You can protect your secured property by registering your interest on the Australian Government’s Personal Property Security Register (the PPSA). If you don’t register your interest and the business holding those goods is placed into receivership (or an individual declared bankrupt), you may find yourself treated as an unsecured creditor, uncertain whether you will ever see your money or goods again.
Before 2009, if a business or individual loaned money, leased goods or provided goods on credit or consignment they could register their security and protect that interest with ASIC or a variety of registers that existed in various states. Now, there is one register, the PPSA. The PPSA records the registration of an interest in personal goods, such as cars, boats, caravans, machinery, shares, crops and livestock. It does not include real estate. An interest in real estate is (still) registered by lodging a caveat with Land and Property Information (formerly, the Land Titles Office).
For the past few years ASIC has encouraged anyone with a registered interest to move that registration onto the PPSA. From 30 January 2014 other registers will no longer operate.
Armed with a registered security interest, you are treated as a secured creditor and will be given priority over unsecured creditors by the receivers.
You can no longer rely on a retention clause or some other contractual agreement to protect your goods.
For example ABC Office Supplies enters into a lease agreement with XYZ Accounting services for 2 computers. XYZ Accounting does not make any repayments and subsequently goes into receivership. If ABC secured their interest in those computers on the PPSR the receiver should pay to ABC money from the sale of those computers. If ABC did not register its interest, it will be an unsecured creditor and might not receive anything, even if there is loan agreement between ABC and XYZ containing a clause stating the title in the computers does not pass to XYZ until ABC has received payment in full for the computers.
But I registered my interest on the ASIC register, is that still ok?
No. The PPSA replaces older registers, such as the ASIC Register of Company charges and “REVS” (Register of Encumbered Vehicles). From 30 January 2014, any interest registered elsewhere will be invalid. If you have a registered interest you need to immediately move it to the PPSA. Coutts can attend to this quickly on your behalf.
How do I register on the PPSA?
In order to register, you must submit a form to the PSSA registry, setting out the parties to the transaction and must describe the collateral and the security sufficiently. Any items that have a serial number should have that serial number included and any other relevant information that would identify your security. Make it easy for the receiver to identify the property you claim an interest in.
I have loaned money to a 3rd party for them to buy personal property- do I have an interest in the property and should I register it?
Yes. Where money is advanced to buy a specific item, for example a loan to purchase a photocopier, an interest exists and should be registered. However until the item is purchased, there is no security to attach that interest to. The only way to protect an interest during the period between when the loan is advanced and the item purchased, is to have a carefully worded clause in the Loan Agreement. Once an item is purchased, it is essential to register this interest, as the Agreement will no longer be sufficient.
For example, XYZ Accounting borrow money from OK Financing to lease computers from ABC Office Supplies. XYZ Accounting are placed into receivership and ABC and OK both claim an interest in the computers. Big Bank has also claimed an interest in all of XYZ Legal’s goods under a mortgage document executed several years ago. If OK financing registered their interest before the computers were leased, their claim will fail as there were no goods to “attach” their interest to. If OK registered their interest after the computers were purchased their interest will be protected and will probably out rank the Big Bank’s general claim. ABC Office Supplies will also be treated as a secured creditor provided they registered their interest with the PPSR too.
I regularly buy second hand equipment- can I check the title of these items on the PPSA?
Yes. You can quickly search to see if the item has any registered interests, to ensure you are not buying an item that is actually leased to the seller or has some other restriction that may compromise your title to it.
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