STOP PRESS!!! We have been informed that the Attorney General’s Department is now formally preparing for a new commencement date of 31 January 2012. We will provide further information on the revised commencement schedule as it is made public.
The official commencement date for the PPSR remains 31 October, 2011 but this is likely to be, yet again, delayed. Regardless of the confirmed commencement date, you must ensure that your business is prepared for and compliant with the PPSA.
Retention of Title
As a result of the PPSA reforms, Retention of Title (ROT) arrangements now constitute a security interest and should be registered to allow the secured party (supplier or lender) to enforce the interest against the grantor (purchaser) and any third parties.
Suppliers who currently provide goods subject to ROT will no longer be able to rely on their title to protect their interest in the goods. ROT arrangements will be registrable provided the security agreement is in writing, contains an adequate description of the goods and is signed by the grantor (or if not signed, adopted or accepted by the grantor).
The main impact of the PPSA on ROT clauses is the enforcement procedures. Firstly, suppliers or lenders cannot just “repossess the goods” but must follow the guidelines in Chapter 4 of the PPSA. Secondly, if a supplier or lender does not register its interests, its claim may be ranked lower in priority than other creditors in the event of a default, and will not be enforceable against third parties.
It is important that all Terms & Conditions containing ROT arrangements are reviewed and amended in order to comply with the PPSA. We can review your documents and advise what changes are required to ensure your interests are protected.
The PPS Register
The PPS Register is essentially a database that will list all registered Security Interests. It will allow secured parties, potential buyers and other interested parties to search the Register to find out if a security interest is registered over property. The actual security agreement (such as Terms & Conditions) which gives rise to a security interest does not have to be registered. Rather, a Financing Statement must be registered which contains the following information:
- Secured party details (supplier or lender)
- Grantor details (purchaser)
- Particulars of collateral
- Serial number, if required
- Description of proceeds
- Registration details (the end time for registration)
- An indication whether the security interest is or will be subordinated.
A registration fee is payable at the time the security interest is to be registered. Provided that there is no defect in the registration, it will take effect immediately and a Verification Statement will be issued to confirm registration.
The Register will also allow users to search by serial number for certain types of collateral such as VIN, Chassis or Manufacturer numbers for motor vehicles.
A search of the Register is only permitted for a genuine purpose (for example due diligence). Anyone who requires a search on an individual will be required to make a declaration that they are undertaking the search for an authorised purpose. If a search is undertaken for an improper purpose, penalties will apply.
The PPSA cannot be ignored. You must ensure that you implement procedures in your business to enable registration of security of interests in an efficient manner. Failure to do so may result in the loss of priority and control of the property concerned.