Personal Property Securities Register (PPSR)
On 30 January 2012 the PPSR was established as a single, national online register where lenders and businesses register their security interests over personal property. Personal property is any form of property other than land or buildings and fixtures. It can include tangibles such cars, boats, machinery and crops; as well as intangibles such as shares, intellectual property and contract rights.
A security interest is created when a secured party (e.g. a lender) takes an interest in personal property of a grantor (e.g. a borrower), as security for a loan or other obligation.
The PPSR changes the concept of ownership and will eventually provide a definitive list of all security interests in personal property of an individual or corporation.
Retention of Title
Retention of Title (ROT) is a provision commonly found in a supply agreement, contract for sale of goods or lease of goods which states that the title to the goods remain with the seller or supplier until such time as the seller or supplier receives payment for the goods (or the buyer fulfils certain other obligations).
The main purpose of ROT clauses are to ensure that where goods are supplied on credit, if the buyer subsequently goes into liquidation or bankruptcy, the seller can repossess the goods.
With the introduction of the PPSR a ROT clause means nothing unless you take the time to register your interest. Here are a few snap shots which highlight the practical importance of PPSR registration:
Premium Fresh
In August 2012 Tasmanian vegetable company Premium Fresh went into voluntary administration. An agreement between Premium Fresh and its creditors in late September specifies that Premium Fresh will continue to trade but creditors will only recoup 20 cents in every dollar they are owed.
Many suppliers rushed to register their interests on the PPSR after the announcement that Premium Fresh had gone into voluntary administration however missed out on being considered by the administrators as suppliers were simply too late in having their interests registered on the PPSR.
The PPSR provides for individuals and businesses to record security interests in assets such as machinery, crops, livestock and grain (amongst other things) and the effect of the PPSR is that if a farmer registers their interest it will ensure they automatically become a secured creditor if their property is trapped in an insolvency dispute.
It is important for farmers and suppliers to review their agreements, especially those which include ROT arrangements, to ensure that they comply with the PPSR.
WOW Sight and Sound
As most would know, Wow Sight and Sound went into receivership after recording losses of $17M and $8M in 2010 and 2011 respectively. WOW’s supply arrangements were largely based on ROT agreements; however many suppliers failed to register these arrangements, leaving them unsecured at the time of WOW’s insolvency.
Time Frames
Although it is important for you to register your interest it is equally important to ensure that your registration complies with the timeframes as imposed by the legislation.
The basic rules are as:
• If the goods are inventory for your customer – before your customer obtains those goods
• If the goods are
not inventory
for your customer –
within 15 business days
of your customer obtaining possession of the equipment.
Remember – registration trumps!
Without intending to sound like a broken record we cannot stress the importance of registering your interests on the PPSR enough. It is one year since the PPSR commenced in Australia which means there is only 12 months of the “transition” phase to go before registration on the PPSR officially overrides the concept of ownership for all past and future transactions.
If you require further information on the Personal Properties Security Register and how it applies to you please contact Darren Sekac of our office.
