Are your security interests registered?
There is a heightened risk of insolvency occurring in respect of all businesses over the next six months. If you are lending money, trading on retention-of-title terms, leasing goods or taking security over personal property in any way, it has never been more important to ensure that you have correctly registered security interests on the Personal Property Securities Register.
There may be a small window to act. The Corporations Act provides that a security interest that is registered in respect of a corporation more than 20 days after the security interest is perfected will vest in the company on winding up or administration. Even less time may apply for certain security interests. An out-of-time security interest that is registered today will only be enforceable if the grantor-company survives the next six months.
We recommend that you act quickly to register any unregistered security interests.
You can still enforce security interests and guarantees
Notwithstanding the Federal Government’s amendments to insolvency laws, parties can still enforce security interests and personal guarantees.
Personal guarantees may be more difficult to enforce due to the effect that the pandemic is having on the courts around the country – though, theoretically, nothing is stopping the enforcement of a guarantee. Security interests under the Personal Property Securities Act 2009 (Cth) (PPSA), on the other hand, do not require a judgement before a secured party can take enforcement action. The PPSA provides secured parties with powers of seizure and disposal. Of course there would be significant reputation risk around enforcement of securities under the current environment that would need to be carefully considered.
The full article can be found here.
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