On 30 January 2012, a little over a year ago, the Personal Property Security Act 2009 (“the PPSA”) came into effect.  On that day, the ‘Personal Property Securities Register’ (“the PPSR”) was switched on for the first time to become the national ‘one stop shop’ for managing securities over personal property.

Given that the PPSR has just had its first birthday, and because we will use any excuse for a good birthday celebration, we thought it was a good time to provide a bit of a ‘refresher’ for those of you that are affected by the PPSA.  If you’re not sure whether the PPSA might affect you, then you should read on to find out.

Does the PPSA affect me?

• Do you operate a business?

• Do you loan, or have you loaned, money to people or other businesses?

• Have you borrowed money to purchase any goods or to assist with the operating costs of your business?

• Do you have any major ongoing contracts with customers or suppliers?

• Do you supply goods to any customers under an arrangement that means that you are not paid in full for the goods upfront (e.g. through hire/ purchase arrangements, vendor finance etc)?

If you answered yes to any of the above questions, then the PPSA will probably affect you at some point in time.  The PPSA will impact your business activities  in situations where your business is the ‘customer’ and in situations where your business is the ‘supplier’.

What is the PPSR?

Have you ever checked the “Vehicles Securities Register” before purchasing a car to make sure the car won’t be repossessed by a third party?  Well, the PPSA has brought together over 23 separate ‘registers’ (including the Vehicles Securities Register) to create one national public register of securities.  The register captures a broad range of property (including motor vehicles) so that just about every item of tangible and intangible property is brought within the scope of the Register.

The PPSA also introduces a lot of new rules about how a person must go about creating an ‘interest’ in property to make it legally enforceable.  If an interest is not properly created, then in some circumstances the interest will not be enforceable against the person that holds the property or any third parties that might be owed money by the property holder.

What type of property is captured on the Register?

As mentioned above, the scope of the PPSA captures both tangible and intangible property.  Tangible property includes plant & equipment, motor vehicles, crops, livestock, wool, aircraft, boats, minerals and even satellites & other space objects.  Intangible property captured by the PPSA includes intellectual property, bank accounts and other financial instruments.

Some Practical Tips for Business

Checklist for dealing with Suppliers

As a business you would often purchase goods and services from suppliers.  Your dealings with suppliers may be affected by the PPSA.  Here are some tips that will help you make sure that your business is keeping track of those transactions that could be affected by the PPSA.

You should:

1. Get familiar with the Personal Property Security Register.  The Register can be found at www.ppsr.gov.au.  This website is the place where you can search the Register, create new registrations and it also contains helpful information for both businesses and consumers.
2. Periodically (perhaps monthly) check the Personal Property Security Register to make sure that no false or incorrect registrations have been registered against your business.  If a registration appears on the Register that you do not know about and did not authorise, you should immediately get advice.
3. Keep track of all property that is subject to registered securities as this may have implications for how you deal with the items.  The best way to do this is to keep your own register of securities and ensure that all employees/ agents of your business that deal with secured items are aware of their status.  This will be particularly important if you are contemplating a sale of business.
4. Make sure registered security interests are removed as they are paid off.  If you pay off the debt giving rise to the security interest, make sure that the security interest is removed from the Register by the supplier/ financier within 10 business days.  If it is not and the supplier/ financier refuses to remove the security interest, then you should seek legal advice as soon as possible.

Checklist for dealing with Customers

Here are some tips that will help to make sure that your business is up to date with the changes:

1. Get familiar with the Personal Property Security Register.  The Register can be found at www.ppsr.gov.au.  This website is the place where you can search the Register, create new registrations and it also contains helpful information for both businesses and consumers.
2. Review your documentation and identify security interests that you may have against any of your customers.  If you have some that are currently in existence but are not registered then you should consider taking steps to register your interest on the PPSR.
3. Put policies in place to enable your business to identify future security interests.  As part of your ongoing financial risk management, it is important that you and your staff understand when a security interest might arise and the importance of taking steps to register those interests in some circumstances.
4. Keep your own register that keeps track of renewal dates, the nature of the secured property and the details of the person against whom the interest is registered.  This should be regularly reviewed to make sure that all property that is intended to be covered by a registered interest, continues to be covered.
5. Make sure you keep reference numbers and tokens securely.  The PPSR system operates on a system of numbered ‘tokens’.  These tokens provide parties with access to the PPSR to make changes to registered interests.  These tokens need to be kept secure.  Under no circumstances should you provide tokens to your customers while your security interest remains in place.
6. If it looks or feels like a security interest, get advice before parting with the goods/ property.

When should I get specific advice about the PPSA?

You should seek specific advice about how the PPSA may affect you or your business when you:

• Are selling or purchasing a business
• Are applying for or have obtained finance
• Are considering or are bringing in new investors, partners, or directors to your business
• Are entering into any ongoing supply contracts as either supplier or customer
• Are thinking about providing finance to your customers or any other third party
• Are entering into any arrangement whereby you provide goods to a customer that are of high value to your business, and the customer will not pay for the goods in full before taking possession of some or all of them
• Get notice that any of your major customers or suppliers may go bankrupt, into liquidation, have a receiver appointed, go into voluntary administration or are suffering any other form of financial distress
• Are unsure, at any time, about the rights, risks and benefits under the PPSA to your business.

For further information, please contact the author.

This article is posted in Adelaide, South Australia by Tri-meridian Corporate & Commercial Law and is intended to be used as a guide only. It is not, and is not intended to be, advice on any specific matter. We do not accept responsibility for any acts or omissions resulting from reliance upon the content of this article. Before acting on the basis of any material in this article, we recommend that you consult your professional adviser.