26 September 2018

The devil is in the detail when it comes to registering on the PPSR. To register successfully, you need to understand the jargon and the fine print. Where to start? Take a look at your security agreement.

 Ensure your security agreement is in place and signed before you even register with the Personal Properties Securities Register (PPSR)

If your terms and conditions of sale do not create a security agreement, section 151(1) of the Personal Property Securities Act (PPSA) stipulates that you must not register a security interest. In other words, no security agreement, no PPSR registration.

You’ll find it easier to register on the PPSR by understanding these four details.

Detail #1: Look carefully at your terms and conditions of sale

If you sell goods on terms that include a retention of title clause, your customer needs to agree that you can retain title until you have been paid. This agreement is called a security agreement, and it must generally be in writing to be enforceable against third parties. In most cases, the security agreement will be in your terms and conditions of sale – which you should seek professional help to draft.

If your customer has gone to the trouble of completing a credit application and signing terms, there is a reasonable expectation that they will buy goods from you at some point in the future. This means that you will become a secured creditor with an interest in the goods.

We suggest registering on the PPSR as soon as you approve the credit application.

Detail # 2: Know if you have a PPS Lease

If you hire, lease or loan equipment to third parties on terms, you need to know if this creates a PPS Lease. If it does, this means that you must register the security interest on the PPSR. If a PPS Lease is not applicable, the PPSA does not apply to you.

If you have a security agreement or PPS Lease and don’t register your interest on the PPSR, you’re risking significant financial loss, as shown with the Forge Group Power Pty Ltd vs. General Electric International Inc Supreme Court of NSW legal battle (NSWSC 52 “Forge v GE”).

Detail # 3: When registering on the PPSR, don’t ever guess an answer

Be prepared ahead of registering by having the information on hand that you might need to enter online. For example:

  • You need to establish your organisation as a secured party on the PPSR, obtaining a Secured Party Group number and Access Code
  • Your customer (grantor) must be identified correctly
  • Your customer must be identified as consumer or commercial
  • The goods or equipment supplied must be identified in the correct collateral class
  • Similarly, your goods and equipment must be described in the correct way
  • There are additional registration requirements if your goods or equipment are ‘serial numbered goods’ within the meaning of the PPSA
  • You need to state:
    • whether your security interest is a Purchase Money Security Interest (PMSI)
    • whether it is subordinated
    • whether proceeds are claimed
    • if the collateral is subject to control
    • if the collateral is inventory
    • the period of registration.

This is a lot of detail to get right every time. EDX’s premium PPSR application, ESIS, pre-populates details in accordance with your PPSR policy, to reduce the risk of errors in your registrations.

Detail # 4: Not discharging old customers may cost you

Don’t forget to discharge customers from the PPSR that have settled all accounts with you (and closed their account). Do the same for those who have hired equipment to you and indicated they will not be hiring from you again.

Under Section 151(3) of the PPSA, you are required to discharge the financing statement as soon as practicable, or within five business days, whichever is earlier. Civil penalties apply if you don’t, so it pays to have procedures in place to ensure that discharges are promptly processed.

If you’ve manually processed PPS registrations, there’s a good chance of errors or omissions that will invalidate your registration. We offer a comprehensive service and integrated platform to help you accurately and efficiently deal with PPS registrations. Our expert PPSR specialists will check, clean, setup, maintain and monitor your PPS registrations for you. Email us to find out more.

Disclaimer: The information contained in this article is general in nature and does not take into account your personal objectives, financial situation or needs. Therefore, you should consider whether the information is appropriate to your circumstance before acting on it, and where appropriate, seek professional advice from a finance professional such as an adviser.