Businesses warned to register interests by January 31 or risk losing them in case of business liquidation
In less than two weeks, the transition period of the Personal Property Securities Register (“PPSR”) will end, meaning businesses with pre-existing relationships with customers from before the introduction of the register in January 2012 are now required to register all security interests.
Failure to do so can result in such interests becoming available to all unsecured creditors in the event of the business liquidation.
The PPSR commenced in January 2012 and replaced 70 different registers of security interests. Businesses with pre-existing business relationships with other businesses have been able to claim exemption from having to register as part of a transitional ‘grace’ period. This period will expire on January 31.
Experts have called on businesses to register their assets, because failure to do so is no legal excuse.
To date, some businesses have already fallen foul of failing to register.
For example, in 2010, Queensland Excavation Services purchased a wheel loader and two excavators using third-party finance. It then leased that equipment to Maiden Civil, which used the equipment in civil construction work in the Northern Territory. Maiden made periodic repayments to QES.
In 2012, Maiden borrowed money from Fast Financial Solutions, granting Fast a security interest over all its assets and equipment. Four months later, Fast appointed receivers to Maiden, who claimed possession of the equipment Maiden was leasing from QES.
QES had never registered its interest in the equipment, and so was not granted one when the matter proceeded to the High Court. The failure to put the lease in writing meant it could not show the arrangement had been in place before 2012, and so it wasn’t able to take advantage of the grace period.
Businesses need to create PPSA compliant terms of trade, and register their interests on the register. If they do those two things, they can get all the benefits if the company goes into liquidation.
Should you require advice in relation to the PPSR, please contact Sherry Kelly of Colville Johnstone Lawyers for down to earth, straight to the point advice.