The Personal Property Securities Act 1999 (PPSA), introduced sweeping changes to security documents in New Zealand and their registration.

The legislation, which is based on a Canadian model, provides for the maintenance of a public on-line register, the Personal Property Securities Register. This register provides for the registration of security documents principally being of two types.

General Security Agreement

The General Security Agreement or GSA replaced securities formally known as debentures. The typical GSA grants a security by a company to a creditor over all of its assets and undertaking.

Purchase Money Security Interest

Under a Purchase Money Security Interest or PMSI, a company generally grants security over all goods supplied by the defined creditor, while they remain unpaid for. There are requirements regarding time of registration, which the supplier must comply with if the PMSI is to be effective as against other creditors. For certain types of goods serial numbers must be registered on the register if the security is to be enforceable.

Preference

Providing they are correctly set up and registered, GSA’s and PMSI’s will be effective against creditors whose securities are not registered, or registered after the GSA or PMSI on the Personal Property Securities Register in respect of the same assets.

PMSI’,s if validly registered within the timing constraints, will have priority over GSA’s in respect of the same assets.

However, both GSA’s and PMSI’s will rank behind some Preferential Creditors, as defined in the Seventh Schedule of the Companies Act. This is the case specifically in respect of accounts receivable and inventory, where there are preferential creditors in respect of wages, GST and payroll deductions.

Retention of Title Securities

Generally, PPSA registered securities will take precedence over unregistered Retention of Title, or Romalpa securities. For a more detailed discussion on this please refer to the Fact File article “Why is Retention of Title less effective now?”