Now that the PPSR is well and truly underway, it’s inevitable that there would be news of creditors who had failed to register their security interests, and consequently suffering for lack of action under the new system. If you’re not sure yet if the PPSR applies to you, take the time to read this article, and find out if some action is needed on your part.
Earlier this year, independent meat retailer Super Butcher was placed into administration with debts in the order of $8 million owing to creditors, mostly meat wholesalers. Although the retailer was able to be saved from insolvency by being bought out, the position of unsecured creditors is still unclear. It has been reported that around $5 million was owed to unsecured creditors, who had not registered their security interests on the PPSR, and therefore their fate now lays in the hands of liquidators.
The fallout from the financial collapse of Super Butcher should be a loud and clear warning to suppliers of the importance of getting registered on the PPSR. Many suppliers conduct business on retention of title arrangements or on consignment, and these arrangements are now considered to be security interests under the PPSA and must be registered on the PPSR to be secured. You won’t be able to just rely on your agreements anymore, and in this radical way the PPSR turns old practices on their head.
If you haven’t done so already, terms and conditions documents should be reviewed, and security interests should be properly registered on the PPSR. Reports from the register are that many suppliers have failed to register their security interests as a purchase money security interest (now known as a PMSI), and in doing so, have lost the special priority that is provided by the PPSR to retention of title arrangements. Failure to do this can mean that when it comes to the crunch, another creditor could have priority over your claim.
And although there are transitional provisions in place, ie a 24 month protection for security interests created prior to 30 January 2012, care needs to be taken, as supply of goods after that date may constitute a new security interest not protected by the transitional provisions. So it would be best to get the protection of the PPSR as soon as possible and get registered!
Contact us if you need help in being PPSA compliant, if you need your documents reviewed, or your security interest protected.