Why should I bother to comply with the PPSA? Well, if you have security and you want to rely on it in the event your counterparty falls into insolvency (the very point when you do want to rely on your security) you better make sure it is correctly registered on the PPS Register. If not you’ll lose your security.
So if you lend money and have security for the repayment of the loan it is fundamentally critical you register your security.
If you rent/hire/lease or lend equipment to customers, the PPSA may deem you to have security in the equipment, you better register the security otherwise you’ll lose it AND your equipment on the insolvency of your customer.
If you sell goods on credit and claim retention of title (security over the goods you supply) the registration of your security will enable you to:
- Recover your unpaid goods;
- Claim an interest in the product in which your goods have been added, attached combined;
- Claim an interest in the proceeds arising from the sale of you goods (any debt due to your customer from the sale); and,
- Act as a defence to having received an unfair preference.
Not bad for a $6 investment in registration.
So your choice is to ignore registering your security and remain an unsecured creditor of your insolvent customer, or register it and become a secured creditor. In our view the choice is easy, but we’ve experienced hundreds of situations where the choice has resulted in significant recoveries.
Let’s take a look at the situations where your business is exposed to the insolvency of your customers and how you might better secure your business from their insolvency. In the following sections we’ll take a quick look at:
- Business Loans
- Selling goods on credit
- Hiring/renting or bailing your equipment to customers
- Asset Protection Structures