How would you feel if the following happened to you:
- You lease equipment to a client
- The client’s lender appoints receivers to your client and your client also goes into voluntary administration
- You terminate the lease and take your equipment back
- Then you find out that the receivers of your client have a priority claim to your equipment so you have to hand your equipment over to the receivers
- You owe still money to your financier for that equipment AND your financier calls on your personal guarantee and mortgage security to cover this loss
Does this sound like a business and personal nightmare?
Well, that’s what happened to a company (Queensland Excavation Services Pty Ltd or “QES”) in the case known as Re Maiden in 2013. Watch the video below for an overview of this case and the implications for businesses.
Re Maiden is a landmark decision on the application of the provisions of the Personal Property Securities Act 2009 (PPSA) in Australia. It underscores the importance of ensuring that your business processes are PPSA-compliant. If you aren’t, you run the risk of other parties getting first claim over your business assets.
What Is The PPSA?
The PPSA has been in place since 30 January 2012. The application of the PPSA is very broad and affects many businesses, not just the finance industry. If your business leases goods, sells goods on consignment terms, sells goods on credit with retention of title terms, stores goods at 3rd party premises, then the PPSA affects your business.
If you, like many small and medium business owners, haven’t even heard of the PPSA or understand how it impacts your business operations, check out these 2 earlier articles:
Then take action and get professional advice immediately to ensure that your business processes are PPSA compliant by 31 January 2014. That date is the end of the transitional period for the PPSA.
Business Implications Of End Of PPSA Transitional Period
The Act provides for a transitional period where security interests in assets pre-PPSA were deemed to be “perfected” for purposes of the PPSA.
What that in essence means that if you have registered your security interests on other pre-PPSA registers but haven’t done so on the Personal Property Securities Register, you still retained priority over those assets against competing security interests. If your customer (being the party who granted you the security interest) went into voluntary administration or liquidation, you wouldn’t lose your priority claim over your assets and end up as an unsecured creditor.
But the ball game changes once the transitional period ends on at midnight on 31 January 2014 (Canberra time). You must ensure that you perfect your security interests by that date ie you must have your registration on the PPSR by that date.
If you do this before 31 January 2014, the priority date for registration will be backdated to immediately before the start of the PPSA regime.
If you do this after 31 January 2014, then the priority date will be the actual registration date. This timing gap can have significant consequences. If your security interests in certain assets pre-date another party’s interest in the same assets but that other party perfected their registration before you did so, then you could lose out to the other party in the event a priority contest over those assets arises.
- The PPSA impacts a wide range of business transactions. Don’t leave your business exposed to the risk of loss of your assets to other parties.
Get professional advice from lawyers or other PPSA specialist services about what you need to do to protect your business. And get it done before 31 January 2014.
- Do you have regular business reviews? Do your business review sessions cover issues such as upcoming regulatory changes, industry conditions and other external factors that could potentially impact your business?
These are essential business disciplines for success in today’s rapidly changing world. My Business Mentoring Program supports business owners who want to build strong sustainable businesses. Contact me if you want to find out if your business is the right fit for this program.