Once they get past the PPSR’s jargon of purchase money security interests, giving of notice identifiers, subordinated
registrations etc, many of my trade credit clients have something of an ‘is
that it?’ reaction. They’d been gearing themselves up to having to list part
numbers and order references only to find that simply choosing the collateral
class category of ‘Other Goods’ was
pretty much all that was required. Understandably, there’s an element of
anti-climax and concern that they should be doing more when it comes to
describing the goods/collateral involved.
The answer to their concerns, to my way of thinking, rests
very much in the nature of the register that the PPSR was set up to be.
Prior to the PPSR, company security interests were
registered on the ASIC Register of Company Charges. The ASIC register acted as a Transaction filing system, whereby the
document that acted as the security interest was filed in its entirety – a 30
to 40 page Registered Charge document signed by both parties being the most
common.
Although the PPSR replaced ASIC’s register, the PPSR has
been established as a Notice filing
system whereby the secured party is merely required to announce that it has a
security interest (or is likely to have a security interest). The actual security interest – usually
represented for trade credit suppliers by a Retention of Title clause in their
terms and conditions – would need to be kept separately and brought out at any
time evidence is required that the security interest asserted by the
registration on the PPSR actually existed.
The registration on the PPSR, therefore, does not define the
security interest or the collateral to which it applies, but instead merely
needs to describe it in a manner that would provide an indication as to its
nature for interested third parties.
Where the ASIC register stored 40 page documents, the PPSR stores the equivalent
of an electronic post-it note.
Thus, when a supplier lodges a registration perfecting their
Retention of Title security interest, they are putting others on notice that they
have an interest, the precise details of which may be separately available from
them in response to any third party enquiry – such as might be required from an
insolvency practitioner should the customer fall over.
When a liquidator (or similar) is appointed to a company,
they will conduct a search of the PPSR to see who is asserting they have a
security interest. They will then write
to each of these asking for the evidence that such an interest exists and is
consistent with the general description provided by their lodgement on the
PPSR. It is at this point that suppliers
will need to detail the specific items of collateral to which their security
interest applies and provide evidence of the relevant acceptance by the
customer of their security rights.
Specific serial numbers are only required to be provided as
part of a PPSR registration when that registration concerns motor vehicles,
watercraft, aircraft and certain other weird and wonderful types of collateral
such as Intellectual property patents and plant breeders’ rights.
Inserting serial numbers in Collateral description fields of
‘Other Goods’ registrations may be of some assistance to a liquidator in
identifying specific stock – although promptly providing that information
separately upon request would be just as helpful – but can create a rod for suppliers’
backs in as much as any typo or omission would render the effectiveness of that
registration subject to challenge. It
would also take the supplier down the path of having to either lodge multiple
registrations every time a fresh delivery was made or constantly amending
existing registrations – an administrative burden I’m sure they could do
without.
If a security interest is in the form of an accepted
Retention of Title clause then an ‘Other
Goods’ registration, describing the collateral as that supplied by the
secured party and the interest as a Purchase Money Security Interest (PMSI)
should be sufficient, if registered in a timely fashion, to secure a supplier’s
rights to those goods until such time as they have been fully paid for and
assure the supplier of a higher ranking interest over those goods than any
other creditor in the event the customer falls insolvent.
