What is PPSA?
The Personal Property Securities Act (PPSA) is a complex topic so we’re breaking it down into “bite sized” pieces. The following articles identify the five principle ways in which the PPSA is likely to have application to your business.
- Business loans
- Selling goods/materials on credit to your customers
- Leasing or renting equipment to customers
- Asset protection structures
- Buying/selling businesses
Whilst the PPSA is confusing, one of its most significant benefits is its ability to improve the likelihood of a return from the insolvency of your customer. It can provide a very significant degree of protection from your customer’s insolvency.
We’ve all experienced (and will continue to experience) the insolvency of a customer and we resign ourselves to getting little if anything back on the money we’re owed. Often whilst the secured creditor’s (usually the Banks) recover their debts.
Well the PPSA changes all of this. Compliance with the PPSA promotes suppliers to secured creditor status for the goods/equipment they’ve supplied. Your security ranks ahead of the traditional secured creditors, you can now outrank the Banks!
The cost of compliance is very reasonable (you’ll likely spend more on coffee each year). Usually, only one registration over your customer is required, attracting a Government charge of $6. This registration will cover every transaction you have with your customer for the next 7 years (about 85c a year for each customer).
So, if it helps protect you from the insolvency of a customer and costs so little why aren’t you complying with the PPSA? Most likely because it hasn’t been explained clearly enough to demonstrate how it impacts your specific business.
If you have business loans (in fact any loans at all), sell goods on credit, lease or rent equipment to your customers, use an asset protection structure or are thinking of buying or selling a business, the PPSA provides you with significant protection. Stay tuned to our future Newsletters in which these topics will be discussed.
The PPSA can be remarkably simple. It’s all about security. If you have security over something, you better register it on the PPS Register (massive online ‘noticeboard’ of security interests). Registration ensures you can use your security. Unregistered security will lose to registered security. The first registered security will beat later registered security. This will make more sense as we progress through our newsletters.
Our thanks to Simon for his help. With over 25 years experience as a former Insolvency Practitioner and having advised on the PPSA since before its commencement (in early 2012), he’s one of Australia’s leading advisors on the practical application of the PPSA.
If you can’t wait for the next newsletters please contact us directly and we’d be happy to facilitate a meeting with Simon (he loves the PPSA).
If you’re wondering whether the PPSA applies to your business, PPSAdvisory will happily perform a free Impact Assessment for Thorntons clients. They’ll review your business operations and tell you how the PPSA impacts your business. They’ll explain how the PPSA works, why it’s important and they’ll also provide a cost/benefit analysis of compliance, enabling you to make an informed decision.
If you’re already complying with the PPSA let PPSAdvisory perform a free Desktop Assurance Review. They’ll perform a high-level review of your existing PPS registrations and your registration policy, identifying any errors or departures from ‘best practice’. It’s a great ‘health-check’ to make sure you’re complying with the law.