Businesses not prepared for the introduction of the Personal Properties Securities Act (PPSA) as its 30 January commencement date looms
The Personal Properties Securities Act 2009 (PPSA) has been heralded as one of the most significant pieces of legislative reform for Australian business in many years. For such an important piece of legislation, albeit one that has suffered a few false starts in terms of implementation, it is a wonder that so few business owners are fully aware of the implications of the PPSA, particularly given it’s confirmed commencement date of 30 January 2012.
The PPSA has been designed to overhaul and simplify the registration of security interests in personal property nationally as it will consolidate the 70+ Commonwealth, State and Territory Acts and security registers that regulate personal property securities into one single national register or remove them entirely. It will provide businesses with peace of mind when transacting with personal property as it will be easier to see if the property concerned is subject to any third party interests (such as retention of title, leases and financing arrangements).
However it will also require significant changes to the way businesses operate, in particular those that sell goods to customers on credit terms or lease goods to customers, thereby retaining a secured interest in the goods sold, and businesses that offer secured loans to their customers. Under the new regime businesses must register their security, ownership, or interests on a new national Personal Properties Securities Register or risk losing their rights to property in possession of another entity in the event of liquidation. In fact the priority of secured creditors in the event of insolvency will change.
MSI Global Alliance spokesperson Alec Blacklaw advises “Many businesses operating today will consider that they have watertight contracts, terms and conditions of business and the like which cement their ownership rights in the event of a default or a company entering liquidation. But under the PPSA regime, that will not be enough. The reality is that in the event of a default there may be many others in the ‘queue’ to recover debts or property. The PPSA is designed to give clarity and consistency to the ‘queue’ – but the key to this is the correct and proper registration of the security interest in the property in the first place.”
In fact in a recent MSI Global Alliance survey of 570 Australian business owners and managers revealed that 65 per cent of businesses have not yet ‘heard of or read about’ the Personal Properties Securities Act 2009 (the PPSA). With this in mind, 35 per cent of those businesses who said they have not heard of the PPSA currently sell goods to customers on credit terms and almost 10 per cent are currently leasing goods to customers. These businesses and thousands like them around Australia will need to become conversant with the new registration regime and given the commencement date, they will need to do so relatively quickly.
MSI Global Alliance recommends the first thing business owners need to do is find out if it will affect their businesses. Businesses will need to carefully consider specifically how, under the new regime, they protect any ‘personal property’ which they own or which they have an interest in. This may include seeking appropriate advice to assist with:
1. Reviewing trading activities and checking standard terms of supply, financing arrangements and contracts;
2. Identifying the assets which are affected and property which needs to be registered on the Personal Property Securities Register (PPSR) to ensure priority (as in most cases a registered interest will have priority over an earlier unregistered interest);
3. Redrafting standard terms and preparing new internal procedures for registering interests.
For more information or to arrange an interview, please call Maree Schneiders on 0411 446 484 or maree@strategyco.net
Defining
‘personal property’ under the PPSA:
‘Personal property’ includes virtually any property which is not real
property or fixtures. It may include money,
goods, motor vehicles and intellectual
property.
About MSI Global Alliance:
MSI Global Alliance (MSI) is a global association of independent legal and accounting firms. Legal member firms in Adelaide, Brisbane, Melbourne, Perth and Sydney are all able to advise businesses on the impact of the PPSA. Visit www.msi-anz.net.
Case Studies:
A local equivalent of the PPSA came into effect in New Zealand in May 2002 and MSI’s New Zealand lawyers have seen the significant impact of the PPSA across a cross section of the New Zealand business community.
New Zealand Bloodstock Limited v Waller [2006] 3 NZLR 629 (CA)
New Zealand Bloodstock leased a thoroughbred stallion in a hire/purchase arrangement to Glenmorgan Farm Limited. When the farm failed to make repayments under the agreement, New Zealand Bloodstock repossessed the stallion and the farm subsequently went into receivership. New Zealand Bloodstock had failed to register the agreement, which was capable of registration, and a bank, which held a debenture over all of the farm’s assets, had registered its interest. Despite New Zealand Bloodstock having possession of and title to the stallion, the bank was found to have priority and accordingly was able to take possession of, and sell, the stallion.
