Retention of Title and Consignment Agreements A Brave New World

The Personal Property Securities Act, (PPSA) came into th effect on the 30 January 2012. For business, this creates a brave new world which fundamentally changes the law in respect of the securitization of personal property. In this article we look at two key areas for small to medium business which the legislation affects, Retention of Title and Consignment Agreements. It is no longer effective just to have title remains with the supplier until payment is made on your invoices and consignment agreements and expect to be able to collect your goods if your customers do not pay. Registration of your supply agreements rather than ownership is now the key if you wish to maximise your prospects of retrieving your goods from delinquent customers. In the Past: Legal ownership was the key principle. In general, providing you could prove legal ownership until payment was made, and your customers were aware of this, you were able to collect your goods from your customer, administrator or liquidator if you were not paid for the goods. Now: Your ability to collect your goods if they are not paid for will be at risk if you have not registered your supply agreement on the Personal Property Securities Register, (PPSR).The PPSR is a national register replacing the state based registers, (e.g. Vehicle Security Register, Stock and Crop Lien register) as well as the ASIC Register of Company Charges. Registration is completed online at www.ppsr.gov.au. By registering your agreements, you have a security interest in the goods you have supplied and improve your prospects of being able to collect your goods from delinquent Customers and or administrators and Liquidators. The Consequences: The dire consequences of non registration become apparent if your customer goes into administration or liquidation. In these circumstances you will be ranked alongside other unsecured creditors, which may allow other creditors who have registered a security interest over your customers assets to be compensated through the sale of your goods before you receive any payment. What should you do? Have a good look at whom you supply, on what terms you supply to them and ask yourself the following questions: Are my terms of trade with my customers up to date? What is the value of the goods supplied to them? What is the risk to my business if my customers do not pay? What is the risk to my business if I can not get back my stock? If your documentation is out of date and the risk to your business is high, you should update your agreements and register them on the PPSR. Depending on your circumstances, it may also be appropriate to seek specialised accounting or legal advice. For further information contact:
Adrian Belperio Business Advisory Services Tel: +61 8 8373 1266

This is not advice. Clients should not act solely on the basis of the material contained in this Bulletin. Items herein are general comments only and do not constitute or convey advice perse. Also changes in legislation may occur quickly. We therefore recommend that our formal advice be sought before acting in any of the areas. The Bulletin is issued as a helpful guide to clients and for their private information. Therefore it should be regarded as confidential and not be made available to any person without our prior approval. Newsletter written by (author name(s) of (Bentleys firm name). A member of Bentleys, an association of independent accounting firms in Australia. The member firms of the Bentleys association are affiliated only and not in partnership.