Getting to know the PPS Act.
By Phillip Leaman
5 June 2013
The Personal Property Securities Act 2009 (PPSA) has now been in force for a few years but is still a mystery to some businesses.
The PPSA can have a dramatic impact on many facets of business dealings including:
- In leasing. For example, if a Landlord leases a premises with chattels and the Landlord leases a few similar premises with chattels then it may need to register a security interest in its chattels over the Tenant’s assets. In the event that a Tenant goes into liquidation, the liquidator could claim the Landlord’s chattels (as the Tenant will be in possession of them) and sell them contrary to the Landlord’s interest. If a security interest is registered with the PPSA, the liquidator cannot deal with them and the chattels will be protected.
- In lending funds. For example, the fixed and floating charge previously registered with ASIC is now replaced with the registration of a security interest under the PPSA.
- In selling goods. For example, businesses who supply goods on credit need to register a security interest on the goods with the PPSA to ensure that in the event their client goes into liquidation they can rely on their retention of title clause in their trading term and take back the goods which have been unpaid.
Businesses need to consider and review:
1. Their Trading Terms to ensure PPSA compliance; and
2. Documents relating to leases and lending money to ensure PPSA Compliance; and
They need to ensure that security interests are registered, maintained and updated and that your processes are in order.
The PPSA can be complicated to understand and it is important that registration of your security interest is done correctly otherwise your rights may not be protected which could lead to significant losses if a tenant, borrower or client goes into liquidation owing you money.