What is personal property?
The term ‘personal property’ covers most examples of property dealt with in the normal course of a person’s or company’s business. Examples include: inventory, motor vehicles, boats, crops, plant and machinery, shares, investment instruments and intellectual property.
The personal Property Security Act (‘PPSA’) does not cover real property. These types of property remain subject to existing state and territory registrations.
How do I obtain security?
There must be a signed security agreement between the parties. This must occur prior to the supply of any finance, or goods. Once a security agreement is signed, a registration should be made on the Personal Properties Securities Register (‘PPSR’).
What are the different types of registrations?
There are two common types of registration, which include:
- All Past and After-Acquired Property (‘ALLPAAP’): a registration over all past and future property. This is commonly used by financiers when there is no specific purpose (e.g. overdraft).
- Purchase Money Security Interests (‘PMSI’): a specific registration for an interest in a specific item for all or part of its purchase price. This type of registration has priority over an ALLPAAP. This type of registration is commonly used by suppliers of financiers of motor vehicle, stock and items of plant and equipment.
When am I required to have a security interest registered?
A security interest must be registered within 6 months of execution, and 20 business days after the security interest came into force. If these requirements are not met, you run the risk of the security interest not being enforceable against an external administrator or bankruptcy trustee.
A PMSI must be registered prior to the supply of any goods, if they are inventory. For all other goods, the PMSI must be registered within 15 days after the delivery of the goods.
What happens if you fail to register your security interest?
It is crucial that suppliers and financiers properly register their security interests to ensure that they retain their rights to the assets in the event of default, or the appointment of an external administrator or bankruptcy trustee.
This is because, where an external administrator or a bankruptcy trustee is appointed, and where the security interest has not been properly registered, the property will not be available to the creditor. The asset will instead be considered an asset of the entity who granted the security interest.
If you require any further information in regards to the above, contact The Quinn Group on (02) 9223 9166 or submit an online enquiry.