The Personal Property Securities Act 2009 (Cth) (PPSA) has been in effect for over 6 years, yet many businesses are still unaware of the existence and the wide-reaching impact of the PPSA.
In our article '60 Million Reasons to Perfect Your Security Interest', we discussed the failure of General Electric International Inc (GE) (an American company) to comply with the requirements under the PPSA and the subsequent loss by GE of approximately $60 million worth of assets.
GE (like many other business owners who have felt the impact of the PPSA) made one critical mistake – they didn't know the PPSA applied to their business.
PPSA - What is it?
The PPSA regulates security interests in personal property, which is essentially all property – other than land, fixtures to land and some statutory rights.
The PPSA sets out a complex and highly technical statutory regime for the creation, priority and enforcement of security interests in personal property.
The first question for every business owner is whether or not the PPSA applies to their business. This is of critical importance as a failure to comply with the PPSA could result in loss of valuable assets even if you own them! (like in GE's case).
Typical transactions caught by the PPSA
Typical transactions which may give rise to a security interest in personal property include:
- sale of goods on a retention of title basis;
- leasing (eg leasing of goods, motor vehicles, plant and equipment etc);
- hire purchases;
- mortgages (eg mortgages over goods, motor vehicles, plant and equipment etc);
If your business is engaged in any of the above transactions it is very important that you comply with the requirements under the PPSA and perfect your security interest. This can be done by ensuring your transaction documents comply with the PPSA and you register a financing statement on the Personal Property Securities Register within the statutory timeframes.