PPSR Made Easy Webinar with Paul Mead, PPSR Specialist at CreditorWatch & Terry Ledlin, Special Counsel at Ledlin Lawyers
Agenda 1. What is the Personal Property Securities Act (2009) 2. What is the Personal Property Securities Register? 3. How to Register and What You Need 4. Case Law Examples – Failure to Register 5. January 2019 deadline
About CreditorWatch Australia’s leading commercial credit reporting bureau with over 50,000 Customers • Other products include: 1. Credit reports, monitoring/alerts and debt collection tools 2. PPSR and DataWashing 3. ApplyEasy - Online credit application and decisioning solution Affordable for all businesses, from sole traders through to public • companies
About Ledlin Lawyers Ledlin Lawyers is a boutique CBD law firm with 50 years experience specialising in Credit Management and Collections, Commercial Litigation, Insolvency and Commercial Documentation. CEO of Ledlin Lawyers, Terry Ledlin is a practical and experienced lawyer who has worked with government agencies, private and publicly listed national and multinational companies across many different industries. He thrives on challenges and helping to solve complex commercial issues is his specialty.
Who Are We? • Can juggle Supports a Wooden Spooner • • Will put Chilli flakes on anything, (Parramatta my favourite football (spicier the food the better) team) • Still don’t look like Tom Cruise L Has a been lawyer for 6.5 times as • • Favourite emoji long as the PPSA has been in effect.
Poll Are you currently registering security interests on the PPSR?
Does the PPSA Affect You? Do you……. - Sell goods on credit or provide credit facilities in any form to anyone? - Have goods or assets located at other people’s premises? - Supply goods on retention of title terms? - Supply goods on consignment and where these goods are stored elsewhere e.g. Art? Motor vehicles? - Grant licences to other parties to use any of your products, trademarks or intellectual property? - Have guarantors with charging clauses in your favour?
Personal Property Securities Act - Commenced on 30 January 2012 - Replaced over 70 pieces of state, territory and Commonwealth legislation and 40 different registers into one national system and register – the PPSR - The 4Cs for secured transactions using personal property – increase consistency, increase certainty, reduce complexity and reduce cost
What Property Are We Talking About? Personal Property - Anything that is not real property i.e. land, buildings, fixtures (e.g. built in bookcases) - Generally speaking, goods including cars, aircraft, watercraft, commingled goods (e.g. wood later made into furniture), intellectual property, bank account, shares
Personal Property Securities Act - Establishes rules for:- • Creating valid and enforceable security interests; • Determining priority between competing security interests; • When a security interest can be enforced after an insolvency event.
Key Terminology Term Meaning Security Interest Interest in Personal Property created out of contracts between parties, securing payment of a debt or enforcement of an obligation. Security Agreement An agreement or act that creates or provides for a Security Interest (commonly T&C's of sale, hire agreement or loan agreement) Retention of Title A contractual provision stating that title to goods being sold remains with the seller until certain obligations (normally payment of the purchase price) are met by the buyer. Collateral Personal Property offered as security for a debt or other obligation. Must be described when registering on the PPSR.
Key Terminology Term Meaning ALLPAAP All present and after-acquired property ('AllPAAP') is a class of Collateral that may be registered on the PPS Register and can be with or without exceptions. PMSI A Purchase Money Security Interest (PMSI) is a special type of Security Interest granted to suppliers of goods or providers of credit which allowed the goods to be acquired or the debt for the goods to be incurred – super priority Financing The data registered in an application for Registration of a Statement Security Interest on the PPS Register. Verification A document confirming the details of a Registration on the Statement PPS Register - any mistakes will mean that the Registration is ineffective.
Personal Property Securities Register (PPSR) - Sellers, lessors and lenders can register security over goods on the PPSR - Buyers can check who is claiming a security interest - Shows when someone is claiming an interest in the personal property
What’s In It For A Buyer? - The most common reasons for searching the PPSR are:- • Buyer searching to make sure goods they want to buy do not have finance owing against them • Liquidator or Bankruptcy Trustee searching for existing security interests, because they affect other creditors • Business or financier searching a potential customer as part of their due diligence
What’s In It For A Buyer? “What are the benefits of registering?” – This can fit it before the ‘What’s in it for a Buyer/What’s in it for a Seller” slides.
What’s In It For A Seller? - Retention of Title Clause (ROT or Romalpa Clause – title remains with Seller until goods are paid for in full) will no longer protect you on its own - If a Seller has not registered a security interest, they will be considered an unsecured creditor in an insolvency, and may recover little (if anything) of what they are owed - Registering as early as possible helps a seller stand the best chance of being first in line over other creditors
What About Leasing, Hiring or Renting Goods? - If someone is: - • Leasing or hiring goods for at least two years; • Leasing or hiring goods for more than two years; or • Leasing or hiring goods for an indefinite period, then a registration will protect the interest in the goods being hired while they are not in possession of the owner.
A Closer Look At Security Interests - A credit account does not on its own create a registrable security interest in the goods - An ROT clause is treated as a security interest granted by the Customer BUT vital to take the extra step to register the security interest - Can’t just rely on the title or ownership and contract terms – registration must take place or priority is lost!
A Closer Look At Security Interests If I have retention of title clauses in my contracts, why do I need to register on the PPSR?”
When Should a PPSA Registration Take Place? As soon as a Seller is going to be dealing with a new Customer OR with an existing Customer on new terms Poll question How many times you have updated your Terms in the last 7 years?
When Should a PPSA Registration Take Place? - Rights are protected from the time of registration - Grantor company - register within 20 business days - PMSI - box must be ticked and generally registered (within 15 business days)
How To Register - PPSR is highly prescriptive – errors can render a registration ineffective and a security interest unperfected - Generally speaking, grantor identifier for registration is as follows:- - Individual - name and date of birth as per driver’s licence; - Company – ACN; - Trust or partnership – ABN; - Any other body corporate – its official name
Financing Statement Some of the following details are required for a financing statement:- • secured party’s details • grantor’s details • description of collateral and proceeds • end time for the registration • whether security interest is, or is to be, a PMSI
What Happens If You Don’t Register? 1. When a grantor becomes insolvent (administration, liquidation, bankruptcy), any rights will be ineffective 2. Creditors who did register will take priority 3. Lose the right to recover proceeds of goods once they are sold, leased or transformed 4. Unperfected security interests will vest in the grantor on insolvency
What Happens If You Don’t Register Maiden Civil v QES [2012] NSWSC 852 - Maiden leased excavators from QES - QES did not register its PPS Lease security interest on the PPSR - Maiden then granted a general security to Fast Financial - Fast registered its security interest on the PPSR - Maiden went into voluntary administration - As QES did not register its security interest on the PPSR, the excavators vested in Maiden
What Happens If You Don’t Register Correctly? Power Rental Op Co Australia, LLC v Forge Group Power Pty Ltd (in liq) (receivers and managers appointed) [2017] NSWCA 8 - Forge entered into an agreement with GE to lease gas turbine generators - GE did not register its security interest on the PPSR - Forge went into Administration - Forge maintained the turbines had become a fixture and had therefore become part of the land - Court held the turbines were not fixtures so it should have been registered
January 2019 Deadline - Many initial registrations were for 7 years which means they will expire in January 2019 - Once the registration lapses, security and priority is lost – You need to act now - Next webinar series will discuss different ways of re-registering and the effect of changing your terms and conditions on your PPSA registrations
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