The PPSA created a new national scheme for the registration of Security Interests over Personal Property. The Register is known as the Personal Property Securities Register and is commonly referred to as the PPSR.
Security interests over personal property are typically granted when businesses borrow money, buy/sell goods on credit or lease/hire items for periods over two (2) years.
The prompt registration of security interests is crucial to ensure that your security will have priority after other creditors and is enforceable in the event of a debtors insolvency.
The PPSA affects almost every business that supplies goods (whether by sale or lease) or extends credit with security. If used effectively the PPSA creates rights and protections for businesses that did not exist previously. However, businesses that ignores the PPSA and fail to register a Security Interest on the PPSR face a real risk of suffering significant losses.
In broad terms, businesses seeking to protect themselves against a customer’s insolvency by taking security over a debtor’s Personal Property will now need to Register a Security Interest on the PPSR.
Personal Property Securities Register (PPSR)
The Personal Property Securities Register (‘PPSR‘) is the register where details of Security Interests in Personal Property can be registered and searched.
Personal Property is broadly defined. With a few exceptions only, it covers any property someone can own other than land, buildings and fixtures.
Personal Property includes, without limitation:
- plant & equipment,
- cars, boats, plates,
- crops & livestock,
- licenses, shares,
- accounts receivable, contract rights, and
- intellectual property.
What is a Security Interest?
A Security Interest is an interest in Personal Property provided for by a transaction that, in substance, secures payment or performance of an obligation. Specifically, a Security Interest includes an interest in Personal Property provided by any of the following transactions:
- an agreement to sell subject to Retention of Title,
- a lease of goods or equipment,
- a hire purchase agreement,
- a consignment,
- a chattel mortgage, and
- a fixed or floating charge.
Generally, when you buy Personal Property on hire purchase or use Personal Property as security for a loan or another type of credit providing transaction (eg Retention of Title sale), the transaction creates a Security Interest in the Personal Property.
Retention of Title
Retention of Title refers to a type of clause often included in a contract for the sale of goods where a purchaser may take possession of goods, but does not acquire title to the goods from the seller until the full purchase price is paid. There is typically a right to repossess the goods if the purchaser breaches the contract.