The role of PPSR Searches in a Sale of Business
Prior to execution of a sale of business contract, and whether you are a vendor or a purchaser, your solicitor should undertake a search on the Personal Property Security Register (“PPSR”) for the vendor, as the normal agreement in a sale of business is that all assets of the business are to be sold free of any encumbrances.
What is the PPSR?
The PPSR is an Electronic Government Register that provides public notice of security interests registered against personal property, including goods and assets of the vendor. Undertaking such a search will identify whether there are registered security interests over the property and stock of the business being sold.
Potential for Delay
If there are registered security interests over any of the assets of the business being sold, then the vendor will need to have them removed prior to completion of the sale. It is, therefore, essential that a PPSR search be undertaken as soon as possible to allow the vendor sufficient time to remove any registered security interest, which may involve a refinance or payment of monies owing to the holder of the security interest to avoid any delay in completion.
Impact of not undertaking a PPSR Search
If both parties failed to undertake a PPSR search and there are registered security interests over any business asset, then the vendor would be in breach of the contract for sale of business (and potentially the agreement that gave rise to the security interest) and the purchaser will inherit the assets subject to the encumbrances. The purchaser would then inherit the risk of the secured party taking possession of the asset, subject of the security interest, which would then likely result in the purchaser having to claim damages against the vendor for breach of contract.