The Personal Property Securities Act (PPSA) is due to commence on 30 January 2012.
The PPSa is one of the most significant reforms to australian commercial law in decades. it will dramatically change core business practices for a wide-range of australian services and businesses, including in the rural/agribusiness sector.
The PPSa applies to virtually all types of property (except land). the PPSa requires that businesses register all security interests on the Personal Property Securities register (PPSR).
For example, from January 2012, in addition to the more commonly recognised security examples (e.g. charges, bills of sale, crop liens), the following arrangements will also need to be registered as a security interest on the PPSr:
- retention of title arrangements (for example, produce supplied to a wholesaler or retailer on trade account terms);
- consignment arrangements;
- plant breeder rights; and
- patents, design and trademarks.
A failure to register a security interest in relevant personal property may result in the interest holder losing its priority interest in those goods to other security holders such as banks, landlords and creditors. that consequence can apply even against the legal owner of the relevant property.
Primary producers/growers are also likely to start receiving information from their own financiers and suppliers about how the PPSa will impact on their commercial or banking relationships. For example:
- a company that supplies fertiliser to a grower for crops on credit terms should be taking steps to protect its interest in that fertiliser by registering its interest on the PPSr;
- some financiers are already asking growers/producers to confirm that their business is "PPSA ready" and that terms and conditions of trade have been reviewed for PPSA compliance;
- any current security interest of a financier over a current crop will be "migrated" to the PPSR with minimal involvement of the farmer. However, any new crop liens will, depending on the financier, look different to documents signed in the past. The new breed of security documents will place additional obligations on the farmer/grantor to ensure their financier's security interest in a crop is protected.
All growers should review their terms of trade as well as terms of trade they commonly sign or operate under. They should seek advice on those terms to avoid inadvertently giving away rights they may otherwise have under the PPSA and/or breaching any covenants contained in current mortgages/charges with their financier/bank.
Thynne & Macartney is prepared to guide and assist clients in navigating through the risks and compliance issues associated with the PPSA. We can offer general PPSA advice and advice on specific issues of concern. In appropriate cases, we can have a member of our team attend a client's workplace to conduct a PPSA seminar specifically tailored to their business needs.
The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.
