Perfection is required to make security interests strong against third parties. It is a general way to refer to various methods that a secured party can use to “advertise its security interest to the world” to put others on notice that they should be careful before taking an interest in the collateral. The very reason for all personal property secured transactions systems is to alert creditors to the state of encumbrance of a debtor’s/grantor’s assets, so that creditors can deal with them on an informed basis.

We have seen (paragraph 15.1.2 of Chapter 15 (Why the PPSA?)) that this is sometimes referred to as the apparent ownership problem. It arises because debtors/grantors may appear to own personal property in their possession or under their control. This could fool creditors into extending credit against already encumbered personal property unless there is a way to discover the true state of encumbrance of a debtor/grantor’s assets.

The purpose of the PPS Register is to create a single, comprehensive, national database which creditors can search to ascertain the state of encumbrance of a grantor’s assets and thus the credit-worthiness of a grantor. The PPSA in general, and perfection by registration on the PPS Register in particular, are designed to address the apparent ownership problem.