When does a secured creditor lose its rights?
There are a number of circumstances whereby a creditor can lose their security. The most common error is to fail to register a financing statement on the Personal Property Securities Register (PPSR). The creditors security is then deemed “unperfected”. If another creditor registers correctly on the PPSR over the same assets, their security would take priority. It’s a simple administration error that can cause a great loss.
If you are in any doubt about your rights under the Personal Property Securities Act, then you should consult a solicitor immediately. Even a late registration on the PPSR, can at least provide some level of security.
Another area where a secured creditor can lose their rights is during an administration. This is an area that many people are not necessarily familiar with. When a company is placed into liquidation, a creditor holding a perfected General Security Agreement normally has the right to appoint a receiver to protect their rights and recover/realise the assets they hold security over. However, in an administration, if the secured creditor fails to act on their security within 10 working days, they lose that right and must wait until the administration has run its course.