PPSR: The Essential Guide to Becoming a Secured Creditor in New Zealand (Or How Not to Become Poor in Liquidations)

Welcome to the not-so-glamorous side of business ownership. Where invoices don’t always get paid, customers sometimes vanish, and the phrase “we’re just waiting on finance” becomes all too much of a reality.

If your business sells on credit or lets customers pay after the work is done… then you are a lender. And if you’re a lender without security, you can easily become a volunteer.

Here at Debt Free, we deal with one thing every day: businesses who didn’t think they needed protection… until they desperately did.

If you’ve ever:

• lost money from a liquidation,
• been told “you’re unsecured” (as if that’s normal), or
• stared at a liquidator’s email with mild nausea…

Then this article is for you.

What Is the PPSA and Why Should You Care?

The Personal Property Securities Act 1999 (PPSA) changed the game in New Zealand.

Before it existed, if a debtor went under, you were:

• in a messy line,
• with everyone else,
• holding an invoice as your only weapon.

Now?

The law gives you a way to stake your claim.

The PPSA governs the creation, prioritisation, and enforcement of security interests over personal property. That personal property includes things you probably care about, like security over materials and money.

The Act also created the PPSR, the Personal Property Securities Register, to make those security interests visible and enforceable.

Think of the PPSR as a public noticeboard that tells the world: “That money or asset is mine if things go wrong.”

The PPSR is an online government register. It lets you:

• record your interest in goods
• protect your position
• outrank other creditors

and avoid becoming an afterthought when insolvency hits.

If it’s not registered… You don’t exist.

If it is registered… You’re playing in the real league.

The PPSR decides:

• who gets paid
• in what order
• and who walks away empty-handed.

Spoiler: unsecured creditors don’t usually win.

No agreement = no protection.
No registration = no priority.

The Liquidator’s Letter You Never Want to Receive.

And here’s the kicker…

Being unsecured doesn’t just mean you might not get paid.

It can mean you have to give money back.

Most business owners are shocked when they discover this:

If your customer pays you…
…and then later goes into liquidation…

…the liquidator may demand the money back.

Why?

Because the law allows liquidators to claw back payments paid to unsecured creditors within:

• 6 months prior to liquidation,
• or up to 2 years in some cases.

That’s called a voidable transaction.

You get paid.
You celebrate.
Months later…
You’re told to return the money.

Why?

Because you were unsecured.

And unsecured creditors don’t often “get lucky” in insolvency.

This rule exists to stop fraud, favouritism and manipulation.

But it hits innocent businesses hardest… unless you secured your position.

How the PPSR Makes You Bulletproof

If you’re registered correctly on the PPSR:

• Your position becomes secure
• Your risk is reduced
• Your payments are protected
• Your exposure to clawback decreases
• Your leverage improves immediately

In liquidation…

Security wins.

Why Debt Free Does This Differently

We don’t just register interests.

We build:

• PPSR strategy
• documentation systems
• Early insolvency Alert systems
• compliance structures
• client education

Because registering is not enough.

Managing it properly is what keeps you paid.

Final Thought

The PPSR didn’t create risk…

It exposed it.

And it gave business owners the power to eliminate it.

Before the PPSR, you had no choice.

Now you do.

You can:

• trade blind
• remain unsecured
• hope nothing goes wrong…

Or you can:

• secure your position
• eliminate clawbacks
• out-rank other creditors
• recover faster
• sleep better

The PPSR doesn’t favour the biggest business.

It favours the smartest one.

And the smartest ones register.

Mark Mclachlan

Voidable Transactions & Clawbacks: What Every Kiwi Business Should Know

Cash flow isn’t just about getting paid. It’s about keeping it.

Imagine you’ve just nailed a big job, invoiced the client, and the money’s in your bank. Sweet as. But what if the company goes belly-up a few weeks later, and the liquidator demands you give that money back? Painful, right? That’s the reality under New Zealand’s law on “voidable transactions” (aka clawbacks).

At Debt Free, we don’t like unpleasant surprises. That’s why we’ve put together this guide: to show you how clawbacks work, when you might be vulnerable, and what you can do to avoid getting caught out. Consider it your insolvency raincoat, just in case the weather turns bad.

What is a Voidable Transaction (and Why Should You Care)?

A voidable transaction, also known as a clawback, is a payment or transfer made by an insolvent company that unfairly prefers one creditor over others. If the company ends up in liquidation, the liquidator can “unwind” that payment, demanding the funds back so the money can be shared fairly among all creditors.

When can it happen?

• The payment or transfer happened within two years before liquidation (the “specified period” under the Companies Act 1993). We find transactions within the last 6 months are targeted, and anything beyond this is outside the norm.
• The company was insolvent at the time and unable to pay its debts when due.
• The payment or transfer gave the recipient more than they would have likely received in liquidation.

In short, if you were paid just before a company collapses, even innocently, you might end up being asked to hand that cash back.

Types of Voidable Transactions (The Usual Suspects)

The “Good Client Gone Bad” Payment

They were paying fine… until they weren’t.
Then one last payment lands.

That’s often the one the liquidator wants back.

The “Mate’s Rates” Deal

Assets sold cheap.
Invoices forgiven.
Debts magically disappear between related parties.

Liquidators hate this stuff.

The “Director Shuffle”

When money or assets start moving between related companies, shareholders, or family members, before liquidation.

Red flag?
Yes.

Also, “transaction” in this context is wide-ranging: money paid, property transferred, charges created, even some credit-note or receivable assignments. Doesn’t matter whether it’s a court order, a cash transfer, or a property swap. If the substance is a payment or transfer, it counts.

The Law Behind the Curtain — What Sections 292–296 of the Companies Act Mean

• Section 292 defines when a transaction becomes “insolvent” and thus voidable.
• If the transaction falls within the “specified period” (typically six months to two years before liquidation), it can be clawed back.
• A key principle behind all this is the pari passu rule, the idea that all unsecured creditors should share equally in what remains. If one creditor gets preferential treatment, it can be unwound.

Can You Fight a Clawback?

If you acted in good faith, had no reasonable grounds to suspect insolvency, and gave value (or changed your position believing the payment was valid), the clawback may not succeed.

Notably, the Supreme Court ruling in Allied Concrete Ltd v Meltzer confirmed that “gave value” can refer to value given when the debt was originally incurred, not just contemporaneously with the payment. That gives creditors some protection… but being secured is a far safer and lower cost option.

But here’s the catch…

Liquidators start with “Pay it back”.
You respond with “Here’s my evidence”.
And guess who usually wins if your paperwork is not up to scratch?

Not you.

Real-World Example: When Things Go Really Pear-Shaped

Picture this: You’ve been supplying building materials to a construction company. A bit before they go under, they make a big payment to you, everything’s all good. But then, liquidation hits. The liquidator reviews transactions from the past six months and sees your big payment. Under insolvency law, that payment might be considered a preferential payment. You get a letter demanding repayment.

That’s not theory. That’s what can actually happen under the clawback regime. You might (and likely will) be expected to hand the funds back, even if you didn’t know anything about insolvency or that the company was on its last legs. That’s the reality of voidable-transaction law.

So, What Should a Business Owner Do to Protect Themselves?

• Do your homework up front. Before you extend credit or supply goods, check the company’s financial health through credit checks (a credit check is never a waste of time).
• Don’t over-extend credit. Limit your exposure; don’t let debts pile up without documentation or security.
• Use strong Terms & Conditions. Require signed and enforceable trade terms, including retention of title, security interests (e.g. under Personal Property Securities Act 1999), and consider personal guarantees when dealing with companies.
• Keep detailed records. Invoices, delivery dockets, payment history, correspondence. If things go sideways, documentation is your lifeline.
• Avoid large payments just before financial trouble (if you can smell it). Paying out big balances right before red flags appear is precisely what attracts clawback claims.
• If you receive a clawback notice, act fast. You typically have only 20 working days to respond before the payment becomes automatically voidable. Seek advice, gather evidence, respond with your defences (good faith, value given, running account).

Why Debt Free Ltd Thinks About This So You Don’t Have To

At Debt Free Ltd, we don’t just help recover debts; we help you stay protected before you even issue an invoice.

Because once liquidation happens, the liquidator doesn’t care whether you were a friendly creditor or a trading partner who gave the benefit of the doubt. If the money was paid within six months and the company was insolvent, it’s game on, and you might get a clawback notice.

We help you:

• Draft rock-solid Terms & Conditions
• Set up security interests
• Screen new clients with accurate credit checks
• Monitor credit files for early signs of insolvency
• And tailor payment arrangements that minimise clawback risk

In short, we try to make sure you get paid, and that when you do, you actually keep it.

Final Thought

If you want your payments to survive liquidations, your contracts to bite back, and your cash flow to stay yours… Debt Free Ltd is here to help.

Mark Mclachlan

Why Debt Free’s Passion Is Your Best Defence

At Debt Free, our passion for what we do is not just a marketing tagline; it’s the engine that drives our entire business. We don’t just manage debts; we protect livelihoods.

We’ve taken countless calls from business owners in crisis. Companies facing unending disputes because they skipped proper Terms & Conditions; sole traders who did a top-quality job only to face a legal blockade and their own insolvency; A builder who forgot to put a subcontract agreement in place, left hanging when a subcontractor installs faulty products across multiple properties.

We’ve seen what happens when paperwork is weak or non-existent, and the fallout can be brutal. But we’ve also witnessed the inverse: when our clients come to us using our solid Terms and Conditions, good credit practices, and the backing of our debt-recovery tools, they dodge disasters.

Sometimes what we help them recover isn’t just cash, but their business’s future, their family’s security, and their peace of mind.

We could call it “just business.” But we don’t.
Because to us, it’s personal.

Passion Matters. Especially When Stakes Are High

Research shows that entrepreneurs driven by genuine passion, whether for the product, the process, or the purpose, are far more likely to push through challenges, stay committed, and build sustainable businesses.

Passion fuels resilience. It gives you the fire to tackle tough situations, like unpaid invoices, legal disputes, or clients who vanish. Without passion, you’re just running a business; with it, you become a protector of value, trust, and fairness.

At Debt Free, our passion isn’t just for debt recovery; it’s for giving you back control. When you call us because a major job has gone sideways, or a once-reliable client refuses to pay, you’re not just another file on our desk. You’re someone who believed in their work, put in the sweat, and deserves to be paid.

That belief drives us harder than any fee schedule.

Real Problems We’ve Seen And How They’re Preventable

Here’s what we hear regularly:

• A business owner who thought “it’ll be fine” without written Terms, only to be blindsided by a client dispute spanning years.
• A sole trader who did an excellent job without any paperwork, only to have the client bring in lawyers, stall payment for months, and push them close to insolvency.
• A subcontractor’s installation required millions in repair work, but because there was no subcontractor agreement, a builder ended up fighting in court for months without recouping any costs. The builder remains liable for the repair work under the head contract.

These situations are avoidable. Not because business is easy, but because with the right paperwork, clarity, and protection, you put yourself in control.

We’ve helped clients avoid these disasters. We’ve seen clients save tens, hundreds, or even millions of dollars, enough to protect their business or even save their family home.

That’s why we get out of bed in the morning.

We’ve Seen Both Ends of the Spectrum, And We Choose to Change It

We’ve seen businesses collapse not because they lacked skill or heart, but because they lacked proper protection. We’ve seen honest tradies left chasing ghosts. We’ve seen companies bleed cash when clients delayed payment, disputed jobs or went bust.

But we’ve also seen the other side: businesses saved, cashflow restored, families secured. Practices that looked like paperwork saved livelihoods. Contracts that looked like formality delivered real-world results.

That’s why Debt Free exists.

Because we believe in business, we believe in tradespeople. We believe in fairness.

And we believe that passion, when combined with clarity and structure, can make all the difference.

Final Word

If you’re serious about your business, treat your paperwork with the same respect as your workmanship.

If you’ve ever swallowed the line “we’ll sort payment later,” stop.

If you’ve ever thought, “we don’t need a contract, we trust them,” think again.

Because in business, as in life, passion matters. But what you invest that passion into matters even more.

Mark Mclachlan