The holiday season in Australia is a time for businesses and business owners to switch off and enjoy parties and presents. The end of the PPS transitional period might not be as flashy or as fun as the holiday season but it could prove very important to the bottom line of your business. The PPS is the new personal property security law that started in 2012.
When the government brought in the PPS Register in February 2012, it put in place a 2-year “free pass” for anyone who has a security interest created under a security agreement entered into before 30 January 2012. This was the PPS transitional period, and on 1 February 2014, that free pass ends.
The PPS Act is all about priority. The basic rule is that ‘first registered’ not ‘first created’ gets priority and gets paid first if a customer goes under (with a few exceptions). One of those exceptions was the free pass. Businesses and individuals with the free pass got to keep their priority for two years, and only lost it if they didn’t register by the end of that period. On 1 February 2014, the transitional rules will fall away – anyone who hasn’t registered will lose their priority – even if they didn’t realise. And that means they may not get paid if their customer goes under.
What could this mean for your Business?
• Is some of your company’s property being held by someone else?
• Are you supplying goods on credit?
• If you have any legal right to get that property back at a later stage including a “retention of title” clause, the PPS Act may apply to you.
If that legal right was created before 30 January 2012 (and has not changed since then) then you have priority at the moment over all later registered interests, but that priority will disappear on 1 February of next year unless you register your interest on the PPS Register. If you fail to register by the cut-off date then you will not only have lost priority to everyone else who registers after the cut-off date, but also to everyone else who is already on the register.
What should you do?
Once you know the registration process, it is straightforward and not expensive and is one off process for each customer.
• Register all your “Transitional Interests” with the Personal Properties Security Register at www.ppsr.gov.au to make sure you get your “free pass”.
• Review your terms and conditions of trade. You need a legal right to register your interest.
• Register any additional interests as well as the “Transitional” interest over the people/companies to whom you supply goods, in the correct way and at the correct time.
• Notify the person over whom you have registered as required under the Act.
• Check who is registering over you. A search can be conducted on the PPSR to check this. If there are people who have registered incorrectly over you either because they have no interest or the interest they have registered is wider than that which they should have registered, then you may be in the position to require them to remove or modify their registration
How Watkins Tapsell can help
Our experienced Watkins Tapsell Commercial Business & Property Team can assist you in putting the right processes in place to ensure your interests are protected. Just call us if you have any questions or concerns.