It’s very common for company directors and employees to use a vehicle that’s financed or leased through the company but registered in the person’s name and not that of the company. Even though the vehicle is ultimately registered in the name of the individual, the company obtains finance to purchase the vehicle and the company is liable for repayment of the finance.
Registering a security interest
If your vehicle is leased by your company, the finance company will register a security interest over the vehicle on the Personal Property Securities Register (PPSR). The PPSR is a national online register of security interests held over personal property such as cars, boats, inventory, plant, equipment or artworks. The PPSR is used to determine priority for secured creditors in the case of debtor default or liquidation.
What happens if the company ceases to trade and/or is placed into liquidation?
Who owns the vehicle? You, the company or the finance company?
The company liquidator will claim ownership of the vehicle for any equity remaining after the amount owing to the finance company has been accounted for. Even if the director or employee continues to personally make the finance payments, the liquidator can still sell the vehicle and use the equity (value of the vehicle less finance owing) to pay company debts. If the finance repayments do not continue by anyone, the finance company is likely to enforce its rights to sell the vehicle.
Registration does not equal ownership
You may assert ownership personally as you use the vehicle for both work and family purposes, and you may argue that the vehicle should not be taken from your possession as it is registered in your name at the Roads & Maritime Service (RMS).
A vehicle can be registered in the name of one person or a company name who is considered to be the operator of the vehicle but not necessarily the owner of the vehicle (see sections 5, 6 and 7 of the Road Transport (Vehicle Registration) Regulation 2017 (NSW).
Our firm had a recent claim by a company liquidator who:
- engaged the Sheriff to seize the vehicle from our client’s residence;
- demanded that our client continue to pay the finance which was entered into with the company, not our client;
- demanded that our client personally pay the liquidator the equity in the vehicle (after the finance amount owing had been accounted for), prior to release of the vehicle.
The fact that the vehicle was registered at RMS in our client’s name personally did not dissuade the company liquidator, or the Sheriff, from the liquidator’s claim that the company was the legal owner of the vehicle, or obtain his consent to release the vehicle without payment.
What should you do?
If your company pays for the finance of your vehicle and the vehicle is registered in your name personally, we recommend that you register a security interest in your personal name on the PPSR, noting your interest in the vehicle.
Once you register your security interest in the vehicle and if the company is placed into liquidation, it will give you priority over any liquidator’s claim in the vehicle. You will, of course, need to continue to pay the finance repayments on the vehicle which your company had previously paid.
Buying A Second Hand Vehicle
It’s also imperative that you undertake a PPSR security interest check prior to purchasing a secondhand car, to ensure that any finance owing on the vehicle by the previous owner has been paid. If you purchase the vehicle and there is still finance owing on it, the finance company can repossess the vehicle from you.
Please don’t hesitate to contact SRM Lawyers if you need assistance to register a security interest or if you have any questions about your rights in relation to a company vehicle.
ITC Note – Always Check Your Company Vehicle is Registered. You might drive a company car and for some reason they have failed to renew registration. If the police scan your numberplate and your car is not registered, it might be a long walk home. A friend of ITC had this happen to him on Victoria Road Ermington when the police scanned his number plate and found that his company had not renewed the registration.
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This is advice of a general nature, this article does not constitute legal advice and is not meant to be complete or exhaustive.
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