28 August 2018

When you don’t know the answer to a question, do you bluff, make up an answer or phone a friend? Although these tactics work in many situations, they won’t do you any favours on the PPSR. Choosing a wrong answer when registering a security interest can have disastrous consequences.

When you don’t know the answer to a question, do you bluff, make up an answer or phone a friend? Although these tactics work in many situations, they won’t do you any favours on the PPSR. Choosing a wrong answer when registering a security interest can have disastrous consequences.

The Personal Properties Securities Act (PPSA) is a powerful piece of legislation with many pitfalls and traps for the unwary. If you get it wrong:

  • Registrations with defective data are likely to have a negative impact on your right to seek priority over other third parties that have since taken security over the same asset.
  • At worst, you may face Civil Penalties of up to $27,500 per instance of incorrect registration (PPSA Act subsection 195A(4), and a damages claim from an aggrieved customer.

Due to the complexity of the Personal Property Securities registration process (PPSR), it’s almost inevitable that some human error will occur if businesses are registering their interests manually and without aid.

Before deciding to go it alone, you need to ensure your business sets up a Secured Party Group to represent itself on the PPSR the first time it accesses the register.  After this initial Secured Party Group registration, you are ready to go, but the level of complexity increases. There are multiple considerations you will need to factor in, especially if your business has many entities or business units.

The registration requirements for a seemingly straightforward Retention of Title (ROT) security interest include:

  • Proper grantor identification within the Personal Property Securities Regulations 2010 (the Regulations)
  • Details of your selected:
    • collateral type
    • collateral class
    • collateral description
  • Whether:
    • the security interest is subordinated
    • the collateral is inventory
    • the collateral is subject to control
    • the security interest is a Purchased Money Security Interest (PMSI)
    • proceeds are claimed
    • a description of the proceeds is required
    • the security interest is transitional
  • The timeframes for the registration, including:
    • date of registration
    • expiry date

For some collateral classes, you’ll need to provide additional information and selections, including serial-numbered goods (see example). Serial numbered goods can include motor vehicles, boats and planes. Each business is unique, and the rules for registration are complex.

Depending on several factors – such as contractual arrangements with customers, transitional vs non-transitional security interests, the nature of the transactions, and the type of goods sold, leased, hired or bailed – more than one registration may be advisable to protect your business adequately.

There’s a good chance you’ll require guidance on the number and type of customers and/or assets to register. Do you register government customers or only the large customers, and exclude the apparently risk-free customers? Should a business log all its assets? Is it necessary or preferable to individually register serial-numbered goods?

Our PPSR experts will help you develop easy to administer selection criteria that fits your risk profile. Faced with the costs of getting it wrong, we have a simple mantra: Do it once, do it right!

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Just one PPS registration mistake can be the difference between recovering property and losing it to insolvency practitioners. Find out what the experts have to say about what it takes to register correctly.

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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.