KXBbwMany businesses gloss over the Personal Property Securities Act 2009 (Cth) (PPSA). How is it relevant to my business? Doesn’t it have something to do with people’s personal property – their furniture, TVs, iPads, watches and the like?

In fact, the PPSA is more relevant to the property of businesses than it is to the goods used in people’s households for domestic use. Personal property is essentially all property except for land and items affixed to the land. It includes the plant and machinery of a business, and its inventory. It includes the crops and livestock of a farming business. Personal property can include more intangible items like intellectual property, shares and accounts.

Essentially, the PPSA allows the holder of a security interest in personal property that is in the hands of another to register that interest on the Personal Property Securities Register (PPSR) and protect that interest against the world at large.

Take the example of Jane’s Jewellery Store. To get her business started, Jane borrowed from XYZ Bank and, to secure that loan, Jane gave a charge to XYZ over the whole of the business. XYZ promptly registered its charge over the business as a security interest on the PPSR.

Jane’s carpenter friend, Adam, supplied and fitted some new cabinetry in the jewellery store. Jane could not pay, so Adam said that he would proceed with the work but retain title to the cabinetry until Jane paid him. Adam did not register a security interest in the cabinetry on the PPSR against Jane’s business.

Jane’s jewellery designer friend, Mary, supplied items of jewellery on consignment to Jane for sale in the store. John rented a cash register, a computer and a safe to Jane. Neither Mary nor John registered their security interests on the PPSR against Jane’s business.

Months later, Jane’s cash resources dried up, and she was forced to put her business into liquidation. XYZ, the only party with a registered security interest, took possession of all the personal property within the business and sold it to repay the debt owed by Jane. By failing to register their security interests over the personal property they had supplied, each of Adam, Mary and John surrendered their security interests to Jane’s Jewellery Store on its liquidation and the priority security interest of XYZ prevailed. Adam, Mary and John were left only with money claims against an insolvent business.

If you can see yourself in this scenario, contact us at Everingham Solomons for personalised advice because Helping You is Our Business.

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