PPSA Pitfalls

I've been asked to compile some speaking notes for a colleague who wants to talk about some of the PPSA pitfalls we have become aware of since the PPSR opened for business at the end of January this year.  

While this is far from an exhaustive list (this is for a speaking engagement after all and it doesn't take long for eyes to glaze over once the subject of PPSR is raised) I nevertheless thought it might be helpful to reproduce it here.

• Don’t rely on an independent body such as a judge, court or the PPSR itself to determine the validity of your security interest under the PPSA – more often than not such issues will be decided by a receiver acting on behalf of a bank who will have a vested interest in defeating any competing rights you hold.
  
• Where the PPSA requires goods to be registered by serial number you must not make any mistakes in recording that serial number on the PPSR as any error is likely to invalidate the registration without it having to be demonstrated that anyone was misled by that error.
  
• Banks are frequently (wilfully?) misunderstanding PPSR registrations and asking suppliers to discharge registrations to enable the bank to put their own registration in place – they are then ‘generously allowing’ the supplier to re-register their own interest!  Do not fall for this!
  
• If your debtor/grantor is a company with an ACN and you do not specifically register against that ACN then your registration will almost certainly be deemed to be invalid.
  
• Timeliness is very important. Do not allow your new credit agreements to pile up with the intention of registering  them all at the end of the month.
• Where your goods are destined to form part of your buyer’s inventory (WIP, end product etc.) you need to register before you make delivery.
• Where you are selling equipment that will not be on-sold you need to register not later than 15 days from delivery.
  
• Do not confuse ARBNs with ABNs – an ARBN (Australian Registered Body Number) is a 9 digit number issued by ASIC, most commonly to overseas companies whereas an ABN is an 11 digit number issued by the Australian Business Register.  We have seen a lot of invalid registrations arise from this confusion.
  
• While the PPSA does not require you to obtain prior permission from your buyer to register your security interest against them it does require you to notify them once you have lodged your registration. (With the right wording in your agreed Terms & Conditions, however, you can have your buyers waive their rights to receive such notification).
  
• PPSR registration is not enough to justify your claim against an administrator; you will still need to be able to provide the documents that demonstrate you have the valid security interest you are claiming with your registration.
  
• Most know that Retention of Title clauses justify PPSR registration but don’t overlook the need to also register consignment stock and long-term leasing arrangements.
  
• Make sure that your staff who are actually lodging your registrations understand what they are doing – we see many instances where they seem confused by terms such as ‘inventory’ and ‘Retention of Title’ let alone ‘Purchase Money Security Interest’.
  
• It is better to have a PPSR registration you don’t need than to need a registration you don’t have.
  
• Do I need to register all my security interests – No, only the ones you want to be effective.