Are you ready for the PPSA? (Personal Property Security Act) Our core purpose is ‘HELPING CLIENTS ACHIEVE FINANCIAL SECURITY’ MULCAHY & CO | P 03 5330 7200 | INFO@MULCAHY.COM.AU | 300B GILLIES ST NTH, BALLARAT
IT COMMENCED 30TH JANUARY 2012 New legislation known as the Personal Property Securities Act 2009 (PPSA) came onto effect on the 30th January, 2012 replacing the way all States nationally have dealt with the way debts and security are dealt with. It applies to all “personal property”, meaning all assets other than land (including buildings and fixtures attaching to land), meaning personal property includes cars, machinery, goods, crops as well as even IP rights or contractual rights. This new legislation drastically affects all businesses that: •
Sell goods on credit or trade terms
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Lease plant and equipment, motor vehicles or other assets
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Provide goods on consignment (i.e. provide a good or asset to another party to use, but retain ownership yourself)
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Provide finance to another party.
This new legislation establishes a framework for creating enforceable security interests and can prioritise you against other competing interest sin the event of insolvency of the party you are dealing with.
WILL MY RETENTION OF “TITLE” STILL EXIST? NO! Previously many of you will have relied on the simple terms “retention of title until the goods are paid in full” on your invoicing, giving you ownership of the goods provided until paid in full. This will now have no effect.
SO, WHAT NOW? The new system creates the PPS Register that will allow lenders or businesses to register their interest in assets provided to another party. This will allow your interest to be “secured” and protected in priority to other entities claiming those assets. It will also allow a searchable database of interests in a party you might be going to deal with, or an asset you might be going to acquire or secure a loan against. The new system will largely replace all existing systems of unregistered charges, mortgages or debentures over assets, requiring you instead to now “register” your financial interest in the asset or assets of an entity you are providing credit too. This new register has commenced on the 30th January 2012.
ARE THERE ANY BENEFITS? For the wise parties that register their interests on the Security Register, more far reaching claw back of your asset or goods, including even the end product those goods go toward creating (previously not possible) is now achievable. Provided you properly document the transaction and register on the PPS Register this interest, you will stand a far better chance of recovering assets or funds as compensation for the credit you provided. It also provides potential trade partners the ability to search each other, or allows the financiers to check whether assets securing a loan or credit terms are already encumbered by other parties. Previously this was all but impossible.
WHAT IF I FAIL TO ADAPT? Let’s give you an example. Previously, if you leased a car or provided goods on ‘retention of title trade terms’ to another party, you retained your title to that car or goods in the event the lessee or purchaser ever went into liquidation.
Now... if you failed to register your security interest on the PPS Register, if the other party went into liquidation you would likely lose the car or goods and simply become an unsecured creditor with the rest of those parties owed money, unlikely to receive much or any compensation from the scraps left over after a liquidation of assets and payment to secured creditors (banks and secured registered interest holders). It is important to note that you cannot later register your interest (i.e. once a party is in financial trouble). The PPSA has strict time lines for registering your interest otherwise the opportunity for registration expires. It needs to be registered upon creation of the financial arrangement of personal property.
WHAT YOU NEED TO DO? If you think you are affected by this new legislation, contact us now. You need to ensure you have appropriate documentation in place by: •
Reviewing your trade terms
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Obtaining complete details of your customer/creditors
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Obtaining unequivocal acceptance in writing from each and every customer you provide credit or assets you want to retain ownership of
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Begin the process of registering your ‘financial statement’ within the tight time frames outlined in the PPSA.
Or, if you are not willing to do the above, you simply must recognise that unless you are paid up front for all goods, or take a bond or guarantee equal to the entire value of the asset, then you are exposing yourself to not recovering any of the value of the goods or assets in the event the party you deal with goes into liquidation.
We offer a free no obligation meeting to review your situation. Call us today on 03 5330 7200 and take advantage of this valuable offer.
IMPORTANT DISCLAIMER: This document does not constitute advice. Clients should not act solely on the basis of the material contained in this document. Items herein are general comments only and do not constitute or convey advice per se. Also changes in legislation may occur quickly and we therefore recommend that our formal advice be sought before acting in any of these areas. This document is issued as a helpful guide to clients and for their private information.
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