- Personal Property Securities Act 2009 (PPSA)
Are you ready?
New legislation known as the Personal Property Securities Act 2009 (PPSA) will trigger profound changes to the way security is taken over personal property. This will impact all individuals and businesses that:
- sell stock on credit (i.e. Retention of Title)
- lease plant and equipment, motor vehicles or other assets
- have stock or other assets on consignment with third parties
The existing concept of ‘title’ is irrelevant under the new Act, and is replaced by the concept of a ‘Security Interest’
The new PPSA raises serious risks for many Australian businesses. Owners and
Directors should understand that in many instances, existing asset protection and
separation structures, such as trusts, may not be sufficient to protect their assets from the reaches of the PPSA.
For example, in a liquidation or insolvency scenario, assets such as stock or assets on
consignment which are held by another party will be available to a liquidator unless security over the assets is “perfected” under the new system.
You should seek appropriate advice and put steps in place to mitigate risk and ensure the interests of you and your business are protected.
A properly structured plan should address:
- a review of the group structure and arrangements between group entities
- a review of your terms of supply, including financing arrangements and
other affected contracts
- identifying assets affected and transactions that need to be registered
- recommending new policies and processes concerning the requirements for registering transactions and any associated documentation
Grant Thornton has a dedicated team to assist you with your PPSA queries. We are happy to discuss with you how this will impact you and your business and how we can assist you in dealing with these important changes.
What is PPSA?
A new law which incorporates a single national register for Security Interests in Personal Property. It replaces around 70 existing national, state and territory laws and registers including the ASIC Register
of Charges, and the Register of Encumbered Vehicles (REVs) which will be consolidated onto one
Personal Property Securities Register (PPSR).
In addition to replacing existing registers, the PPSA will also require non-traditional securities and
other interests in property (i.e. ROT, consignment arrangements) to be registered.
The register will be web based, and will be available online 24 hours a day, 7 days a week.
What is Personal Property?
Basically any asset other than land. Includes:
- motor vehicles
- plant and equipment
- intellectual property and intangibles
- accounts receivable
Who is impacted?
Any person or business who:
- sells stock to customers on credit
- leases plant and equipment, motor vehicles or other assets to third parties
- has goods or assets on consignment with third parties
Key industries or sectors impacted include, but are not limited to:
- wholesale and distribution
What happens if I don’t register?
If you fail to register, you risk losing any claim to an interest in the collateral.
(i.e. In a liquidation scenario, the liquidator may be entitled to sell your assets and apply the proceeds
in the liquidation and you will lose your entitlement to the assets or the proceeds from sale)
When does it start?
PPSA is to commence Monday 30 January 2012.
There is a two year transition period from this date, but businesses should be prepared early to take full advantage of the new system.
How do I register?
Upon commencement, you will be required to register a Financing Statement online for any security
interest. Information will include:
- secured party details
- grantor (or customer) details
- description of the goods
What do I need to do?
Speak with your Grant Thornton contact now if you think this will apply to you or your business.
Sale of Stock subject to ROT
You (Supplier A) sell shoes to a company – Shoes P/L (customer). Under the new PPSA legislation, in
order to have a valid priority security interest (or PMSI) in the stock sold (i.e. a ROT claim under the
Supplier A must:
- have an agreement with Shoes P/L which grants rights of Retention of Title until the goods are paid for
- ensure the agreement is in writing and is signed by a person with appropriate authority
- Register its interest in the stock on the Personal Property Security Register (PPSR) via a financing statement
- ensure that the written agreement is entered into and registration occurs prior to supply of
the stock to Shoes P/L
If these steps are not taken and a liquidator/administrator/receiver is appointed to Shoes P/L, you risk
losing any claim to the stock or the proceeds from the sale of the stock.
Importantly, the “course of dealing” argument (where there is no written agreement but the parties
have operated under implied terms of trade for an extended period) will not be sufficient to ensure a
valid priority security interest against third parties under the PPSA