The Bullet Proof Jacket Act

Personal Property Security Act.

Get it right and it may save your business.

Get it wrong and it could be the end.

Dramatic yes but that is the reality of this newsletter and we implore all business clients to sign off on their business’ understanding and implementation of the Personal Property Security Act (colloquially referred to as the PPSA).

The PPSA establishes a public register for businesses to record security in collateral that is personal property (i.e. property that is not real property).

Who does the PPSA apply to?

The PPSA is particularly useful where businesses:

  • sell goods on credit terms
  • hire, rent or lease out goods for periods of greater than 2 years
  • provide or raise finance using stock or other assets as collateral
  • Has an asset structure whereby a non operating entity owns assets used in possession of an operating entity.

What can it do?

If you register your security interest correctly, you can:

  • Empowered to seize goods you have sold on credit
  • Obtain the cash received by your client that on sold your goods but had not paid for them (yes claim the proceeds of your clients sale, what an opportunity the PPSA presents)
  • Prevent a liquidator from pulling apart your asset protection strategies.

What if you get it wrong?

If you register your security interest incorrectly (even as simple as registering a security interest over an ABN instead of an ACN):

  • You can not seize back your goods sold on credit, no matter what your terms of trade.
  • You can not claim the proceeds from the sale of your goods by a customer that has not paid
  • You can not obtain your plant and equipment back from a liquidator on the basis it is owned by another entity.

What to do?

Contact us immediately. Christmas is a dangerous time for business and there is often a spike in insolvencies

The cost to ensure you have it right is likely much less than you think.  It is a complex and specialist area of law.  We are able to refer you to the professionals that are right for you.

Get your strategy in place!

Prepared by Mark Bailey, Associate Director Hall Chadwick Forensics

A disastrous example – yes, it is real. One Steel Manufacturing Pty Ltd (administrators appointed) had been hiring  a $23 million crusher at a rent of $4 million per annum.  The administrators considered the finance company’s securities registration to be defective because it used the ACN instead of the ABN as prescribed by the Act. The Supreme Court of New South Wales agreed with the administrator and the hire company was not able to have its$23 million dollar machine returned due to the simple administrative error.

2017-12-21T10:27:48+00:00December 13th, 2017|