The commencement of the Personal Property Securities Act
(2009) –the "PPSA" is now scheduled for early
2012 after yet another delay. If your business involves the supply
of goods and you haven't yet considered the impact of the PPSA
on your business, now is the time!
The type of "security interests" covered by the PPSA
is quite broad. This means that certain transactions which are not
traditionally regarded as creating security may now give rise to a
security interest which needs to be registered.
Supplying goods on a retention of title basis (meaning that the
seller retains legal title to the goods, even after delivery to the
purchaser, until payment is received), is one of them. Currently,
as a supplier of goods on a retention of title basis your right to
be paid is "secured" by the fact that you hold legal
title to the goods, and on the insolvency of the customer you are
able to enforce this "security‟ by repossessing the
property you own.
Once the PPSA is in force, title or ownership of the goods no
longer offers sufficient protection. Failure to perfect your
retention of title security will mean that you will lose ownership
of the goods and become an unsecured creditor.
In order to ensure that your business is properly protected and
able to enforce its right (for example, to seize possession of the
goods in case of non-payment), you should consider:
ensuring you and your customers have entered into a
"security agreement" –usually the terms and
conditions upon which you sell goods. This agreement needs to
provide a suitable description of the goods;
assessing whether your terms and conditions have excluded
relevant provisions of the PPSA that you are permitted to contract
out of; and
ensuring that your confidentiality arrangements are such that
you won't be breaching them by registering the security
interest on the national register.The good news for businesses is
that you have an additional couple of months at least to get your
terms in order before the PPSA comes into force in early 2012.
Questions? Give us a call.
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