The Personal Property Securities Act (PPSA), which came into effect in Australia on 30 January 2012, makes wholesale changes to the registration of security interest in personal property and changes the notion of title over such property.
The PPSA supersedes about 70 State and Commonwealth statutes that affect the creation and enforcement of security interests over personal property. There is now one national Personal Property Securities (PPS) Register which secured and potential secured parties will be able to use to search for and register security interests in personal property.
Title is no longer king
The biggest change the new law introduces is that “title is no longer king” and registration is everything. If you fail to register your interests in your personal property, another party with a registered interest or an administrator or liquidator may acquire an interest in your property free of your interest or your interest may not be enforceable against your customer or other secured party (such as your customer’s bank) in the event of your customer’s default, liquidation or bankruptcy. You may end up simply being an unsecured creditor of your customer – even though you are still technically the legal owner of the property that you supplied them.
Personal property is any property other than land and includes things like crops, livestock, motor vehicles, paintings, debtors/receivables and intangibles such as licences.
The new law will affect you if you provide goods under a retention of title (Romalpa) arrangement or you lease, hire, consignor “bail”, i.e. allow someone else to possess or use, your property. It even affects you if your property is merely stored on someone else’s premises.
Get your paperwork in order
The arrangements you make with your customers are “security” interests under the PPSA and must be properly documented and registered in order to be enforceable against your customer or your customer’s liquidator. This will mean you must also ensure your trading terms reflect these arrangements.
The effects of this new law include overseas and foreign entities that sell or own personal property in Australia to which they retain title. If the foreign entity does not register their interest in the personal property on the PPS Register they will not retain any security interest in that property if it is possessed by an administrator or liquidator.
If you think you are affected by the PPSA you should urgently seek advice from one of Nexia’s State offices. Further information on this reform can also be found on the official Australian government website: www.ppsr.gov.au.
For more information, contact:
Tel: +61 3 9608 0100