The Personal Property Securities Act has had a dramatic effect in a variety of industries by changing the way in which companies protect themselves when supplying and trading with other businesses. If one business enters insolvency, administrators swoop in to assess the interests secured on any property in the possession of the business.
The Personal Property Securities Register (PPSR) is a central online database that details all the security interests registered against any property. In other words, it allows users to identify whether property such as vehicles, stock and equipment are subject to a loan, finance agreement or other secured interest, and allows for registering of any new interests like a retention-of-title clause.
The PPSR aims to make everything transparent when any disputes arise over secured interests. By fully complying with the PPSA and registering all your secured interests with the PPSR, your business can make a rightful claim to your property if a business you trade with enters insolvency.
Failure to comply with the PPSA can result in complete disaster. For example, you may supply a power generator to a customer through a leasing agreement. If that customer enters insolvency during the lease, the administrators will assess what property can be recovered for the creditors of that business. If your customer’s creditors are secured and you have failed to fully comply with the PPSA, you run a high risk of losing your claim and having all the leased property taken off your hands.
In some cases, the noncomplying supplier has sought finance for the purchase of an asset prior to leasing it out to a customer. This can lead to the supplier not just losing the asset itself, but also facing a debt to the bank without the collateral to support it.
It’s important that you seek compliance with the PPSA proactively. In other words, don’t wait until you find yourself in hot water as the damage may already have been done. The PPSR and corresponding Act are highly complex, and it’s important to get it right as partial compliance is not enough to protect your business. There are extensive resources available at the Personal Property Securities Register, so have a browse through to gain a better understanding of how it works. In the end, the best path to ensure your business is completely protected under the PPSR is to seek advice from legal professionals specialising in the area.Published 25 April, 2016