact us.