If you are in business, you need to know about the PPSR.

There is a simple step that many business owners can take to manage better the risk that certain assets may bring.

A few years ago, a new scheme was introduced, which also established a national register. This register could apply to anyone who answers “yes” to any of the following questions — are you operating a business, and does your business:

  • Sell products on a retention of title terms?
  • Hire, rent or lease out goods or products?
  • Acquire or sell valuable second-hand goods or assets?
  • Apply for finance and use stock or other assets as security?
  • Advise clients who conduct these activities?

As you will gather from the broad scenarios listed above, the scheme (the Personal Property Security Register, or PPSR) could potentially apply to a significant number of Australian businesses.

Many Australian business owners are not familiar with the PPSR, let alone it’s practical implications. However, you may be putting your business at risk when buying, selling, leasing or hiring out goods, or selling goods on a consignment.

For example, ask yourself if the goods you are buying have money owing on them? Or would you get your goods or money back if your customer goes broke?

You can’t avoid these everyday transactions, but you can help protect your business.

How can I protect my business?

This a single, national online noticeboard (the register) can show you whether someone is claiming an interest against goods or assets.

You can also make a registration, so others know when you have retained an interest in goods you are supplying. If your customer doesn’t pay or goes broke, you are in the best position to get your products, or at least their value, back.

Examples of personal property

The PPSR is a national register of security interests in personal property. “Personal property” is a legal term for any property that is not land, buildings or fixtures. Some examples are:

  • crops, cattle and other livestock
  • stock in trade, artworks or equipment
  • motor vehicles, boats or aircraft
  • other goods, new or second-hand, whether owned by businesses or individuals
  • intangible property, such as patents, copyright, commercial (not government-issued) licences, debts and bank accounts
  • financial property such as shares, cash or cheques.

The register offers your business risk protection, and can also be a tool that can help you secure finance using your business goods and assets.

When you buy goods

Searching the register lets you know whether the valuable products you are interested in buying are security for a debt or other obligation. The register won’t tell you the value of the commitment, but it lets you know to whom the obligation is owed to so you can find out more.

For example, someone may try to sell you used goods, such as a van or piece of machinery, without telling you they still have finance owing on it.

And if they stop making payments on the loan, there’s a genuine chance the finance company can turn up on your doorstep and take those goods away, without paying you a cent for your loss. The PPSR lets you check that goods you want to buy are likely to be free of financed debt, and safe from repossession.

When you sell goods on retention of title or consignment

Making a registration shows searchers that you are claiming an interest in the products or assets you are selling on retention of title terms, or have consigned to someone else to sell on your behalf. This interest means the goods or assets secure the debt or obligation that someone owes you. The registration protects your interest in the products or assets should the customer default or go broke.

If you don’t make registration on those goods or assets and your customer goes broke before they have fully paid you, your assets may be sold to pay secured creditors first. If you are not registered, you will be an unsecured creditor in any insolvency settlement, and may not recover much, if anything, of what you are owed.

By registering as early as possible, you stand the best chance of being first in line over other creditors. It also helps you to protect your interest even if the goods or assets are sold on, mixed or installed onto other assets.

When renting, leasing or hiring out of goods

If the arrangement was entered into on, or after 20 May 2017 and lasts for at least two years, or for an indefinite period that will last for more than two years, then this may apply to you.

There are some lease, and bailment arrangements are considered to be “security interests”, and these can be registered on the PPSR.

Do you think you’re already covered with a contract?

Retention of a title clause, which indicates that the title remains with you until the goods are paid for in full) in your contract or invoice may no longer protect you on its own.

If you fail to make a registration, then it may not be a certainty that your retention of title clause is going to hold up against others when you may actually need to rely on it. In other words, if someone else has already registered an interest, they are ahead of you in the queue should your customer default or go broke.

Use is optional, but a good idea

Using the register is, of course, optional, but many businesses rely on it as a useful risk management tool. If you would like to discuss how your business may be able to use the PPSR, get in touch and Join the conversation…

Share This