Written by B2B Lawyers
It is not uncommon that people are unaware whether they have granted a security interest. It may be that you are the sole director of a company which has an overdraft from a bank (Bank 1). Now your company has applied for a loan from another bank (Bank 2) but that loan has been refused. Bank 2 says that Bank 1 has security over all your present and after-acquired property and there is insufficient security for the loan. You don’t recall giving anyone security but how can you check?
You can search the Personal Property Securities Register to identify whether an individual has any securities registered over their personal property. You must only conduct such a search however if you have an authorised purpose (as set out in section 172 of the PPSA).
In the above scenario, the director might conduct a search of his own name and discover that Bank 1 does in fact have a registered security interest. The likely basis for this would be a (long forgotten) personal guarantee, including a charging clause, which the director signed in order to obtain the overdraft. While previously such guarantees could not be registered, a secured party’s interest under a guarantee can now be recorded on the PPSR.
Take out lesson: If you are unsure whether there are any securities are registered against you or your company, you can search the PPSR using Encompass SmartSearch. You should check that any registration is supported by a security agreement and that the details contained in a registration are correct (if not, request that the secured party make amendments). If any security interest is registered without foundation or your obligations to the secured party have been fulfilled, you should request that the secured party takes steps to immediately release their interest.
For more information: contact Nicola Young, B2B Lawyers, +61 3 8602 4000, email@example.com
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Lawyers, accountants, corporate advisors and lenders must review and cross reference official documents from a range of sources, to verify facts at the beginning of every matter.