If you buy or sell goods on credit, or rent or lease equipment, are your rights actually secured?
The Personal Property Securities Act 2009 impacted the way businesses protect themselves against the potential insolvency of those with whom they trade and has changed the way creditors secure their interests.
The Act created the Commonwealth 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 and 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.
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.
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.
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
You must first have a security interest in the asset. This must be granted in writing in a loan agreement or other document and it must secure the repayment of a debt or performance of some sort of obligation.
A lease, bailment or consignment of personal property may also be registered on the PPSR if the arrangement meets the requirements to be a PPS Lease or Commercial Consignment.
Before you purchase goods valued over $5000,provide credit to a person or organisation, invest in, with or through a person or organisation, You should search the PPSR for the goods, person or organisation. This will show any registrations over the goods, or any security interests granted by the person or organisation.
There are a number of collateral types and classes. You must choose the correct class for the type of personal property. The most common classes are:
1. Motor vehicle, this includes goods such as cars, trucks, caravans, trailers, tractors and diggers. You may need the vehicle’s serial number (such as the VIN).
2. Other goods- a catch-all category to cover any goods not falling into any other category. You must list the specific goods in the registration, or refer to a document that lists them.
3. All present and after acquired property- this is a registration that applies to all current and future personal property of the grantor. It is common for a business to grant its main financier this type of charge under a general security deed.