The Personal Properties Securities Register ('PPSR')

What is the PPSR?

The PPSR is a national register of security interests held in personal property, and was introduced under the Personal Property Securities Act 2009 (Cth) ("PPSA"). Personal property is any property other than land, and includes vehicles, art, cattle, shares, and copyright.

Selling Goods

You have a contract in place with another business to supply goods, with the contract having a retention of title clause. This clause allows your customer to take physical possession of goods. However, ownership of the goods remains with you until the goods are paid for in full. This means your goods are protected in the event that your customer becomes insolvent, right?

Unfortunately, this is no longer the case. If your customer is about to go into liquidation and there is another party with what is called "a perfected registered interest" on the PPSR then they will take priority over any unregistered interests. You would become an unsecured creditor, and there is a risk that your goods could be sold to pay creditors.

We note, in order to register on the PPSR, there must be legal grounds to do so, such as an agreement or contract which gives rise to an interest.

You can 'perfect' your interest on the PPSR through three different methods, including possession of the secured goods, control of the secured goods, or registering a finance statement through a Personal Money Security Interest ("PMSI"). A PMSI is often used for consignment transactions, for loans or credit to purchase goods, or for leases or bailment of goods exceeding one year. A PMSI allows a party to have priority over unpaid amounts (whether all or part of the purchase price), meaning you can defeat all other security interests in the goods.

Time is of the essence!

The time for registering an interest is crucially important, 'as the first in time equals first in line'. Further, if you do not register your interest within the strict time lines under the PPSA, then your interest may not be protected. It is better to register your interest as soon as it arises such as after signing an agreement, rather than waiting for goods to be delivered. Also, waiting until your customer shows signs of financial distress to register your interest is very risky, as it may be too late for you to become a secured creditor.

Another benefit of registering your interest on the PPSR is that it can help to protect your interest in the event that the goods are sold to third parties or if they are incorporated into other goods.

Buying Goods

Before purchasing goods, you should search the PPSR to make sure the goods are free from encumbrances. For example, goods may be held for security by another company or business. Of course, while not all interests will necessarily be registered, it is still recommended that a search be completed, preferably the day of or the day before you purchase the goods. If you were to search for certain goods, such as a motor vehicle by its serial number, then a search should also be made of the company or business which has a security interest in the motor vehicle.

Any Tips

• Identify what transactions your business enters into which may give rise to PPSA rights or obligations with suppliers, customers, tenants, and others
• Carefully review your contracts with customers and ensure they allow you to register your security interests
• Ensure you comply with the strict time restrictions under the PPSA. Do not wait until your customer is in financial distress before you register your security interest
• Conduct searches on the PPSR for both potential and current customers in order to assess their liability position
• When registering your security interest on the PPSR, make sure all the details are correct (including spelling and no typographical errors) as any mistakes could invalidate your registration.

As Accredited Specialists in Commercial Law, our legal team can assist businesses and individuals in matters relating to the PPSR.  We provide fixed prices and offer substantive free benefits to all customers who run a business. Click here for full details. Call Sharrock Pitman Legal today on 1300 205 506.

The information contained in this article is intended to be of a general nature only and should not be relied upon as legal advice. Any legal matters should be discussed specifically with one of our lawyers.

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