We all know that a bank can secure a loan by registering a mortgage over land. But what if you are a small business owner who has leased out valuable equipment or advanced stock to another company? Can you take measures to protect your interests to ensure you are not left out of pocket? The answer is yes you can, and you should, and Chamberlains can help you.
In 2012 the Personal Properties Securities Act (“PPS Act”) established a new system for the creation, priority and enforcement of security interests in personal property, which is generally all property other than land.
The Personal Properties Securities Register (“PPSR”) protects businesses that sell on terms such as retention of title or consignment, or the hiring, renting or leasing out of valuable goods, machinery, vehicles and equipment. It allows you to protect goods you have supplied to someone for which you have not yet been paid. For example, equipment or appliances you have provided to a builder, alcohol presented to restaurants or agisting cattle on another property can all be protected by way of a PPSR.
If any of these scenarios sound familiar, you need to act promptly to secure your interest. To become a secured creditor, like a bank, you need to have a written agreement, and this requires to be registered in accordance with the PPSR. Old “retention of title” clauses in your terms and conditions of supply will no longer protect you.
Should your customer become insolvent, the PPSR works on a ‘first come, first served’ basis. If someone has registered an interest before you, they will get paid first. However, for your interest to be effective against a liquidator, it must be registered within 20 business days of the transaction under which the security interest was created.
We acted in a matter where a business owner supplied alcohol to restaurants with payment to be made at a later date. One of the restaurants went into liquidation and the alcohol supplier, relying on their terms and conditions of supply, asked for their alcohol or its value to be returned. In this case, because the alcohol supplier had not registered their interest, the liquidator was able to retain and sell the alcohol, and the alcohol supplier only received $0.02 in the substantial suffering losses.
If you sell or supply goods and are looking to secure your interest on the PPSR, Chamberlains can assist. We can also assist you in drafting your terms and conditions of supply so that they create the relevant security interest, and we offer training services to you and your staff on PPSR registration.
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