Taking the Ombudsman’s advice: how do you check if you are PPS ready?

By Katherine Payne

The Australian Small Business and Family Enterprise Ombudsman Kate Carnell has been quoted in multiple publications urging businesses to ensure that their assets and loans are properly secured. While these comments focus on small business, all businesses, large and small, ought to take heed.

’Given the incredibly tough past 12 months we’ve had and predictions of a wave of insolvencies to come, PPSR has never been more important.’ [1]

Ms Carnell’s comments follow the Ombudsman’s research paper reviewing the Personal Property Securities (PPS) system. Her conclusion is best summarised by the following quote:

‘At the moment PPSR is hard to get right and easy to get wrong.’ [2]

The difficulties faced by many businesses in properly protecting themselves under the PPS regime is borne out by the recent cases.

To date, there have been 48 Court judgments where creditors have realised that their registrations contained a fatal error (or that they were not registered at all), and applied to the Court for help in fixing their position. We have been involved in many such cases; there are more currently going through the Court process.

The reported cases include a company who realised that they had registered over vehicle chassis numbers rather than a VIN, many businesses and financiers who have incorrectly described the secured party and/or customer (eg describing them by ABN when they ought to have been described by ACN, or vice versa), and others who inadvertently missed registering within the required timeframes or did not realise that their registrations had expired.

Unfortunately, in our experience it is more common that the creditor does not become aware that their registration is faulty (or that they do not have a registration at all) until it is too late. While there can be grounds to fight in some circumstances, more regularly, the company loses its assets when an insolvency practitioner is appointed to their customer/debtor.

The PPS legislation contains strict rules about what rights should be registered, and the timeframes for those registrations. Failing to ‘tick a box’ or inadvertently describing the customer or asset incorrectly can be fatal. If issues are caught in time, they can often be fixed. If they are not caught in time, the regime is unforgiving.

Even in the more complicated legal questions that can arise under the legislation, unless a company is properly registered, they are unlikely to have a seat at the table.

If you have not already done so, now is a good time to conduct a ‘health check’ on your PPS registrations. It is important to ensure that your assets are protected if your customers or borrowers enter difficult financial times.

For more information about expiring registrations, or what you can do to protect your interests if a registration has expired, contact Hall & Wilcox or see the PPSR website.

[1] Kate Carnell quoted by Lian J ‘ASBFEO issues call to register assets ahead of insolvency spike’ Accountants Daily 2 February 2021
[2] As above


Katherine Payne

Katherine is an insolvency and commercial litigation specialist with a focus on the PPSA and its implications.

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