It is surprising that we still come across wholesalers who are
not availing themselves of the security registration available
under the Personal Properties Securities Act (PPSA) in order to
protect their retention of title trading terms.
Wholesale suppliers commonly retain title in goods they have
sold until they are paid for, under their terms of trade. This is a
very basic form of credit control. It is well recognised as being
problematic, in particular because the stock is usually allowed to
be on sold in the buyer's ordinary course of business to
consumers to generate income to pay for the stock.
Retention of title still exists, but the PPSA and Corporations
Act 2001 have made this mechanism a far less attractive method.
Retention of title clauses are now deemed to be
"securities". If they are left unregistered on the
Personal Property Register (PPSR) they will normally have no effect
if there is a formal insolvency appointment to the buyer. The good
news is that these clauses can be registered on the PPSR as
security interests called Purchase Money Security Interests
The government PPSA website offers user friendly help about PMSI
and how to register them: see www.ppsr.gov.au.
Some key points to note about a PMSI are:
They must be registered before the stock is delivered;
They are not defeated by earlier registered bank securities if
A one off initial registration can be done for each buyer;
They are for commercial dealings, not sales to end
PPSA offers useful enforcement rights.
To avail themselves of a PMSI, clients will need to train their
staff to both obtain the execution by the buyer of the
appropriately drafted trade agreement and to then do the timely
PMSI registration. We can assist clients to both establish
effective PMSI and to enforce them.
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.
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