We are now over two and a half years down the track since the introduction of the Personal Property Securities Register ("PPS Register") with the enacting of the Personal Property Securities Act 2009 (Cth) ("PPS Act") which has revolutionised the national system for registration of security interests in Australia.
This Register has replaced over 40 different registers of security interests in Australia covering vehicles, plant and equipment, registration of patents, trademarks and designs.
Lack of knowledge and more importantly lack of action regarding the Personal Property Securities Act (PPSA) and the Personal Property Securities Register (PPSR) could be a time bomb for businesses.
Millions of dollars has already been lost by businesses that paid for an asset but had not registered that asset on the PPSR. Whilst it's voluntary to register, if you have a transaction that you wish to register, you have to do so within a very tight registration time period. A business needs to be continually reviewing transactions with:
|· debtors;||· service company arrangements; and|
|· loans made;||· asset rental, lease or storage,|
|· intellectual property agreement;|
to determine whether those transactions need to be registered on the PPSR.
As one of the key criteria for making a decision on whether to register on the PPSR, businesses need to determine their level of 'financial tolerance' to a potential business problem. If a registration is not made, whilst there may be no immediate problem (indeed, there may never be a problem), there's a possibility that, sometime in the future, there could be an 'insolvency event' with a customer, borrower, hirer, lessee or property owner where one of your assets is stored. This really is a potential commercial time bomb.
If you haven't already done so, we recommend you contact a PPSA specialist commercial solicitor for advice on a 'Terms of Trade' agreement and 'Retention of Title' agreement that comply with the PPSA legislation. If you had these agreements prepared prior to January 2012 when the Personal Property Securities Act 2009 (Cth) ("PPS Act") came into effect, the agreements probably don't comply with the PPSA legislation. It's a good idea to have a due diligence review of your systems, to ensure you have the ability to make decisions within the very tight registration time frame, if you wish to register a particular transaction on the PPSR.
Businesses in high impact industries that need to be especially diligent, relative to the PPSR requirements, include:
|· Retail||· Ingredient Suppliers|
|· Restaurants||· Artists and Sculptors relative to paintings, works of art, sculptures, etc|
|· Hospitality||· Manufacturers|
|· Trades and Contractors||· Farm Suppliers|
|· Wholesale Suppliers||(suppliers of products to farms including seed, fertilisers and pest control)|
|· Livestock Owners||· Livestock Feed Suppliers|
|· Farmers with crops||· Thoroughbred Horses|
|· Portable Building Renters||· Construction Businesses|
|· Equipment Renters|
When the GST was introduced, there was a major business education campaign, funded by the government. Unfortunately, there hasn't been a major campaign relating to the effects of the PPSA and the PPSR. Whist the GST couldn't send a business broke, ignorance of the PPSA and the PPSR could cause major financial problems for a business.
On 4 April 2014, the Attorney-General announced a review of the PPS Act to determine whether it has achieved its original objective of providing greater certainty to lenders and helping business to access finance. The interim findings of this report indicated that the PPS Act and the PPS Register are too complex and that many businesses are still unaware of the PPS Act, or do not appreciate the extent to which the PPS Act can impact on their activities.
The final report is due to Government on 30 January 2015 and is expected to contain recommendations on how the PPS Act should be reformed to ensure it achieves its objective.
If you are unsure of your need to act to ensure your assets are secured under PPRR please speak with your usual Hanrick Curran adviser.
Please note that this publication is intended to provide a general summary and should not be relied upon as a substitute for personal advice.