Personal Property Securities Register - relevant for all suppliers
The PPSA (Personal Property Securities Act 2012) was introduced on 30 January 2012. It combines more than 70 or so Commonwealth, State and Territory Acts into a single, national law which, amongst other things, governs the taking and granting of security over personal property. Personal property includes all forms of tangible property (e.g. goods) and intangible property (e.g. trademarks and licenses) and so its effects are wide reaching and affect all Australian businesses in some way.
Why do I need to register?
What is significant for Australian businesses is that transactions not previously regarded as security interests under the old laws have become so under PPSA and these now need to be registered on the PPSR to give the supplier rights to the supplied goods/services/intellectual property. The two main areas that have changed are:-
The sale of goods/services/intellectual property on credit terms subject to a retention of title (ROT) clause. The seller is effectively taking security in the supplied goods/services/intellectual property to guarantee payment. Sellers that register correctly and within time now have enhanced rights that were not previously available. Not only do they have rights to recover their stock but they can now trace their supplies into finished goods and even into debts created from the sale of their supplies.
The PPSA is extremely beneficial for suppliers of goods/services subject to ROT.
The lease, rental or bailment (passing of physical possession) of an asset to a customer. The PPSA law which governs these arrangements is extremely harsh on suppliers of hired equipment. If a correct registration is not placed on the PPSR within a specified time then the supplier of the hired asset risks losing it if a customer in possession enters any form of external administration i.e. liquidation.
It is vitally important that suppliers of goods on rental terms register against their customers on the PPSR to protect from losing their equipment. It is not enough to register the asset. The customer MUST be registered.
Other benefits of registering
There are many other benefits to registering all of your customers on the PPSR. If you register you become a secured creditor and can defend a Corporations Act 5588 Unfair Preference claim from a liquidator. For those unaware, a liquidator can demand the return of payments made by an insolvent company to its creditors during the six months leading up to a liquidation appointment on the basis that those payments should have been divided equally between all of the unsecured creditors. Registration on the PPSR elevates the supplier to the status of secured creditor and, accordingly, protects the supplier from this ‘clawback’ provision.
Lawyers acting for buyers of businesses will ensure that PPS registrations placed against the business are discharged unless the buyer is willing to accept the ongoing security. This means that if you register against all customers you will find that your customers selling their businesses are keen to pay you to obtain a PPSR discharge and sell the business.
What happens next?
Our affiliate Inspired Business Services (IBS) will need to review your customer Credit Application and Terms of Trade to ensure they contain the correct PPS Act 2012, Security and Privacy clauses, as well as consideration for the Unfair Contracts Act Nov 2016. A quote will be provided once documents are sighted.
IBS can then create your Company as a Secured Party Group (SPG) on the PPSR – at a cost of $350.
An email will need to be sent to all customers with a copy of your new Terms of Trade, stating that all future trading will be subject to the new Terms of Trade. Under the PPS Act 2012, the customer’s written acceptance of those new Terms of Trade is not required, so long as the customer has been duly notified. It is not sufficient just to attach the new Terms of Trade to your Quotes/Invoices.
IBS can then register your security interest on your customers – for a fee of $80 plus gst each (discounts available for bulk registrations). You can choose to register all customers, or a selection of customers with which you have the highest risk/exposure. Registrations last for 7 years.
Call us on 07 5536 3055 to make a no-obligation appointment with one of our solicitors.
Cost Free Initial Consultation
If you are interested in knowing more about how we might be able to assist you, please call 07 5536 3055 to make a cost free initial, 40 minute consultation with our Principal, Mr Jim Wilson.