Personal Properties Securities Register (PPSR) – Are you ready for the end of the transitional period?
The transitional period under the Personal Property Securities Act 2009 (Cth) (PPSA) is coming to an end on 30 January 2014.
Businesses that have been relying on the transitional rules to protect existing credit, hire or lease arrangements need to take action now or risk automatically losing their rights in their property or position as a secured creditor.
The kinds of arrangements that may give rise to transitional security interests include:
Lease of goods from an asset-holding entity to an associated entity that operates the business;
Agreements for the hire or lease of goods;
Arrangements where contractors store property on the principal’s land.
The PPSA provisions apply to related party as well as third party arrangements and, it is often the related party transactions that are overlooked.
How do the transitional provisions work?
Although the PPSA started on 30 January 2012, security interests that existed prior to this date are covered by the legislation.
Some pre-existing security interests migrated to the new PPS Register (such as fixed and floating charges registered with ASIC), and therefore became perfected from commencement of the PPSA.
However, many interests that were not previously registrable (such as retention of title arrangements and some leases) were deemed to be protected for two years after the commencement of the PPSA. This was designed to allow businesses time to adjust to the new procedures for taking security over personal property and perfect their interests in accordance with the legislation.
All companies and individuals should act now to ensure they have identified all transitional security interests and take appropriate action to protect their positions before this date. Registration of a transitional security interest on the PPS Register is free.
What happens if you do nothing?
Under the transitional rules, a security interest that existed prior to 30 January 2012 is deemed to be perfected until 30 January 2014. From 30 January 2014, the deemed perfection ceases.
Unless you have perfected these security interests by taking the appropriate steps under the legislation by registering your interest on the PPS Register), you will become an unsecured creditor from 30 January 2014.
This means you could lose goods that you own but which are held by a third party, if the other party becomes insolvent so it is worth ensuring that you are covered.
Written by Kasen Stevens