What is the PPSR?
The Personal Properties Securities Register was introduced in 2012. It offers an online database for certain kinds of assets. If you’re lending to someone purchasing an asset it also allows you to take security over those assets. It’s basically an online notice board. Prior to this there were something like 40 registers scattered around Australia. Remember, this is security over personal property as opposed to real property. There is already a land titles registration system in Australia. Personal property is something else. It’s basically anything that isn’t land, buildings or fixtures. That can include vehicles, boats, aircraft, crops, cattle or other livestock. You can also list intangible products like patents or trademarks. You can also take security over shares, cash and cheques.
When should I use the PPSR?
You need to know the practical use of the PPSR for you or your clients. The most obvious use is whenever you are negotiating the sale of personal property. You need to ensure that there are no encumbrances over that property. Imagine if you are a business owner and you are buying another business. You will want to make sure that what you are buying isn’t encumbered somewhere else.
As I mentioned before the previous registers were lumped together in the PPSR. That means that the same items could have been listed on multiple registries. This can be really problematic when purchasing assets. You are going to want to do multiple searches on the business licenses, the ABN or ACN’s or individual serial numbers. Anything and everything you have information on should be searched to make sure that there isn’t security on those items elsewhere. Another example is when you’re buying a car. You want to make sure that car is actually owned by the seller.
Another common mistake we see is during the purchase of goods for a business. People can purchase those goods in their name, not the businesses name. This creates a problem when someone tries to sell their business. The assets will listed under a personal name, not the business name and are therefore encumbered. If you are offering credit to someone you want to make sure you are registering your securities on those loans. If you are leasing your goods or equipment to clients you should be registering those items as well.
Anyone who was using the old registry regime knows that there were different charges on property levied by ASIC. There was a fixed charge or a fixed and floating charge. Fixed and floating charges governed all the property owned by a company. Fixed charges were only for a specific item. When they brought all the registries together a lot of the fixed charges became fixed and floating charges. That created a major problem. In PPSR language these are called ‘All present and after – acquired property – no exceptions’. If there was multiple lenders on those items it will create a lot of headaches. Most banks were pretty understanding about this issue but it still remains a problem. If you have clients that have property registered before 2012 it is worthwhile to check to make sure they have been registered correctly. The other migration issue relates means you really need to check to make sure that their registrations are current and up to date.
Depending on what’s registered on the PPSR and when it’s registered determines who has security over that item. If you’re lending money to someone who is buying an asset and you want to get super-priority you should resister your interest on that asset before you lend the money. In a practical sense you might sign a loan for an asset. The bank will then register their interest and then will approve the loan.
Retention of title clauses
These have been around for many years. If you sell some goods to a person but aren’t going to be paid for 30 days you will retain title in those goods. Provided you have an agreement that includes retention of title you are going to want to register your interest in that item. If you do it correctly you will be given super-priority over those goods. You should complete the registry after you sign the agreement but before you hand over the goods. One of the benefits of doing this way is that there is a clear set of rules about how you can get those goods back. You do have to take into account the commerciality of the good. If it’s just single widget you aren’t going to bother.
Enforcing your interest
If a customer hasn’t paid if you’ve properly registered those items you will be allowed you to seize the goods. In addition, when you have your register and super-priority in place you will be able to bring those into force during the liquidation process. That property will not be liquidated.
More about this Show
We started Business Legal Lifecycle to create a simple way for you to understand complex legal terms. Most importantly we want to help you to develop a plan to take your business successfully into the future. There’s a startling statistic the underscores the importance of developing a solid plan. The majority of business owners are just seven months away from losing everything. A single aspect of your business that is not set-up correctly can shut down your whole operation very quickly. Legal advice is not cheap and even when you can afford it there is often a divide between lawyers and their clients. We want to close that gap once and for all. We want to put legal knowledge and tools into your hand to prevent the worst from happening to you.
Twice a week we are going to deliver those tools right to your home or office with Business Legal Lifecycle TV. We’ll start the week with Fast Fix Monday, a short 5-10 minute video that will tackle a single issue that businesses have to deal with. Then on Wednesday’s our main show will feature with more fulsome discussions and interviews all delivered in a straightforward and easy to understand format.