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Important Update – Delay to PPSA commencement date

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Delay to PPSA commencement time

As part of our ongoing series to keep you up to date with Personal Property Securities Act (PPSA) developments, the Commonwealth Government Attorney General’s PPSA Department has advised the commencement date of 31 October 2011 cannot be reached.

Although the PPS Register has been built and will shortly be ready for a ‘soft launch’, a public release date of 31 October 2011 is not achievable. It is proposed that the system be tested properly before it goes live hence the delay in launch date.

The PPS Act provides that 1 February 2012 is the last possible commencement date and a draft plan has been developed to make the register publicly available before 1 February 2012.

Although a draft schedule showing a PPS Register commencement date of 30 January 2012 is now being discussed, it is important to note that this date has not been confirmed as yet.

Irrespective of what date is finally determined for launch of this transformational system, we recommend every business take adequate steps to prepare as soon as possible.

What every business needs to do

The PPSA is modelled on similar systems in Canada and New Zealand. Our research has shown that there is a litany of case law in New Zealand in the early years after PPSA launch, where businesses lost their assets because of a failure to address PPSA requirements.

With the delayed PPSA launch, we recommend you use the valuable extra time to:

1.  Arrange a briefing about the PPSA

It is important to understand the new PPSA regime: its terminology, potential issues for your business, and why and how the new legislative regime will operate. There is a lot of confusion about the PPSA but in our view it is a system that can provide most businesses with added protection and support.

2.  Consider if and how the PPSA will impact your business

The PPSA has wide scope – in affect it applies to all personal property excluding real estate/land and water rights.

The PPSA will most likely apply if your business:

  • Supplies goods on credit to customers (eg on retention of title terms)
  • Has documentation in place which includes charging clauses that require the provision of security over personal property
  • Provides finance or credit of any form (eg hire purchase) for which  security is required
  • Leases equipment (subject to a lease agreement or provides goods on leasing arrangements)
  • Operates a dealer structure where goods are provided via floor plan finance arrangements
  • Provides goods to customers who factor their debts
  • Finances receivables
  • Licences intellectual property
  • Takes security over personal property from a third party in order to secure the performance of an obligation to your business

3.  Update relevant documentation

Your business documentation such as ‘Terms and Conditions of Trade’ will need to be PPSA compliant. This requires a review of your business ‘paper trail’ to identify which documents should be amended.

4.  Develop internal systems and procedures

You will need to address how your business will manage security interests (including registrations) on the Personal Property Securities Register (PPSR).

5. Check existing financing arrangements

If your business is subject to a fixed and/or floating charge (eg: a ‘Form 309’ lodged with ASIC), it will be automatically ‘migrated’ to the Personal Property Securities Register (PPSR). This documentation should be checked carefully prior to migration.

Financiers and banks are starting to amend financing documentation to incorporate PPS legislative requirements. The new covenants require business to comply with certain aspects of the PPSA. It is important every business subject to such financing arrangements appreciate PPSA compliance provisions as a failure to do so may find your business in default of the financier’s covenants.

If you haven’t addressed what your business needs to do to be PPSA ready and you require assistance, please contact Susan Reece Jones in our Corporate Advisory Team.

MST: a member of the Attorney General’s PPSA Legal Special Interest Group.

Send an email to Susan