The Personal Property Securities Act (PPSA) became fully operational from the 31st January 2014. This means that the Personal Property Securities Register (PPSR) is now fully operational.
The PPSA allows a ‘security interest’ in personal property to be registered and searched by anyone at any time. ‘Personal property’ applies to everything, except land and buildings. Whilst there is no compulsion to register any asset with the PPSR, if you don’t register assets to which the legislation has deemed a requirement, you could end up losing those assets (even though you paid for those assets) to someone else who has a superior claim to you, because they have registered in accordance with the PPSA. That business will then be lawfully able to sell the asset for which you have paid and utilise proceeds, as contribution towards payments to secured creditors.
Virtually every business will be affected by this legislation. If you have not seen your commercial solicitor for advice on your ‘Terms of Trade’ and the ‘Retention of Title’ clauses (‘Romalpa Clauses’) included within your tax invoices, there is a strong possibility that you are not complying with the PPSA legislation. As your accountants, we are able to assist you in implementing appropriate systems for the management of transactions that should be considered for registering the security interests on the PPSR.
There have been major legal decisions, which have cost people, who thought they owned the assets but had not registered on the PPSR during the two-year transitional period. To their utmost dismay, they have found that the law didn’t recognise their ownership. In the case of WOW Sight & Sound, the business went into financial difficulties and many of the suppliers, who had supplied stock and consignment stock to WOW Sight & Sound stores, did not register their interest in the stock they supplied with the Personal Property Securities Register. The liquidator was able to register the stock items that were in the premises at the time of their appointment, thus the ‘owners’ of the stock did not have a priority. As a result, the suppliers lost a large amount of money.
In the QES case, QES placed plant and equipment on someone else’s property, which went into liquidation. QES did not register their security interest on the PPSR, and the liquidator was able to claim that plant and equipment, and sell it for the benefit of the secured creditor.
In the Kentor Minerals case, a business supplied a tank worth $300,000 to Kentor Minerals, which then went into liquidation. The owner of the tank did not register their security interest on the PPSR, and they were unable to claim a priority on the tank. The liquidator was able to sell the tank for the benefit of the secured creditor.
This legislation is very important; if you have any questions as to how the legislation operations might affect your business, please do not hesitate to contact us.
