Have you registered your security interest yet?
It is important that all business owners are aware of the reforms to the personal property securities laws introduced in early 2012. These reforms aim to create a national set of laws for the identification, protection and enforcement of security interests in personal property. The Personal Property Securities Register (PPSR) is the register where details of security interests in personal property can be registered and searched. The Insolvency and Trustee Service Australia (ITSA) is the Australian Government agency responsible for administering the PPSR.
What is a security interest?
When you buy personal property on hire purchase, or use personal property as security for a loan or another type of credit providing transaction, the transaction creates a security interest in the personal property. A security interest is an interest in personal property provided for by a transaction that secures payment or performance of an obligation.
Why register a security interest on the PPS Register?
Businesses can improve the way they manage credit risk by registering their security interest in the goods they supply or lease on the PPS Register. If you do not register your security interest and a debtor goes into bankruptcy or is placed into liquidation, your position will be like that of an unsecured creditor. Secured creditors will be ahead of you when payments are made or assets distributed.
The Personal Property Securities Act 2009 (Cth) contains rules for determining priority between security interests in the same collateral. It is therefore important to register your security interests as soon as possible.
What is personal property?
Personal property is given a wide definition by the PPS Act. With a few exceptions, it covers any property someone can own, other than land, buildings and fixtures.
Personal property includes:
• plant and equipment
• cars, boats, planes
• crops, livestock
• licenses, shares, accounts receivable, contract rights, and
• intellectual property
Who are the parties involved in the creation of a security interest?
Usually there are two distinct parties involved in the creation of a security interest:
• the secured party (creditor, lender, supplier or lessor), and
• the grantor (debtor, borrower, supply customer or lessee).
What are some of the common business transactions that can create a security interest?
There are many different kinds of business transactions that can create a security interest. The list below provides some common examples:
• a fixed charge
• a floating charge
• a chattel mortgage
• a conditional sale agreement (including an agreement to sell subject to retention of title)
• a hire purchase agreement
• a pledge
• a trust receipt
• a consignment (whether or not a commercial consignment)
• a lease of goods (whether or not a PPS lease)
• an assignment, or
• a transfer of title
Retention of title
Retention of title is an important example of a transaction that creates a security interest that will affect many small businesses that supply or receive goods on credit.
What is collateral?
Collateral is personal property that is subject to a security interest. When personal property is offered as security in a lending or leasing transaction, the PPS Act refers to it as collateral.
All collateral is considered to be commercial if it is not consumer property.
As a business user of the PPS Register, you would most likely need to register security interests in commercial property on the register.
The PPS Register and commercial collateral
The PPS Register has arranged commercial collateral into nine categories or classes. Before making a registration it is advisable for you seek professional advice.
The nine collateral classes are:
• agriculture – for example crops and livestock
• all present and after-acquired property
• all present and after-acquired property
• financial property
• intangible property – for example intellectual property, financial property
• motor vehicles
• other goods – for example art works, office machinery
Each registration you make must only relate to a single collateral class.
The PPSA is a significant change to the law concerning dealing in personal property. Here at The Quinn Group our experienced team of Lawyers and Accountants are able to assist you with changes to the PPSA. Submit an online enquiry or call us on 1300 QUINNS (1300 784 667) or on +61 2 9223 9166 to book an appointment.