The Personal Property Securities Register (PPSR) is a common topic of conversation as of late. Why are more and more people discussing its significance?
The PPSR (Personal Property Securities Register) came into existence in 2012 as a result of the PPSA (Personal Property Securities Act 2009). The act and register essentially protect your security interests in the event of a customer or supplier’s liquidation. PPSR is a vital business component for anyone who supplies goods on credit terms; leases, rents or hires out goods; or accepts personal property as security for outstanding debt.
PPSR is coming up in conversation more frequently as the seven-year anniversary of the first PPSR lodgements is fast approaching in January 2019. A large volume of registrations will need to be renewed.
So why is PPSR necessary?
In the event of a liquidation, Retention of Title clauses aren’t enough to protect your goods. This is because the administrator will review the Personal Property Securities register and prioritise assets accordingly. Those who have registered their security interests on the PPSR will take priority. If you haven’t registered, you will be competing with other unregistered debtors and face the possibility of losing your collateral or any monetary value.
The flow on effect of the loss of goods or money in the event of a customer’s liquidation can be a risk to your own credit and cash flow. PPSR can provide an alternative to a potential nightmarish situation. Since your security interests take priority, you won’t be hit as hard if a debtor goes into administration. For further peace of mind, you can choose to list your collateral on PPSR for 7 years, 25 years or indefinitely.
The importance of getting it right
Beware, PPSR lodgements aren’t that simple. All of the information in the registration must be entered accurately with no room for mistakes. Otherwise, those errors will void the registration and you might not find out until a liquidation, when it is too late. Some things to look out for include:
- Registering within the strict PPSA time frames based on whether the customer is a company, inventory or not an inventory
- Accurate details such as correct ABN or ACN, secured party details, grantor details, description of collateral, end time for registration
A common example of registering correctly is that it is important to identity the security interest as a PMSI. A Purchase Money Security Interest (PMSI) is a security interest that is granted to suppliers of goods or providers of credit which allow for goods to be acquired or debt for goods incurred. It provides super-priority over general security interests or ALLPAAP. For an example: A supplier will register their stock under a PMSI. When the stock is sold to a third party, the PMSI will also be attached to the proceeds of that stock as well. You cannot change a registration later to indicate a PMSI.
Click here to read some notable PPSR mistakes that have ended up costing significant sums of money.
If a customer’s information changes or you realise there is a defect, registrations must be amended as soon as possible. PPSR is complicated and can even confuse lawyers but the benefits of registering far outweigh the risks of not registering at all.
What you should be doing
If you currently have active PPSR registrations, you should be aware of when they are due to expire. CreditorWatch can run a report for you to identify all registrations and when they are due to be renewed. Make sure that any renewal, amendment or new registration is completed before the current registration expires. You should also be checking over details and looking out for errors or cleansing your data. If you aren’t sure, it’s a good idea to seek advice. Most importantly, don’t wait until the last minute to register or amend registrations.
Patrick Coghlan is the Managing Director and one of the founders of CreditorWatch. CreditorWatch is an innovative and customer-centric commercial credit reporting bureau,empowering over 50,000 users to perform due diligence and determine risk to their business with credit management tools and credit risk information on any entity in Australia. You can create and manage your PPSR registrations CreditorWatch’s PPSR portal or speak with our in-house PPSR specialist.