Every decade or so a law is introduced which dramatically shifts the operating paradigm of an industry. Not unlike the now ubiquitous Building and Construction Industry Security of Payments the Personal Property Securities Act 2009 (Cth) (PPSA) has significantly impacted the legal environment for many sectors and has created new challenges for credit managers and directors nationwide.
Particularly, the PPSA has significantly changed the way businesses think about their retention of title when supplying goods on credit. It has imposed further registration requirements on parties to ensure they are properly protecting their interests and has shifted the manner in which retention of title matters are addressed in insolvency scenarios.
Accordingly, it is important for businesses to keep a few things in mind when considering your retention of title interest pursuant to the PPSA.
Section 14 of the PPSA defines retention of title interests as purchase money security interests (PMSI), granting them super priority if registered properly.
When registering their retention of title interests as PMSIs businesses must also state that the interest is a PMSI on the registration. A registration that incorrectly claims a PMSI is ineffective, according to sections 160 & 165 of the PPSA.
The PPSA also imposes deadlines on the timing of registrations. PMSIs must be registered within the required time to ensure that their priority status is preserved. This means prior to supply for inventory and within 15 days of supply for non-inventory goods in accordance with section 10 of the PPSA.
It is also vital that businesses ensure they have properly executed security agreements or terms of trade in place before they supply goods. They must also ensure their documentation is in order and their retention of title claim is properly mirrored and supported by all of their documentation including:
1. Terms of trade.
2. Delivery dockets
3. Proforma purchase orders.
4. Tax invoices.
5. Consignment notes.
Documentation does not have to be complicated, nor does it have to be expensive. Chamberlains can you provide businesses with a detailed suite of operating precedents and advice on implementation regarding a wide variety of PPSA matters including retention of title.