What is the PPSR?
The Personal Property Securities Register, more commonly referred to by the acronym “PPSR”, is where parties can register their security interest in personal property in order to take advantage of the priority regime under the Personal Property and Securities Act 2009 (Cth) (“PPSA”) and to put third parties on notice that they have a security interest in certain property.
It is used as a mechanism to protect your interest in personal property that is in the possession of others.
When is the PPSR used?
The PPSR is commonly used in the following situations:
- Where goods or inventory are leased or hired out.
- Where goods or inventory are supplied on credit and the goods or inventory supplied are used as security for the debt, for example, a retention of title arrangement.
Example: Party A agrees to supply goods or inventory to Party B before Party A receives payment in full. Party A and Party B agree under the credit terms or agreement, that title and ownership of the goods or inventory supplied by Party A remain with Party A and do not pass to Party B until Party A has received payment in full (retention of title). The goods or inventory supplied by Party A to Party B are used as security for the debt owed to Party A, until Party B pays Party A in full.
Why is it important to register?
Registering a security interest on the PPSR is the most common form of perfection.
The importance of registering a security interest is that it defines the priority status of the security interest compared with other interests and, if done correctly, it ensures that the security interest survives the bankruptcy or insolvency of the grantor.
Example – PPSR and Lease or Hire Arrangement
In a lease or hire arrangement, if the lease or hire is for a period of at least 2 years, or an indefinite period that will last for more than 2 years, it will likely be regarded as a PPS Lease requiring registration on the PPSR of the interest in the goods being leased or hired. If the party receiving the goods under this arrangement goes bankrupt and a liquidator or administrator is appointed, and the person leasing out the goods has not registered their interest on the PPSR, unless that party has possession or control of the goods, they may lose the goods to the administrator or liquidator.
Example – PPSR and Retention of Title
If Party A has a clause in its terms of trade or agreement entered into with Party B, which grants Party A a security interest in the goods (such as a retention of title and PPSR clause), and Party A does not register this interest on the PPSR, the clauses regarding retention of title may be virtually useless in the event of a liquidation or administration of Party B. If Party A does not register its security interest in the goods, Party A will be an unsecured creditor and the goods supplied by Party A may be sold by the administrator or liquidator and the proceeds used to pay out secured creditors first.
How does the PPSR affect my business?
In short, if you have supplied goods to a party without having been paid for those goods in full, you should ensure that you register your interest in the goods on the PPSR. This will place you in a much better position to make a full or partial recovery of any money or your goods if that party is eventually made bankrupt or insolvent and a liquidator or administrator is appointed.
If you do not have a valid security interest which is registered on the PPSR, other parties who are secured creditors will have priority over you to your goods and/or the proceeds from the sale of your goods.
There are different types of security interests under the PPSA (e.g. general security interests and purchase money security interests), complex priority rules, and timing provisions that may affect the validity of your registration. Therefore, if you are in the business of supplying goods on credit, or leasing or hiring out goods, you should ensure that you consult with a solicitor to review your terms of trade and advise you in relation to registering on the PPSR.
For more information or advice on the PPSR, please contact us.