Asset Holding Entities (PPSA)

For a long time accountants and business advisors have recommended the use of an ‘asset protection structure’ between related entities within the same group.

The whole purpose of these structures is to protect Asset Co’s assets from the insolvency of Trading Co.

Most often this involves one entity owning the property, plant and equipment whilst another related entity trades with it. The thought being if the trading entity was forced into insolvency the property owning entity could simply repossess its property.

The PPSA now undermines the effectiveness of this structure. If your business uses this type of structure, you really should comply with the PPSA, ensuring your asset protection structure actually does what it’s supposed to – protect your assets.

Example

  • Asset Co owns a number of prime movers and trailers worth over $1m
  • A related entity, Trading Co is a transport company
  • Asset Co has leased all of its equipment to Trading Co
  • Trading Co collapses and Voluntary Administrators step in
  • The Administrators seize and keep all of Asset Co’s equipment in the possession of Trading Co because Asset Co had not complied with the PPSA
  • To avoid this situation Asset Co simply needed to have a PPS compliant lease, comply with the PPSA and could have protected its equipment for $6.80(Goverment charge).

If you’d like further information contact PPSAdvisory by clicking here.

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PPSAdvisory advises against several proposed revisions to the PPSA legislation due to potential increased costs, complexity, and uncertainty for businesses.

 

On Friday 17 November 2023, PPSAdvisory submitted a detailed response to the proposed amendments in the Personal Property Securities (PPS) framework. They challenge a number of the 345 proposed amendments made in the government’s response to the 2014 Whittaker report.

 

After almost 12 years of implementing the register, PPSAdvisory is concerned that these revisions will burden businesses with additional costs, complexity, and uncertainty instead of providing tangible benefits.

 

Users of the PPSA have adjusted their policies and registration practices to comply with the current legislation. Implementing such significant changes as proposed would require a complete overhaul of policies and practices. Additionally, these proposed amendments would render the policies and practices of many Australian businesses and financiers, particularly those involved in equipment hire, unworkable.

 

As result, the availability of finance for mining, construction, and heavy earthmoving equipment would be directly impacted. If financiers are unable to register their security interest in specific items of equipment (as only equipment with a Vehicle Identification Number can be registered by serial number), obtaining finance for such equipment will

become even more challenging.

 

We now await the response from Government to the submissions which have been made.

 

Feel free to reach out to us via the ‘contact us’ page on the website if you’d like any further information.