What is the Personal Property Securities Act?
In general terms the Personal Property Securities Act, the PPSA in short, is a revolution in Australia’s commercial law system. It changes the way debts are secured over personal property (being any property other than an interest in land).
Specifically security taken to secure payment of a debt should be registered on the Personal Property Securities Register, the PPSR in short. The PPSR is an electronic register accessible 24 hours a day.
As the PPSA only involves personal property it does not affect any charges that may be taken over land and any caveats that are lodged over the land, to secure debts.
What else should be registered on the PPSR?
While the PPSA most commonly covers security taken over personal property, it also extends to some leases or bailments of personal property, even though the lease or bailment is not a security.
A bailment is a situation where items are delivered to another person for safekeeping or a specific purpose. An example of a bailment would be when a car is delivered to a mechanic to have the car serviced.
If the lease or bailment is one to which the PPSA applies, then the lease or bailment should be registered on the PPSR.
A retention of title clause provides that when goods are sold, even though possession of the goods is transferred to the purchaser, ownership does not pass until payment is made. It has been commonly used in Australia to help a seller of goods ensure that it receives payment. A retention of title clause is not a security, but it should also be registered on the PPSR.
Who should consider the PPSA?
Any person who sells goods or services on a credit basis and wants to secure the debt needs to carefully consider the PPSA.
How long do you have to register?
If the item to be secured is inventory, then registration of the security interest should take place before transfer of possession of the inventory.
If the item to be secured is not inventory, then registration should take place within 15 business days of transfer of possession.
What happens if you do not register within the specified time?
If you miss the time specified for registration it is possible to have a late registration, although there may be a loss of priority for the security interest.
The effect this has on Unfair Preferences
An unfair preference arises when a purchaser of an item, having paid a seller a debt due to the seller which is not secured, becomes insolvent. The insolvency practitioner is then entitled, under certain circumstances, to claim this money back from the seller.
Registration of a retention of title clause on the PPSR may assist the seller avoiding such unfair preferences if they were secured at the time of payment.
What happens if you fail to register?
The consequences of not registering are severe, potentially leading to a loss of priority for the security. Also in the cases of the leases, which are required to be registered under the PPSA, a failure to register may lead to a loss of ownership by the lessor of the assets.
How does this affect existing arrangements?
The PPSA commenced on 30 January 2012 however it still applies to all securities taken prior to that date. It also applies to certain leases and bailments taken prior 30 January 2012. The PPSA allowed a period of 2 years, expiring on 30 January 2014, where the existing arrangements were deemed to be registered. If the existing arrangements were registered before 30 January 2014, they were deemed to be registered from 30 January 2012 onwards without any loss of priority or rights.
If you have any queries or require any assistance with regards to the PPSA and PPSR please do not hesitate to contact Harrick Lawyers on (03) 9670 2266.