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The Importance of the Personal Property Securities Act for Your Business
The transitional period allowed for by the PPSA legislation runs out on 30th January 2014.
Although new contracts from 30th January 2012 are already caught, time is up on the transitional 2-year period for contracts or agreements entered into before this date.
Why is this important?
If you sell goods to your customers using retention of title contracts (this is where your customer has possession of the goods, but title to them does not pass until they have paid the purchase price in full), if you hire or lease plant, or supply goods on consignment and do not register your security interest with the Personal Properties Securities Register (PPSR), you may surrender those assets in the event your customer becomes insolvent.
You may think you own these assets but if an External Administrator is appointed, the assets may vest in the insolvent entity and you forfeit your right to them.
Ignoring the risks may have severe consequences as recent court cases have demonstrated, with substantial plant values being forfeited.
What do you need to do?
Ensure all security interests are perfected (registered) with the PPSR.
Do you control a plant holding entity and that equipment is made available to a trading (and therefore potentially ‘at risk’) associate or subsidiary? If so, internal asset protection strategies are a must. If the associate or subsidiary fails those assets may be at risk of forfeiture or surrender.
On the flip side, do you buy valuable second-hand items (e.g. equipment, vehicles, stock)? If so, you should check the PPSR before you buy to see if item is debt-free and safe from repossession or seizure.
Need more help? Please contact the team at McKinley Plowman. We will assist in assessing your risk and making sure your interests are protected.
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