The Personal Property Securities Act 2009 says in order for a producer to maintain an interest in goods supplied to someone, it is necessary to register the interest on the Personal Properties Security Register.
A question we encounter frequently is what does registering an interest in property on the PPSR actually do?
In order to attract the protection of the act, there must first be a security agreement. In its simplest form, this is a contract, an agreement between parties in respect of collateral or goods - grapes, grain, livestock or plant and equipment - that enables a person to register an interest in the goods on the PPSR.
It is an important, but sometimes overlooked, requirement that a security agreement must be in writing for the registration on the PPSR to have any effect.
The easiest way to understand how registration affects a security interest is to treat the PPSR like a noticeboard.
Registering a security interest in particular goods effectively pins a piece of paper to the noticeboard, spelling out an interest in the grain, so anyone looking at the noticeboard will be aware of that interest.
In registering the interest, it is considered to be 'perfected' for the purposes of the act.
It is not uncommon for multiple parties to have a security interest in the same collateral, so provisions of the act prescribe which of the competing security interests has 'priority'.
This is where having a 'perfected' security interest becomes desirable.
In simple terms, and noting that there are some exceptions, priority is determined by the following simple rules:
- A perfected security interest is always preferred to an unperfected security interest.
- Competing perfected security interests are decided by whichever security interest was registered first.
- Competing unperfected security interests are decided by whichever competing interest was created first.
By registering a security interest on the PPSR, an interest is afforded a higher priority than unregistered interests, even where those other interests may have been in existence for some time.
Another reason for registering the interest in the registration will survive the insolvency or bankruptcy of the person who has acquired the goods.
As a result, a liquidator or trustee in bankruptcy will not have the same ability to claim assets of the insolvent company or bankrupt.
The two important things to remember are to have a contract in writing to record an interest and to register that interest on the PPSR, to not be left empty-handed if things go pear shaped.
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.