THIS CHECKLIST IS DESIGNED TO ASSIST YOU IN IDENTIFYING IF THE PPSA WILL IMPACT ON YOUR BUSINESS AND HOW YOU CAN PREPARE PRIOR TO THE PPSA COMING INTO EFFECT

DOES THE PPSA AFFECT YOUR BUSINESS? Yes No
In the course of your business :
  • Do you supply or have supplied to you goods on credit, either on retention of title terms or on the basis of receiving/providing some form of security over the goods?
  • Do you enter into documents that include charging clauses or do your standard documents include clauses that are intended to give you some form of security over non-real estate assets?
  • Do you supply credit/finance (including vendor finance) secured by non-real estate assets or borrow funds secured by non-real estate assets?
  • Do you lease or enter into similar arrangements for a period of more than one year or for an indefinite term?
  • Do you or any of your customers factor their debts?
  • Are you party to any commercial consignment arrangements?
  • Do you provide or enter into hire-purchase arrangements?
  • Do you take or provide security over goods by way of pledge?
  • Do you take or provide security over intellectual property?
  • Do you acquire debts or are you involved in receivables financing?
  • Do you currently take or grant any form of security over non-real estate assets to secure the performance of obligations, eg under franchise arrangements, shareholder agreements or joint ventures?

If you have answered YES to any of the above questions, the PPSA is likely to apply to your business.

WHAT ARE THE CONSEQUENCES OF NOT REGISTERING YOUR SECURITY INTEREST ON THE PPS REGISTER?

  • If a person holds a registered security interest in assets over which you have granted security, that person will take priority over any other unregistered interest in those assets.
  • If you supply goods on retention of title or lease terms and fail to register your interest on the PPS register then on insolvency those assets will vest in your customer and may be dealt with without reference to your security or your interest in the asset (even if you hold title to the asset).
  • If your customer deals with the asset over which you are seeking to take security in the ordinary course of their business, those assets will be able to be disposed of and your interest in the asset will be extinguished (even if you hold title to the asset).
  • In circumstances of insolvency or administration of your customer, you may cease to be a secured creditor (or have security by way of ownership of the asset) and end up being only an unsecured creditor of the customer.
  • Once the PPS regime commences on 30 January 2012 existing security arrangements may not provide you with the advantages they currently do.

Ownership of/title to an asset will not provide you with protection against unauthorised dealings with the asset. the registers on which you may currently register your security interests will be replaced by the PPS register.

The new PPS regime may have significant negative consequences to the value of your business with potentially adverse flow on effects in relation to cash flow, profitability and relationships with your own financiers.

WHAT SHOULD YOU DO TO AVOID THESE CONSEQUENCES?

  • Identify a key executive or team to take responsibility for consideration of how the PPSA affects your business.
  • Seek expert advice as to the operation of PPSA and how it will impact on your processes, procedures and documentation.
  • Determine what changes should be made to your processes, procedures and documentation to ensure your security and ownership rights are protected under.
  • Implement appropriate changes, including education of all relevant staff as to the operation of PPSA, and ensure that appropriate processes, procedures and documents are used from commencement of the PPSA regime on 30 January 2012.

Thynne & Macartney is able to assist you in respect of the above matters. Please contact our PPSA team if you require assistance to prepare for the PPSA.

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.