Why your business needs to get PPSA savvy before 30 Jan 2014
While the Personal Property Securities Act 2009 (Cth) (the Act) has been operating for almost two years, the Act is still widely misunderstood or unknown to the average business owner.
As the Act is complex, there has been a tendency for many people to put PPSA compliance in the ‘too hard basket’ and many business owners still do not appreciate the risks they are exposing their businesses to by failing to register their interests in assets on the Personal Property Securities Register (the Register).
Under the Act, a ‘security interest’ is an interest in personal property (almost all non-land assets) which secures payment or performance of an obligation. Equipment leases, lending secured over non-land assets or goods being sold ‘on account’ all constitute security interests.
Up until this point, any security interest which existed prior to the Act commencing on 30 January 2012 was protected by the ‘transitional provisions’ in the Act, which meant that you did not need to register your interests on the Register in order to be protected.
However, this protection ends on 30 January 2014, making it more important than ever for business owners to seek legal advice on the effect of the Act to their business.
- Do you hire vehicles or equipment in the course of your business?
You must ensure that you have a written hire agreement signed by both you and your customer. If the hire exceeds a certain timeframe, your interest in the vehicle or the equipment must then be registered over your customer’s record on the Register, to protect that vehicle/equipment from a third party purchasing the item from your customer free of your interest. In this respect, the concept of ‘ownerships is King’ is no longer sufficient to protect your interest.
- Do you allow customers to purchase goods from you ‘on account’ (delayed payment terms)?
These payment terms constitute ‘retention of title’ interests, which arise when you own items supplied to a customer until the customer pays the invoice relating to those items. It is important that your terms of trade contemplate this interest and that you register this on your customer’s record on the Register - by doing so, you can elevate yourself to a position like a secured creditor, in the event of your customer becoming insolvent.
- Do you search the Register to ensure that you receive clear title to vehicles or equipment which you purchase for use in your business?
If these searches are not undertaken, you will be unable to take the equipment free of any interests registered on the Register, which means a party who has a security interest in the equipment or vehicle may take possession of the equipment or vehicle from you.
However, these searches are not required if you purchase equipment or vehicles from a retailer in the usual course of business.
If you have any concerns regarding the above matters, we strongly recommend that you contact our Business Services Team to obtain advice regarding the application of the Act to your business and what you should do to ensure that your interests are protected prior to 30 January 2014.
Our team possesses an extensive knowledge of the PPSA and provides advice with a commercial approach, recognising the imperfect world in which business operates.