Better safe than sorry
Posted 23 Sep 16 by Hugh Milne
The Personal Property Securities Register (“PPSR”) offers a low cost way of protecting assets in insolvency. The cost to register a security interest is minimal - $6.80 – whereas failing to register a security interest could cost millions of dollars. The reason being that, when a company has an Administrator or Liquidator appointed, an unregistered security interests vests in the company.
Consider for example the plight of General Electric International Inc (“GE”) in Forge Power Group Pty Limited (in liquidation)(Receivers and Managers Appointed) (“Forge”) v GE.
GE had leased turbines (which had an estimated value of $60 million) to Forge for a two year period and Forge was obliged to return the turbines at the end of the lease. GE did not however register a security interest and when Administrators were appointed GE sought to recover the turbines based on:
1. The lease with Forge was not a lease of a type that required registration on the PPSR; and
2. The turbines were fixtures – the point being that the PPSR is not where interests in land and fixtures can be registered.
GE lost on both points. The Court held that GE’s lease was a security interest that required registration and that the turbines were not fixtures.
Registering a Personal Property Security Interest would have protected GE’s interests. The cost to register a security Interest for seven years is $6.80 - modest compared with the security that registration provides.
Contact an expert for more information