Do your Terms of Trade really protect you in case of insolvency?

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Do your Terms of Trade really protect you in case of insolvency?

Terms of Trade issued by a supplier of good or services is one of the most important documents when conducting business in New Zealand. This document sets out the terms and conditions that apply between a supplier and customer. Often these Terms of Trade contain what are commonly called Retention of Title or Romalpa clauses.

However, unless a supplier’s rights are registered on the Personal Property Securities Register (“PPSR”), these retention of title clauses are worth very little in the case of liquidation.  

What is the PPSR?

The PPSR is effectively an online noticeboard where suppliers give notice of a legal claim to personal property.

Anyone can access the PPSR and register their security interest (called a “financing statement”) for a small fee.  The financing statement identifies the debtor (the party giving security), the secured party (the person being given security) and the collateral (the assets over which the security applies).

Why is registration important?

Registration determines the priority of the sometimes competing interests of claimants. Without registration of such interests, the supplier becomes an unsecured creditor upon liquidation.  

In general, priority is dependent upon the date of registration, even if the underlying security agreement was completed much earlier. Therefore, registration of a financing statement should be completed as soon as possible.

The main exception to this is a Purchase Money Security Interest ("PMSI") which is where a supplier of goods takes a security interest over goods supplied but not yet paid for and also includes a lease over goods for a term of longer than one year. PMSI's have "super priority" over registered security interests provided they are registered within the required time frame.


If you would like to know about how to better protect your business or if you have any questions regarding the PPSR, ABMM has an experienced Commercial Team that is happy to assist.


Please contact: or call 06 757 5183


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