Terms of Trade and The Personal Property Securities Act
The Personal Property Securities Act 2009 (PPSA) came into full effect on 1 February 2014. Now, all businesses that supply goods to their customers or distributors, on the basis that they retain title until payment is made, are at risk if they do not appropriately register their sales on the Personal Property Securities Register (PPSR).
The PPSA replaces over 70 pieces of regionalised law in relation to “security interests” in “personal property”. Personal property is not just consumer property; it is all forms of property other than land and certain statutory licences. Commercial equipment and stock are common examples of personal property.
Businesses that do not have possession of their personal property (e.g. stock and equipment supplied or hired to customers) must:
- Have a security agreement in place that satisfies the requirements of the PPSA; and
- Register their security interest on the PPS Register.
Businesses that do not take these and other steps may not have the ability to seize or otherwise deal with their personal property upon a debtor’s default.
Your business will be affected by the PPSA.
The PPSA will affect a variety of industries, including:
- Manufacturers, distributors and suppliers that supply goods;
- Accountants, insolvency practitioners and business advisers;
- Transport and logistics companies that provide transport or warehouse services and freight forwarders and carriers;
- Leasing companies that lease vehicles, equipment or other goods; and
- Factoring businesses.
The PPSA requires some very significant changes to the way your business operates and it is important that you are ready and understand how the PPSA may affect your business.
To provide you with an example of the operation of the PPSA, if a manufacturer were to supply goods to a business under usual 30 day trading terms and that business were to later become insolvent, the manufacturer’s security interest would become void. This applies even though the manufacturer may have title (i.e. ownership) in the goods.
Your Terms of Trade
As a business owner you need to ask yourself:
- Are my Terms and Conditions of Trade up to date?
- Do they incorporate adequate provision for the protection afforded by PPSA?
- Do I understand the ramifications of PPSA and how I could be adversely affected?
If the answer to any of these questions is “No”, then Accounts Receivable Solutions can help you. We will:
- Assess your existing Terms of Trade;
- Compile new Terms which incorporate the PPSA requirements – written by an experienced legal practitioner;
- Explain to you in simple, easy to understand terms how the PPSA affects you;
- Provide training to your staff on how the PPSA works;
- Assist you in registering sales on the PPSR
You cannot afford to operate with inadequate Terms of Trade.