Credit risk management and PPSR
Those accepting of risk, or perhaps the more naïve hire businesses, seem set to run the gauntlet of insolvencies as we move into 2023.
Now is a perfect time to bring back stricter credit risk management practices and begin re-assessing credit limits.
Access Intell – Guide to Credit Risk Management and PPSR in the Hire and Rental Industry
Access Intell has produced a guide Credit Risk Management and PPSR guide for the Hire and Rental Industry.
Click here to download a copy.
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Frequently asked questions
The Personal Property Securities Register (“PPSR”) is an online government register of security interests which went live in January 2012.
The PPSR combined 40 or so separate registers, including the Register of Encumbered Vehicles REVS and the ASIC register of company charges. This resulted in a single national register that anyone can access to register a security interest, or to search whether a security is registered.
The Personal Property Securities Act 2009 (“PPSA”) was introduced on 30 January 2012.
Its purpose was to provide a comprehensive regulatory framework governing the laws relating to the taking, and the granting, of security in Australia.
The Personal Property Securities Register (“PPSR”) went live that same day.
The PPSA unified over 70 separate legislative and common law rules governing personal property security. The PPSR combined 40 or so separate registers. The result was a single national register that anyone can access to register a security interest or to search whether a security is registered.
The term ‘personal property’ can be misleading. Under the PPSA legislation it should be regarded as being any property that is not ‘real property’ (ie. that is not land or buildings).
This may include general property, tangible, intangible and financial property.
Once supplied or financed, the personal property in question is referred to as ‘collateral’ within the PPSA.
The individual or entity that holds the security and places the registration is called the ‘secured party’, ‘secured party group’, or ‘SPG’ for short.
The ‘grantor’ is the party that the registration is placed against. For example, they are usually the buyer of goods on credit terms, the borrower of money in a finance transaction or the party that is hiring equipment.
They are called a ‘grantor’ because they have ‘granted’ the security interest to the ‘secured party’.
Depending on the hire agreement terms, you might need to.
In most longer term hire cases (and some short term hires), failure to register could mean that you lose your equipment to the insolvent estate of your customer.
It is vital to understand this aspect of PPSA and put in place the necessary protections. The consequences of not doing so could be disastrous.
It is always of benefit to register on PPSA when you sell goods on credit terms subject to retention of title.
The extent of that benefit depends on what you sell, how you sell it and who you sell it to.
Registration means you recover the sold stock that is still on your customers premises, as well as stock that is incorporated into their process or products as raw materials; or, finished goods and even debts created from the sale of your goods to their customers.
The benefits are enormous in the majority of cases. For most retention of title suppliers, the cost to register is minimal and lasts for at least 7 years.
In most cases, registering on PPSR is of little value when services are provided because, unlike the supply of goods, you cannot re-take possession if you don’t get paid.
For example, if you perform grass cutting duties for a customer you cannot undo the work done or take it back. However, if it has created value, in the form of a debt (eg. your customer has on-sold your service), you have a right to the debt if you have security and register.
Accessii would be happy to explore the benefits of registration with any potential secured party.
In most cases, yes.
When you register on PPSR you become a secured creditor. The Unfair Preference legislation, covered by under Section 588 of the Corporations Act, enables liquidators to ‘claw back’ payments made to unrelated entities in the 6 months prior to insolvency when that money should have been available for all ordinary unsecured creditors equally.
By registering on PPSR and becoming a secured creditor, you fall outside that group.