Legislation called the Personal Property Securities Act (PPSA) came into effect on the 30 January 2012. The legislation introduced a national online Personal Property Securities Register (PPS Register) which replaced other registers including the ASIC register of company charges. The act covers security interests over all forms of property other than land and buildings or fixtures which are a part of land. So whilst the term "Personal" is used in the Act title, it is not just personal in nature.
The purpose of the legislation is to improve the ability of businesses to use all their property in raising capital, as well as to clarity the position of competing creditors in an insolvency situation.
A personal property security is when a secured party takes an interest in personal property to secure payment or performance of an obligation. Examples include:
Under the PPSA, the concept of "title" is irrelevant and has been replaced by the term "security interests". Title itself will not equate to rights over property unless "security" over them is "perfected" in the PPS Register.
Effectively, if you own assets which you do not have possession of (e.g. inventory sold to a customer for which you are still owed the money), you are at risk unless your interest in the asset is registered.
Generally a security interest over personal property will be ineffective unless registered on the Personal Property Securities Registered. Where retention of title clauses are not registered, the clause will be ineffective if disputed by a liquidator. This is particularly true for companies, where by non-registered security interests will vest in the company upon liquidation and their only re-course would be to prove the debt against the liquidator and be paid out as an unsecured creditor.
In effect, without registration, any retention of title arrangements you have, may not be enforceable.
The online PPS Register as well as further information about the registered can be found at www.ppsr.gov.au.
Review your group structure, paying specific attention to agreements between entities, including leases and loans. This is particularly important due to the irrelevance of "title" under the Act. If security over property has not been correctly "perfected" by a related entity in the PPS register, separating entities may not protect your assets as they previously did.
Review your terms of trade if you supply inventory to other entities, especially if you have retention of title ("ROT") clauses in your contracts. If you have ROT clauses, ensure that these terms are in writing, signed by a person with appropriate authority and that the terminology accords with the concepts in the Act. These signed agreements should be in place before the supply of goods. Implied terms will not be sufficient to ensure priority under the Act.
Review your existing financing arrangements for registered and unregistered security interests. These may include financing and operational leases, consignment arrangements, personal/directors' guarantees, loans secured against personal property (e.g. motor vehicles), margin loans and factoring of accounts receivable.
If you sell goods with ROT terms or on consignment, you should register existing arrangements in the PPS Register. The period of registration (up to 7 years, 7-25 years or indefinite) will depend on whether you will have future transactions with the buyer and whether you want to register each time you make a sale. Sellers are able to register a single registration against buyers for multiple future sales.
If you lease or bail personal property to others for more than one year (or indefinite periods), you should register existing arrangements in the PPS Register. If you lease real property to others, you should ascertain if personal property is included in these leases. If so, you will need to register these as a security interest. Ensure that all lease agreements are in writing, signed by a person with appropriate authority and that the terminology accords with the concepts in the Act.
If you lend money or secure obligations, ensure that your security documents accord with the concepts in the Act. Register the interest on the PPS register.
Review your credit policies for new customers and develop standard PPS registration procedures to be implemented. This may include but not be limited to:
Check the PPS Register to ensure that all security interests recorded on another register have been successfully migrated to the PPS register. If the security interest is missing or incomplete, contact the PPS Contact Centre on 1300 007 777 to determine what action may need to be taken.
If you buy goods:
Create a secured party group by going to the PPSR website and submitting details of your organisation including names, addresses and phone numbers. Record the secured party group number and access code.
Create a registration on the PPSR website. You will need the following information to create a registration:
The fee payable will depend on the duration of the security interest.
Once the registration is complete, you will receive a verification notice via email or post. You must provide a copy of the statement to the grantor of the security interest as soon as reasonably practicable after the registration.
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Disclaimer
The information provided in this information sheet does not constitute advice. The information is of a general nature only and does not take into account your individual financial situation. It should not be used, relied upon, or treated as a substitute for specific professional advice. We recommend that you contact Brentnalls SA before making any decision to discuss your particular requirements and circumstances.
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