Daniel Turk | September 2011 | Commercial Disputes & Insolvency
The Personal Property Securities Register start date will be delayed from 31 October 2011. The new date has not been announced but must be before 1 February 2012. The extra time allows businesses to become familiar with obligations under the Personal Property Securities Act 2009 (Cth) (“PPSA”) and be ready upon commencement.
Who does it impact? >> Trade creditors who supply goods under retention of title arrangements >> Financiers >> Businesses that lease goods
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PPSA - start date delayed
What action should be taken? >> Review your terms of trade and agreements with customers to ensure you are PPSA ready >> Put in place processes to register your interests in property held by your customers >> Educate your staff as to your obligations under the PPSA
Background The Attorney-General’s Department has announced that the PPSR register start date of 31 October 2011 will not be achievable. A new date has not been announced yet. However there is a deadline under the PPSA that commencement must begin on 1 February 2012 unless an earlier date is notified. The Attorney Generals department has stated that the register is built however final stage testing requires more time to avoid risk. It is expected to commence prior to 1 February 2012. The delay provides breathing space for businesses affected by the PPSA to get ready.
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PPSA - start date delayed
What do you need to do now before the PPSA commences? 1. Identify if the PPSA applies to your business. Any business which takes securities over its customer’s assets needs to be aware of the PPSA requirements. An example is a charge over an asset of your customer’s business securing monies owing. The PPSA also includes the following as security interests: (a) A supplier’s interest in goods which are sold under retention of title arrangements to its customers. (b) A lessor’s interest in goods which are leased to a customer for an indefinite period or over one year.
2. Ensure your trading terms are signed, agreed or adopted by your customer. In order to retain maximum recovery rights it is necessary to have your terms of trade, loan agreements and leases signed or alternatively, accepted or adopted by your customer. Businesses should identify which existing customers are not signed up to terms and consider whether those customers have accepted or adopted the written terms in accordance with the PPSA. Steps should be taken to ensure that all new customers are signed up to terms of trade to avoid problems in the future with enforcement.
3. Ensure your trading terms and agreements are PPSA ready Have your trading agreements, loan agreements, and leases reviewed to ensure you have the best possible security interests under the PPSA.
Provisions can be inserted into your terms of trade to make management of the PPSA obligations easier for businesses. One example is a provision under which the customer waives its right to be notified in writing of registration. Such a provision will save management time.
4. Register your interest on the PPSA Register Businesses should register their security interests in their customer’s assets or goods on the PPSA Register. This applies also to ROT goods and leased goods held by your customer. Processes should be put in place to ensure that new customers are registered upon the opening of an account. This involves staff education.
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Daniel Turk | September 2011
For existing customers they will also eventually need to be registered. However, provided the written terms are agreed prior to PPSA commencement and they cover ongoing supply or advances then you have two years to register those customers from PPSA commencement.
What if you don’t register? In the event that your customer goes into an insolvency administration then you will lose security rights. The legislation favours banks and other parties who have registered security interests. Banks and other parties with securities such as charges will now be able to attach their security to retention of title goods or leased goods in the possession of borrowers. For example if retention of title suppliers have not registered their interests, then a bank charge will take priority over their interest even though the borrower does not have title in the goods.
Conclusion The extra time provides valuable breathing space for businesses to get organised for the PPSA commencement. If you require assistance with getting PPSA ready please do not hesitate to call me or one of my team.
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Daniel Turk Partner T: 02 8257 5727 M: 0408 667 220 daniel.turk@turkslegal.com.au
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