14 Jan 2013

Who really gets that asset?

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The PPSR is the new single national source of registered charges against personal property.

It has always been common practice to register a charge against cars, trucks, plant and equipment to secure loans made to businesses and companies.  Shrewd purchasers would always conduct their own investigations with agencies such as the Register of Encumbered Vehicles (aka REVS) to ensure that what they were buying would really be theirs, and not the bank’s.

However, since 30 January 2012, the Personal Property Securities Register (PPSR) has become the single national source of registered charges against personal property.

With the PPSR, the old system of registering charges has been completely replaced with the new system of registering “security interests”.  While the old charge is still considered to be a “security interest”, the task of actually registering the security interest has become more complex.

You should be aware that a potential consequence of not registering your security interest is that someone else’s interest may take priority over your interest.  If the asset is not worth enough to pay both, you may be unable to recover your loan.

The owner of a $100,000 front-end loader leases the equipment to a building company for a 3 year period. The owner does not register its leasehold interest on the PPSR. Later, the building company gives an all-assets security to its bank and the bank registers its interest on the PPSR over all of the company’s assets.

If the company defaults to the bank and the bank enforces, the bank will be able to sell the $100,000 front-end loader and it will keep the proceeds.  This is despite the fact that the company does not actually own the equipment. The new law allows the bank to do this.

Smaller businesses can easily lose out if they do not promptly register any security interests they may have. However, good planning and swift action can protect smaller businesses from the big banks.

If you are a:

• Lender            • Retailer        • IP provider/licensor
• Equipment lessor        • Consignor        • Inventory financier
• Manufacturer            • Farmer        • Miner
• Wholesaler            • Distributor         • Builder
• Franchisor            • Trustee        • Buyer of accounts receivable

… then you need to be aware of the PPSR and consider registering any security interests you may have in any cars, trucks, plant and equipment that you own or have financed.

A major benefit of the PPSR is that it allows for quick and simple checks to be made on whether other parties have registered security interests.

Aaron’s brother-in-law Bob asks Aaron to lend his company, ABC Pty Ltd, $50,000.00 to purchase a truck. Bob offers to give Aaron a charge over the truck as security.

Before Aaron agrees the lend the money, he does a search on the PPSR to see if other banks have registered security interests against ABC Pty Ltd. Aaron’s search reveals that Bank A and Bank B have already registered security interests against any and all property and assets owned by ABC Pty Ltd.

With this information, Aaron weighs up the risks of lending the money to Bob’s company.

This is a new area of the law with massive ramifications for everyone dealing with personal property.  Taylor Smart’s Perth lawyers and notaries are happy to help chart a path through the minefield for both you and your business.

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About the Author


Glen Giles is a Partner in our Commercial practice group. He practices predominantly in the areas of mortgaging and finance, property, leasing, retirement villages and aged care, franchising, wills and estate planning, revenue law and general commercial and corporate law.

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