For a secured party to retain the priority of their registration on the Personal Property Securities Register (PPSR), they must keep their financing statement up to date with all the information that they are aware of, including a change of the debtor’s name.
The effectiveness of the Personal Property Securities Act 1999 (“PPSA“) depends upon people being able to search the PPSR to determine whether personal property owned by a particular person or organisation may be subject to a security interest. It is particularly important for a secured party to record any changes of a debtor’s name, given that this is one of the main ways to search on the PPSR.
Accordingly, the PPSA provides that where a secured party with a perfected security interest gains knowledge that the debtor has changed its name (including as a result of a company amalgamation), the secured party has 15 days to act in order to maintain its priority.
If the secured party fails to take possession of the collateral or to register a financing change statement recording the change of the debtor’s name within 15 days after gaining knowledge of the debtor’s name change, the secured party’s interest will be subordinated to:
- an interest (i.e. any non-security interest such as the interest of a buyer or lessee) in the collateral arising in the period commencing 15 days after the secured party gained the requisite knowledge and concluding when the secured party either files a financing change statement to record the new debtor name or takes possession of the collateral;
- a perfected security interest in the collateral that is registered or perfected in the period referred to above; and
- a perfected security interest in the collateral that is registered or perfected in the first 15 days after the secured party gained the requisite knowledge if the secured party does not file a financing change statement to record the new debtor name or take possession of the collateral before the expiration of that 15 day period.
In effect, a secured creditor which obtains knowledge of the change of a debtor’s name has 15 days to act to protect itself and preserve its priority position by either taking possession of the collateral or filing a financing change statement to record the debtor’s new name. Failure to do so will mean that the secured party’s priority will be lost to competing interests.
Practically speaking, if your business becomes aware that a customer has changed its name (i.e. if a customer asks you to change the name that invoices are addressed to), you should have a system in place to ensure that the PPSR registration is also updated within 15 days in order to maintain the priority of your registration.