Registration on the Personal Property Security Register (PPSR) is an essential step in protecting your property from being seized by third parties. The Personal Properties Security Act 2009 (Cth) (PPSA) established the PPSR when the Act was introduced in 2009. The PPSR is the national security interest register that was established by the PPSA, the PPSR is how third parties can look up interests attached to certain property. The object of the Act is to simplify the registration of security interests in personal property. It was designed to ensure maximum clarify for minimum cost and burden. Although introduced in 2009, the PPSA commenced on 30 January 2012. During this time previous registrations on one of the 23 other registers in Australia, was transferred (migrated) over to the PPSR. This time frame is called the transitional period and all previous registrations were given temporary perfection.
Perfection is a technical term from the PPSA used to describe the enforceability of a security interest on the (PPSR). Whether registration is perfected or unperfected will affect your ability to protect your assets from claims by third parties. If you have failed completely to register your interest you are at risk of losing priority to other creditors. However, there is a late registration period of 20 business days. Any registrations made within this period will retain normal standing, as if they were registered on time.
The following interactions between Builders Co, Suppliers Ltd and Company A will outline how the PSSA registration operates and how failing to register can be costly.
Builder Co Began construction works for Company A on the 3 May 2014. Builder Co brought their own equipment to the site and 13 days has passed since works began. What does Builder Co need to do under the PPSA to protect its assets that are now in the possession of Company A.
Builder Co’s agreement with Company A began after 2012 so it is not subject to the rules of temporary perfection. This means it needs to comply with the PPSA and register its property on the PPSR within 20 business days of the agreement commencing. Builders Co at this point in time still has 7 days to complete registration before the registration would be deemed to be late registration. The consequence of late registration is that if Company A was to become insolvent in the next 6 months the liquidators in charge could ignore the late registration and essentially treat Builders Co as if they had not registered their interest. If it is done within the 20 days then they cannot do this and Builders Co would be able to claim the property back.
Builders Co’s has purchased tiles off Suppliers Ltd for building work on Company A’s site. On the 5 May 2014 Suppliers Ltd delivered 4 pallets of tiles, 12 days have passed since and no payment has been made. How does the PPSA affect who owns the tiles?
The relationship between Suppliers Ltd and Builders Co can be classified as a Purchase Money Security Interest (PMSI). A PMSI is a type of security interest that has a superior priority. A PMSI, like an ordinary security interest, has a grace period for registration. However, a PMSI must be registered within 15 days as opposed to the regular 20 day period. As it is currently day 12, if Supplier Ltd registers its interest within 3 days it will still have an enforceable interest and gain a superior priority against any other creditor of Builder Co’s because of the PMSI.
On 30 May 2014 Builders Co submits a new purchase order to Suppliers Ltd for the same quantity of tiles to be delivered in a month. What does Supplier Ltd need to do under the PPSA?
A PMSI need only be registered on the PPSR once. As long as it is done properly the first time around, there is no need to register each time a new order comes from the same customer. The PMSI may cover either the contractual relationship between the customer and the supplier or the specific goods. Therefore as long as Supplier Ltd registered their original PMSI within the 15 day time period in relation to all the inventory to be supplied to Builder Co, it will have an enforceable PMSI in the new order.\
This is general information only, and does not constitute specific legal advice. If you would like further information in relation to this matter or other legal matters please contact our office on Freecall 1800 609 945 or email us now.