Selling your business can be both exciting and stressful at the same time. Once a purchaser is found the parties usually move as quickly as possible to enter into a sale contract and then to completion.
An area often overlooked by a seller is taking the time to consider what security registrations (PPSR Interests) under the Personal Properties Securities Act (PPSA) may exist over the assets being sold including vehicles, stock, plant and equipment.
Standard Sale Condition
If the Contract for Sale of Business 2015 edition is being used:
- a standard clause requires a seller to provide a release of each security interest that applies to the assets being sold (or such other statements or documents confirming the security interest does not apply to those assets
- often a seller mistakenly believes that because they have already paid for various assets that they are not subject to any security interest
- thus it can be quite a surprise to receive a PPSA search showing security registrations do in fact exist
Inherent difficulties with obtaining a release of each security interest are:
- a seller needs to make a request to the entity/person who has the benefit of the PPSR
- that third party may not necessarily work to the same timeframes as a seller and purchaser
- delays caused by that third party can affect the time for completion of the sale
Due Diligence Check
A search for a PPSR interest is inexpensive and by obtaining the search at or before the time the sale contract is being prepared it can eliminate future surprises and potentially costly delays.
If you would like more information about the PPSR, selling your business or any other legal matter, please contact the leading commercial lawyers in Parramatta, the Matthews Folbigg Commercial Law Team on 9635 7966 to speak with one of our commercial lawyers.