Protecting your assets & goods – another lesson from the Dick Smith collapse

Since commencement of the Personal Property Securities Act 2009 (Cth) (PPSA) on 30 January 2012, entitlements and rights to assets that are yours may not necessarily be what you think they are. In some circumstances, if your assets are off-site and the business that has possession of them goes into administration, you could lose your entitlement to your own asset.

business, people, deadline, stress and paperwork concept – sad businessman with stack of folders at office

It has been almost a year since Dick Smith’s insolvency, yet aggrieved creditors are still frustrated with the liquidation process. There is a way to make certain creditors’ claims a priority over others in the event of a business collapse like this.

Below is an overview of Personal Property Securities Act, which deals with registration of rights to certain assets in Australia, showing how you can protect certain goods and personal assets.

How can the PPSR protect your business from risk?

If you are buying second-hand goods such as a vehicle, you can search the register and find out if there is an existing security interest on the vehicle or not. If there is a still prior security interest listed for the vehicle, it could be repossessed in some circumstances.

If your business is selling goods on terms, yet to receive payment or has goods/assets that are not on your business premises, then you want to ensure that your interest in the asset(s) are appropriately registered. If you’re involved with leasing, for example, where goods are not kept on your premises, registration is imperative so that your security will have priority over others with security if your customer defaults on payments or becomes insolvent. This will reduce the risk of losing assets being suppliers and lessors.

Key PPSR terms explained

If you are not familiar with this relatively new law, the key terms are defined below.

Personal property – is all forms of property other than real estate in accordance with Section 10 of PPS Act.

Security Interest – is an interest in personal property that in substance secures payment of a debt or other obligation regardless of the form of the transactions in accordance with Section 12 of PPS Act. Some of the examples are:

  • mortgages over motor vehicles
  • consignment goods arrangement
  • leases of goods/equipment for more than one year

Personal Property Securities Register (PPSR) – is a national online database of security interests in personal property in Australia. The PPSR legally defines the priority of security interests as first in best dressed principle, not legal ownership. PPSA is maintained and administrated by the Insolvency Trustee Services of Australia (ITSA). Anyone can search this register online at a cost.

How to register?

Express consent from the party in possession of the goods or assets should be obtained to register security interest.

A financing statement should be completed then registered on-line via PPSR website at www.ppsr.gov.au

Formal documented procedures are recommended to ensure that security interest registrations are reviewed and updated by management on a regular basis to prevent potential loss of goods/assets.

Do you need help?

Accru recommend that all businesses consider if PPSA is applicable and seek specific advice if you think you are exposed to risk over entitlement to your assets. Accru can assist with initial advice on how the PPSR can help.

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