Personal Properties Securities (PPS)

What is it, and How does it affect you?

http://www.butlerca.com.auPh: 03 5333 5144F: 03 5333 5944Email: info@butlerca.com.au

Does the PPS Legislation Affect you

DO YOU ?• Sell goods on credit • Provide credit facilities in any form, including to related parties • Make loans or advances of funds to anyone including related parties • Have goods or assets located at other people’s premises • Rent, lease or hire goods or assets to others, including to related parties • Supply goods on retention of title terms• Supply goods on consignment and where these goods are stored elsewhere• Grant licenses to other parties to use any of your products, trademarks or

intellectual property• Plan to enter into and pay a deposit for a conditional sale or purchase contract• Intend to take security over certain assets• Have guarantors with charging clauses in your favour• Have assets or funds held on trust by other parties If YES to any of the above, then the PPSA applies to you

If no then the PPSA is unlikely to affect your business.

Brief Overview of the PPS

• Commenced 30th January 2012

• The Personal Property Security (PPS) reform will bring all the different Commonwealth, State and Territory laws and registers regarding security interests in personal property under the one national system. Personal Property Securities Act 2009 (Cth)

• The PPS reform will be administered by the Insolvency and Trustee Service Australia (ITSA) and create a single online PPS register available 24-7.

• The aim of the PPS is to improve the ability of individuals and business alike, to utilize all their property when raising capital, along with:

• -Insolvency protection for purchasers and suppliers• - Allowing business owners to manage credit risk• -Whether planned property for purchase is encumbered• - Search and/or register Assets used to secure loans

What are Personal Property Securities

• Personal property is any property other than land, fixtures that form a part of that land or buildings, this includes both tangible &intangible items

Tangibles- Cars, Boats, Machinery, Crops, Livestock, Art & Equipment• Intangibles- Shares, Intellectual Property, Contract Rights & Negotiable

Instruments

• Personal property Security is an interest in personal property that has been provided for by a transaction in substance that secures payment of money or performance of an obligation, Includes:

• Leases & Retention of title • Hire purchase for more than one year• Commercial consignment.

Existing Security Interests

• Due to the introduction of the PPS reform a number of existing Commonwealth, State and territory registers have now been closed. Any Security interests currently registered on these registers will generally be migrated across to the new PPS system.

• Commonwealth• Australian Register of Ships (mortgages only)• ASIC - Register of Company Charges (including provisional charges)• Fisheries Register

• Victoria• Vehicle Securities Register• Register of Liens on Wool and Stock Mortgages (stock mortgages only)• Register of Co-operative Charges

An existing transitional security agreement(TSI) will be temporarily perfected for 24 months, from commencement date, in which you will need to register your security interest on the PPS within 24 months

(A Full list of registers being closed is available at www.ppsr.gov.au/about_pps)

Who is a Secured party?

• A secured party is a company, individual or other entity that has a security interest in a grantor's collateral. This can include individuals or companies who are involved in:

• Taking fixed and floating charges• Long term and finance leases• Chattel mortgages• Retention of title arrangements• commercial consignments• Factoring.

• A secured party is able to register their security interests with the PPS to protect their priority over these interests- i.e. The leasing of machinery or vehicles to customers.

• A secured party may use the PPSR to:• Search for existing security interests• Find out if security interests are registered against personal property• Register security interests.

Users of the PPS

Grantor• A grantor is a company, individual or other

entity that grants a security interest over personal property to another party. Grantors include those who:

• use their personal property as security for a loan, for example a secured car loan

• use their business assets as security for a loan, for example a fixed and floating charge

• receive property under a retention of title arrangement.

• lease personal property from another party for an extended period.

Why use the PPS?Grantors will be able to search the PPS registrations

made in relation to their personal property.

Buyers• A buyer is anyone who has, or is contemplating,

buying or investing in some form of personal property, such as a car, aircraft, intellectual property, crops and livestock.

• Why use the PPS?• Allows for buyers to search the register to check

any planned personal property does not have any existing security interests over it.

How do the Priorities Work

• When the grantor is in default of its security agreement, a secured party will be able to seize the collateral and deal with the collateral as it sees fit, which may include the sale of that property.

• Perfected: Security interest that is attached to the collateral, or where the secured party has possession or control of the collateral, or where the collateral is registered. Otherwise, the security interest is ‘unperfected

FIRST PRIORITY SECOND PRIORITY• Perfected Security Interest Unperfected Security Interest• Perfected By Control Perfected By Other Means• Perfected First In Time Perfected Later In Time

Unperfected But Attached First Unperfected And Attached Later

What PPS means for you

Manufacturers, wholesalers, and other suppliers of goods

• Manufacturers, wholesalers & other suppliers of goods who supply goods on terms of trade, often include a retention of title arrangement.

• Retention of title Arrangements:- Will become a security interest under the

PPSR- Needs to be registered with the PPSR, to be

enforceable against the customer or the customers liquidator.

- If it is not registered the supplier will not be entitled to recover the goods from the customer, if the customer becomes insolvent.

Hiring of Serial Numbered Goods• The PPS contains new rules affecting the

hiring arrangements for serial numbered goods: Aircraft, motor Vehicles, Water Craft.

• Serial numbered goods include any number that is unique, accurate and affixed permanently to the property.

• If a business hires serial numbered goods to a customer for 90+ days, then the business should register a security interest on PPSR, otherwise if the customer becomes insolvent it will not be able to retrieve the goods.

Equipment Hiring

• If a business supplies equipment (other than serial numbered goods) on hire to a customer for an indefinite period or 12 months or more, the it must register a security interest on the PPSR.

• If you choose not to register the equipment on hire, then you will not be able to retrieve the equipment if the customer becomes involvement or lose rights to other creditors.

Plant, Truck Hire

Company

Trading entity

LeasesRegistered on PPS

Has a secured interest in equipment and can

be retrieved if insolvency occursIf insolvency occurs,

will lose the rights to the equipment or

to other creditors

Failure to Register on PPS

Customer 1

Customer 2

What needs to be Provided

• Secured Parties Details, including Address for giving notices to secured parties & notice Identifiers.

• Commercial Property?

• Collateral Details, including class and description of item.

• Serial Number of Goods.

• Grantor details- CAN, ABN, ARBN .etc

• Registration Details- End time for registration, If interest is a TSI, and any other relevant information.

• Any Purchase Money Security Interest (PMSI) loan details.

More Information

If you require any more information or feel that the PPSR can or does affect your business do not hesitate to contact eitherDamien Butler or Nathan Folkes on 03 5333 5144

Or visit the PPSR Website www.ppsr.gov.auEnquires@ppsr.gov.au Call: 1300 007 777