Personal Property Securities Update
The new Personal Property Securities Act (PPSA) will commence at
1AM AEST on 30 January 2012.
What is the PPSA and how might it affect your business?
The PPSA will rationalise most existing laws and registers governing personal property securities and will introduce substantive changes to the current law.
The PPSA will establish an electronic register (referred to as the PPSR) which will replace most existing Commonwealth, State and Territory security registers including those for company charges (i.e. the ASIC Register), motor vehicle securities, stock mortgages and other securities affecting both tangible and intangible personal property rights.
Modelled on its Canadian and New Zealand counterparts, the PPSA also introduces a new range of terms and phrases that are important to understand.
If your business is a creditor, equipment lessor, consignor, provides goods on retention of title terms or purchases accounts receivable, you need to immediately address the impact the PPSA will have on your business.
It is very important to remember that the PPSA is a system of priority and NOT a system of title.
For example:
a) Goods supplied on Retention of Title terms:
If a business supplies goods to a customer on a retention of title basis, it needs to perfect its security interest by registration on the PPSR.
If the business does not perfect its security interest and the customer goes into liquidation, the business stands to lose its asset as title is no longer relevant: i.e. the liquidator may seize the business’ goods and sell them as part of the customer’s asset pool.
b) Leased goods
The consequences of failing to register a security interest on the PPSR in relation to leased goods are best illustrated by the landmark New Zealand case, Waller v New Zealand Bloodstock Finance Ltd.
New Zealand Bloodstock Finance Ltd (‘NZBF’) leased a stallion (valued at approximately NZ$2.5m) to a company known as Glenmorgan. NZBF did not register its security interest in the lease on the NZ PPSR. Glenmorgan’s financier had a security interest which was registered on the PPSR.
Glenmorgan defaulted in its payments to its financier and the financier appointed a receiver. Even though NZBF had reclaimed possession of the leased stallion, NZBF lost its title and rights of ownership to the stallion as it did not have a registered, perfected security interest. The stallion was ultimately sold by the liquidator and the sale proceeds passed to Glenmorgan’s financier.
The Government has recently provided some valuable PPSR E-Learning modules via YouTube. We would recommend that you review these links and consider the impact the PPSA may have on your business.
- Getting started http://www.youtube.com/watch?v=2h5oGAnsEcA
- Searching the register http://www.youtube.com/watch?v=Qf4vS4Z12Wg
- Creating an SPG http://www.youtube.com/watch?v=UxE0QExvXds
- Creating a registration http://www.youtube.com/watch?v=u_ZPjTOmDCg
- Creating an account http://www.youtube.com/watch?v=MyvJsJJUN8Q
What should you do?
Once you have determined what security interests may apply to your business, you should establish a system to register the security interests and retain all relevant records. For example, the financing and verification statements generated in the registration process on the PPSR are valuable records and should be kept on file.
It is also likely that you will need to amend your Terms and Conditions of Trade and other related paperwork.
If you require any assistance in relation to what impact the PPSA may have on your business, please call our Corporate Advisory Team.
Author: Susan Reece Jones
