In my last article, I made reference to the Personal Property Securities Register or PPSR and said that it was an article for another day. Well, today is that day!
So what is the PPSR and how can it help farmers or those operating in agribusiness? The reality of business is there is always a risk the companies you are dealing with may become insolvent and need to be wound up. In those scenarios, there are often a long line of creditors each demanding payment of the amounts they say they are owed. If there are not enough assets remaining in the company to pay all of those creditors, there needs to be a system to determine how the competing claims of creditors can be determined.
That is where the PPSR and the Personal Property Securities Act 2009 comes in. The Act provides the framework for how those competing claims are determined and provides mechanisms by which a creditor can secure their interest so they are paid out in priority to other creditors. The PPSR is a smaller component of the broader system.
The best way to understand the PPSR is to picture it as a noticeboard. The noticeboard is visible to the world generally and people can register any interest they say they have in particular personal property. Other people can then see those interests. So how does a registration on the PPSR help and why should you do it? The competing claims of creditors are determined by an order of priority that is set out in the Act.
The higher the priority the earlier your interest is considered and the more likely you are to recover any amounts owed. Registration of an interest on the PPSR is one of the ways that priority can be increased, which will immediately improve the priority of your interests and increase your changes of recovering those funds.
In the event that two parties have both registered an interest on the PPSR, priority is generally determined by which interest was registered first in time – in essence, fist in best dressed.
For that reason, if you are supplying goods to someone as part of your business, it is always worth having a written agreement that grants you a security interest that can be registered on the PPSR. You should register that interest as soon as possible to maximise priority. Sometimes it still may not be enough to recover funds owed to you, but it is better to have it and not need it than to need it and not have it!
This article was published in The Stock Journal on 11 August 2022.