PPSR - Securing Against Customer Insolvency

If you buy or sell goods on credit, or rent or lease equipment, are your rights actually secured?  

The new Personal Property Securities Act 2009 is impacting the way businesses protect themselves against the potential insolvency of those with whom they trade. Coming into effect on 30 January 2012, the Personal Property Securities Act has changed the way creditors secure their interests, and will affect many businesses.  

‍What Is It?

‍The Act created theCommonwealth Personal Property Securities Register ('PPSR'), an online register of all personal property that has security interests registered against the property. This means that any motor vehicle, stock, plant equipment, boat or other property that is collateral to a secured loan or is subject to a retention-of-title clause will be quickly and easily identified on one central database. In order for the creditor's interest to be secured, the property must be "perfected", or registered on the PPSR, with the goal of providing one simple, transparent system to administer all secured interests.  

The benefit for businesses is that the PPSR allows you to quickly identify pre-existing secured interests or secure your interest in stock, leased equipment and collateral, protecting you in the event of customer insolvency.  

‍How Does It Work?

The website www.ppsr.gov.au provides a detailed explanation as to how the PPSR works. Users can search for specific property to find out whether it is already subject to a secured interest like a bank mortgage or finance agreement, and the website provides for simple registration of new interests such as suppliers' retention-of-title clauses. Once perfected, the registered party's rights in the relevant property have priority over subsequently registered interests.  

‍If I Don't.

Failure to register your security interests on the new Personal Property Securities Register can be a costly mistake, because if you do not have a registered interest and your customer becomes insolvent, you will be barred from claiming a secured interest in the specific property. Instead, you will join the list of other unsecured creditors with only the prospect of receiving a fraction of the debt.  In short, if your property is in the possession of someone else, you should consider registering your interest - or risk losing it entirely.  

‍What Should I Do?

Changing the way you do business with the PPSR doesn't need to be a big task, but it is something you should make a priority:

 
• Identify any existing security interests which should be registered on the PPSR
 
• Update standard trading terms and retention-of-title clauses in your sales and lease contracts
 
• Establish a PPSR registration procedure
 
• Follow it!

If you need help reviewing the way you do business under the PPSR, feel free to contact one of Hutchinson Legal's business experts on 03 9870 9870.