PPS Register one year on
Happy first birthday to the Personal Properties Securities Register (PPSR) which celebrated its first year of operations on 30 January.
The PPSR is a noticeboard of security interests in personal property throughout Australia. On the first anniversary of its commencement, over 7.1 million security interests were registered on the PPSR. Almost 3.9 million registrations were security interests over motor vehicles and more than 2 million registrations represent what would formerly have been considered 'floating charges'.
More than 75%, or almost 5.4 million registrations, are 'Transitional Security Interests' (TSIs). These are security interests which were in existence prior to the commencement of the PPSR.
The bulk of TSIs currently registered on the PPSR are security interests which were registered on other registers prior to the commencement of the PPSR - such as ASIC's Register of Charges. These security interests were 'migrated' to the PPSR from its commencement.
There is a 2 year transitional period after the commencement of the PPSR during which TSIs are protected. If they are registered on the PPSR within this period, they continue to be valid and enforceable. But if the 2 year period expires without registration, the TSI will cease to have effect.
It's not known how many TSIs are in existence and are still to be registered on the PPSR. One of the reasons is that certain interests, such as retention of title (ROT) and consignment arrangements, did not require registration prior to the introduction of the PPSR - and there's no way of estimating the extent of these pre-existing arrangements.
Some holders of these types of security interests mistakenly believe that they are protected by the 2 year transitional provisions. Only agreements which were in existence prior to the commencement of the PPSR are protected as TSIs. Any agreement entered into after 30 January 2012 is required to be registered on the PPSR to have effect.
Certain suppliers under ROT or consignment arrangements may still be unaware that their arrangements are 'security interests' and require registration. Just prior to Christmas, a voluntary administrator was appointed to a rare guitar store in Sydney. There were guitars on hand, valued at over $800,000, which were being sold on consignment. Over 100 suppliers of this guitar stock were unable to recover their instruments - because their interests were not noted on the PPSR. According to newspaper reports, the majority of consignors were unaware of the existence of the PPSR, had no idea what it was for and didn't realise that it applied to their particular business arrangements.
Now is a good time to review your security arrangements. More than half of the two year transitional protection period has now expired and holders of TSIs will need to register their interests on the PPSR in order to maintain their validity after the end of the protection period.
Note that in the event of an insolvency - a liquidation, voluntary administration or bankruptcy - property which is subject to an unregistered security interest will generally vest in the insolvency practitioner - and the unregistered security holder may lose all rights in the property.
Protect your interests now!
For specialist advice on all insolvency matters, contact one of our Recovery & Insolvency specialists.