PPSR – Benefits and Consequences
The new Personal Property Securities Register means significant changes to the way you manage your security interests. While there are a number of benefits for businesses, there are some serious consequences attached to non-compliance.
The new PPSR, introduced on 30 January 2012, replaced multiple capital, state and territory registers to bring information into one national system. Merging this information into one register means businesses and individuals will save time when registering and searching for security interests within Australia. The reform also includes new rules for determining priority between competing security interests and other interests in the same personal property. Bringing everything together under one legal framework can benefit your business in a number of ways.
Improves credit risk
Registering your security interest on the goods supplied or leased will result in the improved management of your business’ credit risk. For example, you will be protected if your debtor becomes bankrupt or is liquidated. In this situation your business will remain as a secured creditor, meaning the goods leased will still belong to you and you will be paid on time. Personal property includes boats, planes, cars, plant and equipment, shares, accounts receivable, crops, livestock and art. Because of the wide range of this classification it is crucial that you register anything before entering into a credit transaction of any kind.
Simplifies your records
With each territory, state and the Government having their own register prior to the PPSR, a business with personal property registrations in more than one state would be liable to pay the registration fee more than once. Under the new national register these costs are reduced with businesses only having to pay the fee once. Records and registrations held on properties are also simplified with only the single registration needed.
Retain ownership of your goods
You can claim ‘retention of title’ if your business supplies or leases collateral to a third party which becomes insolvent. This means that you can repossess the goods if they have not been completely paid for. Under this clause however, in order to repossess the goods you must have registered your security interest. If the supply or lease to a third party is on a regular basis, only one register is required for each customer, not for each supply. Failing to understand and allow for the new PPSR can have consequences resulting in a loss of assets to your business. To ensure that you avoid any penalties or ramifications from non-compliance it is important to consider the following:
- Do you have any current security interests not lodged that could be registered under the new PPSR?
- Ensure your clients are aware of the changes and direct them to the appropriate Government websites.
- Are there any areas of lending/credit who do not lodge a security interest over assets, but could under the easier processes of the new PPSR?
- Have you analysed the effects of the new system on your credit administration and management processes?
- What processes have you instated to advise customers before registering a security interest and to provide verification after lodgment?
- What processes do you have in place to monitor and manage the transition of existing interests on the new PPRS within the two year period allocated?