Lack of knowledge of the Personal Property Securities Act (PPSA) and the Personal Property Securities Register (PPSR) could be a ‘time bomb’ for businesses.
Millions of dollars has already been lost by businesses that paid for an asset but had not registered that asset on the PPSR. Whilst it’s voluntary to register, if you have a transaction that you wish to register, you have to do so within a very tight registration time period. A business needs to be continually reviewing transactions with:
- Debtors;
- Loans made;
- Intellectual property agreement;
- Service company arrangements; and
- Asset rental, lease or storage,
to determine whether those transactions need to be registered on the PPSR.
As one of the key criteria for making a decision on whether to register on the PPSR, businesses need to determine their level of ‘financial tolerance’ to a potential business problem. If a registration is not made, whilst there may be no immediate problem (indeed, there may never be a problem), there’s a possibility that, sometime in the future, there could be an ‘insolvency event’ with a customer, borrower, hirer, lessee or property owner where one of your assets is stored. This really is a potential ‘commercial time bomb’.
If you haven’t already done so, we recommend you contact a commercial solicitor for advice on a ‘Terms of Trade’ agreement and ‘Retention of Title’ agreement that comply with the PPSA legislation. If you had these agreements prepared prior to January 2012, the agreements probably don’t comply with the PPSA legislation. It’s a good idea to have a due diligence review of your systems, to ensure you have the ability to make decisions within the very tight registration time frame, if you wish to register a particular transaction on the PPSR. We can assist in undertaking a due diligence review of your preparedness for the effects of the PPSA legislation.
Businesses that need to be especially diligent, relative to the PPSR requirements, include:
- Retail
- Restaurants
- Hospitality
- Trades and Contractors
- Wholesale Suppliers
- Livestock Owners
- Farmers with crops
- Portable Building Renters
- Equipment Renters
- Ingredient Suppliers
- Artists and Sculptors relative to paintings, works of art, sculptures, etc
- Manufacturers
- Farm Suppliers (suppliers of products to farms including seed, fertilisers and pest control)
- Livestock Feed Suppliers
- Thoroughbred Horses
- Construction Businesses
When the GST was introduced, there was a major business education campaign, funded by the government. Unfortunately, there hasn’t been a major campaign relating to the effects of the PPSA and PPSR. Whilst the GST couldn’t send a business broke, ignorance of the PPSA and the PPSR could cause major financial problems for a business.
If you would like us to conduct a review of your internal systems, relative to the identification of transactions or asset rentals, leases, etc, relative to the PPSR, please don’t hesitate to contact us.
