This week a long–term client wanted help with loading a debt into our system. This is not unusual but the details behind the debt gave me cause to write this blog.
The client had a large debt that was from a retailer that had since sold their outlet to new owners. This account had always been kept in order, paying on time except for the last one. Our client has a signed credit account form including a personal guarantee but there was something missing. He had failed to perfect his interest by registering it on the PPSR.
We all understand that this registration would assist our client if his customer had been declared bankrupt but it is the strength the registration affords to the secured party if the debtor is trying to sell his business that I am more interested in!
Under the PPSA, if you are attempting to sell a business the solicitor acting on behalf of the purchaser should check the registry for secured interests. If there are still PPSR’s on the registry it is his responsibility to ensure these are removed prior to the sale transaction being completed.
What this means for our wholesale client is that if he had a registration and there was an outstanding amount then this debt will be required to be paid prior to the sale going ahead. My client now understands that if he had spent the small amount of money to register his security interest, then the system would have done its job and he will have been contacted to remove his registration. At this time he will have had the opportunity to request that the account be settled prior to him releasing his registration.
The moral to the story is that all credit accounts should be registered as it is not always the bad debtor we are securing ourselves against.