The inclusion of guarantees in credit applications and terms and conditions is commonplace, but are all guarantees registrable on the Personal Property Securities Register?
A guarantee does not by itself create a security interest which can be registered on the PPSR. However, a guarantee which contains a charging clause is registrable. Previously, a charging clause would provide that “the guarantor grants a fixed and floating charge over all his assets and undertakings” (or words to that effect). Since the commencement of the Personal Property Securities Act, a charging clause is likely to be worded along the lines of “the guarantor grants a security interest over all his present and after-acquired personal property”.
Whatever the wording and terminology, if a guarantor agrees to give security over his personal property (usually in addition to any security provided by the debtor) then this is registrable on the PPSR and provides a further avenue of recourse in the event that the debtor becomes insolvent.
Take out lessons: It is prudent to review your terms and conditions to ensure that they provide that any guarantee sought is strengthened by a security interest granted over the personal property of the guarantor. You will then be able to register your security over both the debtor and any guarantor on the PPSR.
Conversely, if you are giving a personal guarantee, beware of the terms of that guarantee so that you do not unwittingly give security over all your personal property.
This post was written by B2B Lawyers and first published on 26 September 2012
For more information visit: www.b2blaw.com.au
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