What to do when your customer goes bust!

While it would be great if lodging a registration on the PPSR actually stopped your customer from going insolvent, that’s probably a little too much to expect from a $6 registration.  However, your registration will give you an important leg up in trying to recover something from the inevitable mess caused by the insolvency – specifically, any money you are owed for unpaid for goods.

Your first action (after putting a hold on any future deliveries) should be to write to the insolvency practitioner.  If you haven’t already got it, you can find contact information for the liquidators via ASIC .  Although you can write a letter, it is probably best if you use email.

Your email needs to put the liquidator on notice that you are owed money and that you want your recovery rights to be respected.  You will also want to start the process of gathering information to ensure any value you are able to recover is maximised.

You will, therefore, need to include:

·         A statement of account showing what is owed and/or outstanding.

·         A listing/description of what goods have been supplied (including any information that might help the liquidator identify the goods on a factory/warehouse floor).

·         A copy of your Terms & Conditions clearly showing your security rights (usually a Retention of Title clause) and some indication that the insolvent company actually accepted those terms – most commonly a copy of the Credit Application completed by the company.

·         A copy of your PPSR registration (the Verification Statement) – the registration number would probably be sufficient as the liquidator will, as a matter of course, obtain details of all the registrations lodged against the insolvent company.

·         A request for an urgent stocktake of your goods held at the insolvent company’s premises (or anywhere else where they may be being held on the company’s behalf).

·         A request for access to the company’s premises to identify any goods you have supplied. And

·         A demand that the liquidator ensure that any sales of your goods be put on hold and not go ahead without your express consent in writing.

It is important to remember that, even though you may not want your goods back – perhaps they have been specially made or adapted for this one customer – you still need to assert your right to recover them so as to maintain leverage over a liquidator who may well want to sell them as part of an end product to maximise income from the company’s assets. Unless you wash your hands of them, the liquidator will need your permission to deal with those goods and therein lies the opportunity for a deal to be made.

Have you sold tyres to a trucking company?  Getting used tyres back may not be a particularly attractive idea for you, but a liquidator will have a much better chance of making a profitable sale of vehicles with tyres than without.  If the liquidator wants to sell trucks with your tyres on them, your registration gives you the opportunity to insist that the liquidator pays you what you are owed out of the sale proceeds.

PPSR & COVID-19

There is no shortage of articles being published concerning the impacts of the current Coronavirus pandemic but the following extract concerning PPSR registration from the law firm of Cooper Grace Ward serves as a timely reminder:

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.

Section 64 and Maintaining Access to Finance

What is a Section 64 letter?

Note: It is important to have an understanding of a supplier's right to 'proceeds' in order to properly appreciate the role of Section 64 of the PPSA.  You can get a quick briefing on proceeds here.

Section 64 letters are designed to fix the problem caused when a supplier’s claim to proceeds of on-sale conflicts with a financier trying to get ‘clean’ security for an accounts receivables package (also known as debtor financing).

If a financier is being asked to finance a business’s on-sale of goods it is reasonable for them to want to take security over the money the business will receive from that on-sale.  However, where the original supplier of those goods has a Retention of Title clause and has registered it correctly as a PMSI, they are entitled to the first ranking security right over monies received from the on-sale of their unpaid-for goods.

Unless a compromise is reached the buyer may have his access to finance curtailed and the supplier will possibly run a greater risk of late payment or even non-payment.

The compromise included in Section 64 of the PPSA, involves the financier giving the supplier 3 weeks’ notice of their intention to lodge a registration over their customer’s proceeds from sales.  The registration they lodge at that time will take precedence over the supplier’s – BUT ONLY FOR THE PROCEEDS ELEMENT – and, in return, the supplier’s security rights will transfer from the proceeds of on-sale to the proceeds from the financier’s finance package.

Sometimes the 3 week wait is too much for the financier and their customer and, as a result, the supplier will be urged to discharge their registration, allow the financier time to lodge their registration, then put their registration back in place.  This is NOT beneficial to the supplier and would mean that they would be sacrificing their right to proceeds without any commensurate right to a share in the finance to show for it.

When do I have an interest over 'Proceeds'?

What does ‘Proceeds’ mean?

The term 'proceeds', in this context, refers to money that comes to a buyer from the on-selling of goods supplied to the buyer by the original supplier of the goods.

If a supplier has a Retention of Title right and registers it as a PMSI (see here) they get the opportunity to have their security interest extend to any money their customer receives from on-selling the supplier's unpaid-for goods.

While in most cases (unless they involve a motor vehicle identified by its VIN number, for example) the supplier's right to recover their unpaid goods ends with their buyer's on-sale of those goods, the PPSA allows a supplier's PMSI security interest to 'automatically' transfer to the proceeds of on-sale of those goods as soon as their secured 'grip' over the original goods is lost.

While this can be a useful ‘added extra’, proceeds claims can be messy and, typically, will only be successful when the proceeds monies are received AFTER a liquidator has been appointed to the customer’s business.

I've yet to see rights over proceeds used in a defence against a liquidator's preference claim and, whilst I can envisage some scope for success, I can also imagine that such a defence would not be particularly well received by said liquidator.

PPSR - Ticking the Inventory Box

Should I designate my goods as ‘Inventory’ or not?

The correct answer depends upon how your customer will be dealing with the goods being supplied.

It is a common misunderstanding that whether the goods are 'inventory' or not depends upon how they are treated by the supplier.  I've heard suppliers, when asked why they didn't designate their goods as inventory, say, "Because they weren't inventory items, we had to make them specially".

Under the PPSA, an item of property can be inventory if sold to one business or non-inventory when sold to another - it all depends upon the use to which the buyer will put the property in question:

• If the goods are for on-sale, 

• for inclusion into an end-product that will be on-sold, or

• consumed as part of the customer’s business (eg, fuel for a transport company, or disinfectant for hospital), 

then they should be designated as ‘Inventory’.  Otherwise, the inventory designation should be left blank.  

While the official review of the PPSR recommended doing away with the 'inventory question' because of the confusion it causes, for the time being, it is still required as part of the registration process and, if you get it wrong, you will find it difficult to enforce your registration.

Is there a deadline for lodging a PPSR registration?

When should I lodge a registration?

Once a liquidator is appointed to a debtor, they are allowed to ignore any security interests registered during the 6 months leading up to their appointment if they hadn’t been lodged within 20 business days of the security agreement being formed. 

In a trade credit context, the security agreement is usually the completed credit application incorporating the supplier's Terms & Conditions (which, in turn, would be expected to include their Retention of Title right).

Thus, if a supplier fails to lodge their registration within 20 business days of receiving a credit limit application, they risk losing their security rights if a liquidator is appointed within the next 6 months.

Separately, the supplier needs to register their Retention of Title right before they deliver their goods to their customer in order to make sure they don't lose any Purchase Money Security Interest (PMSI) rights to which they might be entitled.  Although, where the goods represent a product that will be kept by the buyer for their own use, the PPSA allows an additional 14 days' grace.

Should I register against the ACN or the Trust ABN?

My buyer has an ACN but also has a Trust ABN – should I register against the company or against the trust?

We would recommend both. 

One registration can be lodged against two different ‘grantors’, so there shouldn't be any additional expense.  However, at the very least, a registration should be lodged against the Trust ABN.

The below chart is a handy reference to identifying a grantor:

Grantor Type	Grantor Details Required
Sole Trader	Full Name (as per driver’s licence) and date of birth
Sole Trader acting as Trustee	Trust ABN (if the Trust does not have an ABN, as per ‘normal’ Sole Trader)
Partnership	ABN
Partnership acting as Trustee	Trust ABN (if the Trust does not have an ABN, as per ‘normal’ Partnership)
Partnership without an ABN	Full name and DOB of each partner (or ACN’s of each if a corporate partnership)
Company with an ACN and no Trust involved	ACN
Company with an ACN acting as Trustee	Trust ABN (if the Trust does not have an ABN, as per ‘normal’ Company)
Corporate entity without an ACN	Full name of the business as per articles of association
Government Entity	ABN
Trust	Trust ABN (if no ABN, use rules per the trustee)

Government's Response to the PPSR Review

Bruce Whittaker completed his formal review of the PPSR in March 2015 and his report, containing 394 recommendations, was put to Parliament at that time.  I first wrote to the Attorney Generals' Department in September 2016 asking what progress had been made in assessing the review's recommendations and have begun making something of an annual habit of it ever since.

The request for information and the formal response from the AGD after 18 months consideration can be found HERE, and the response after 30 months can be found HERE.  Some 44 months on from the PPSR Review's release I've received the following response to my latest enquiry requesting an update on the progress of its consideration:

Thank you for your email about the Government’s response to the Review of the Personal Property Securities Act. I am sorry for the delay in responding to you.

Regarding timelines, while the department has made considerable progress on the response to the Review, we are currently consulting with a range of industries and stakeholders regarding a number of the more complex recommendations in the Review.  Following the conclusion of this consultation, the Government intends to release its response to the Review. This is to provide stakeholders with notice of the Government’s position on the review as soon as possible. Following this, the department will undertake broader consultation on the corresponding exposure draft legislation. We are not in a position to provide a release date at this time, but will keep you updated.

With all due respect to the AGD, this doesn't represent any advance on their update last year in which they advised:

The Government intends to release an Exposure Draft of a Bill to amend the Act and a prototype PPS Register, for public consultation. Stakeholders will have an opportunity to provide comment on the Bill and the Register before the Government takes further action to implement the recommendations of the Review.

The Government will make further announcements about the timing of public consultation on the Bill and Register.

If anything, the latest response seems to represent something of a step backwards.

At this stage, it might be worth pointing out that it 'only' took around 2 years from the passing of the 2009 Act to commencement of the Register in the first place (not that anyone considered that to be particularly quick) and we are now approaching 4 years from the presentation of the Review's findings without the Government having even released a response for consultation let alone an implementation strategy.

With so many finding the registration of their security interests on the PPSR an overly complicated exercise fraught with the possibility of error, it is disappointing that there is such delay in implementing recommendations designed to simplify the process and remove many of the Act's pitfalls.

How to Renew a PPSR Registration

As seen in my last post, we're rapidly approaching the time where many suppliers will be needing to renew registrations they put in place shortly after the start of the PPSR in 2012.

Renewal should be a straightforward process. 

Individual PPSR Brokers will probably have different approaches to the activity but the following shows the step by step process involved in renewing your registrations directly on the PPSR website.

In order to attempt this, you will need to have already established an account with the PPSR – this is a requirement for setting up an SPG but might have been avoided if the supplier’s SPG was set up for them by an intermediary that already had a PPSR account.

The following steps show the process once you have navigated to the PPSR and logged into your account.

Access your Secured Party Group (SPG) and click on the Group Registrations tab:

Use the 'Other filter options' to select a suitable range of expiry dates:

This will generate a screen showing all registrations due to expire within the selected time frame.

Select the registration you want to renew and click on the renew button:

Unfortunately, for reasons that are not entirely clear, if you make multiple selections, ie, you have a number of registrations that need to be renewed, the ‘Renew’ button becomes greyed out and unavailable!  In other words, registrations can only be renewed one-by-one, so it could be a bit of a slog if you have a lot of registrations expiring at the same time.

Once the Renew button is clicked you’ll be asked to choose a new expiry date and be given the opportunity to review the details of the registration being renewed:

It’s a little annoying that while the PPSR allows for simple selections for 25 year and indefinite registrations, it doesn’t allow for a simple 7-year registration – instead, the PPSR requires the user to manually enter a 7-year expiry.

You should also note that, when setting the expiry date for, say, 7 years, the 7 year period counts from the current day’s date and NOT the original expiry date. 

After that, it’s a simple matter of confirming the renewal and paying the renewal fee (which will be exactly the same as if a new registration were being lodged):

While it should only take a minute to renew a registration, make sure you don’t cut things too fine and miss the expiry date.  Registrations that have already expired cannot be renewed!

Obviously, a third party PPSR Services provider should be able to provide bulk renewal facilities along with an alert process warning of impending expiries and their own renewal processes are likely to work quite differently.

UPDATE: AFSA has now told me that, following my whinge suggestion that a simple 7-year expiry selection should be available for renewals, they have implemented that change.  Renewals will now be a little bit easier... which is nice.

Spike in PPSR Registrations due to Expire

Earlier this week, AFSA released their PPSR statistics for the 2018 June quarter.

While there’s not much that’s particularly surprising in the statistics (which you can find here) there is a new addition to the format, in that AFSA has now provided information regarding the number of registrations due to expire in the next 18 months.

I’ve drawn up a quick chart based on the figures, in as much as they relate to ‘Other Goods’ registrations (the type of registration most appropriate to the majority of trade credit suppliers):

While the picture from March 2019 onwards looks as we might have expected, this is preceded by a huge spike in expiries in January 2019, surrounded by high levels of expiring registrations from October to February.

While the last two days of January 2012 saw the start of the Register (and the previous three months a few waves of advanced registrations and migrations from other registers) I’m surprised that the registration activity that took place at those times didn’t concern itself, almost exclusively, with transitional registrations with an indefinite expiry.  As someone very closely involved with thousands of bulk registrations in those early weeks of the register, virtually all were lodged as indefinite transitional registrations.

However, clearly there were a great many registrations being lodged for only 7 years and these are now coming up for renewal.

I'll shortly be following up this post with a step by step guide to renewing registrations on the PPSR.

PPSA Clauses in Terms & Conditions

Firstly, it needs to be said that you do not need specific PPSA clauses in your Terms & Conditions of trade in order to lodge a registration on the PPSR, only the presence of a security right.  For most trade credit suppliers, this security right will be a Retention of Title clause – if you have one of these in your T&Cs and those T&Cs have been accepted by your customer, you can go ahead and register that security right on the PPSR.

This often prompts the question, if all that is needed is a one-sentence Retention of Title clause, why have multiple paragraphs of PPSA related text been included in the T&Cs?

Although not an unreasonable question, this is a little like hearing that you only need to drink water to avoid dying of thirst, and then asking, why bother with beer, wine and coffee?

So, in what way do PPSA specific clauses help us survive our mundane existences and allow us a temporary respite from the ever-present agonies of life?  Or, to put it another way, how do PPSA specific clauses make things a little easier for us?

Their first purpose is one of transparency and understanding.  Clauses will often start off by saying something along the lines of:

“You hereby acknowledge that these Terms and Conditions of Trade constitute a Security Agreement which creates a Security Interest in favour of [the supplier]…”

It has only been since the introduction of the PPSA that Retention of Title rights have been properly deemed to represent a form of security and it is helpful to draw a customer’s attention to this, particularly when the supplier goes on to add that, as a security right, they intend registering it on the PPSR.

A lot of terms then go on to suggest that the buyer/customer should sign documents or pay costs facilitating the supplier’s PPSR registration.  I don’t know if I’ve led an unduly sheltered life, but I’ve not come across any instance where any action has been required of a trade credit buyer in this regard and certainly haven’t heard of any additional fees being passed on, but, apparently lawyers think suppliers will feel comforted by having that option.

While there might be a little more repetition, the next purpose of the PPSA specific clauses will be the ‘waivers’.

The PPSA places a surprisingly large number of obligations on the ‘secured party’ to keep their customers advised of any actions they take.  I have this idea that the drafters of the Act had a visual image of the supplier being a huge unfeeling multinational bureaucracy and their customer being a little old lady with cats. 

In its vanilla form, the Act requires the supplier to keep their customer advised of anything and everything relating to the security interest – letting them know of the registration (and any amendments to it), giving notice of any intention to recover unpaid-for goods, advising of plans to dispose of any recovered goods, sending statements detailing whatever payments they might have received from on-selling the recovered goods, sending statements for anything they’ve recovered that hasn’t been disposed of, and providing the customer with an opportunity to object (!).

Fortunately, most obligations of this nature can be contracted out of and including clauses in T&Cs is probably the most effective way for a supplier to dodge these administrative bullets.  Hence clauses along the following lines:

“The Purchaser and the Supplier agree that the following provisions of the PPSA do not apply to the enforcement by the Supplier of its security interest in the Goods: sections 95, 118, 121(4), 130, 132(3)(d), 132(4), 135, 142 and 143.”

While I won’t go into each potential waiver/exclusion in detail (and can’t guarantee that I’ve spotted them all), the following table should help as a quick guide to what aspects of the Act are addressed in each of the ‘avoidable’ or ‘enhanceable’ sections of the Act.

Section	Issue addressed	Comment
95	Secured party must give notice of removal of accession	http://ppsr-blog.blogspot.com/2014/06/ppsa-accessions.html
118	Enforcing security interests in accordance with land law decisions	A waiver of the Secured Party’s obligations to provide notice to the grantor.
121	Enforcement of security interests in liquid assets	A waiver of the Secured Party’s obligations to give notice to the grantor of their intention to enforce their security interest.
123	Secured party may seize collateral	There’s a requirement here for the Secured Party to give notice to the grantor of their intention to seize.
129/130	Notice of disposal of collateral	Waiver of the Secured Party’s obligations to advise the grantor of their plans to dispose of collateral in their possession if a default has occurred.
132	Secured party to give statement of account	Waiver of the Secured Party’s obligation to provide a statement regarding any collateral they have disposed of as a result of default.
135	Notice of retention of collateral	Waiver of the Secured Party’s obligation to notify the grantor that they will be retaining collateral in their possession.
137	Persons entitled to notice may object to proposal	Removing the grantor’s right to object to any intended disposal of recovered collateral.
142	Entitled persons may redeem collateral	Waiver of the grantor’s right to priority when it comes to redeeming recovered collateral from the Secured Party.
143	Entitled persons may reinstate security agreement	Withdrawal of the grantor’s rights to reinstate a ‘broken’ security agreement.
157	Verification statements—secured parties to give notice to grantors	Removal of the Secured Party’s obligations to send the grantor a copy of the PPSR Verification Statement every time a registration event occurs.  See also http://ppsr-blog.blogspot.com/2014/05/notifying-grantor-what-are-your.html
275	Secured party to provide certain information relating to a security interest	The ‘vanilla’ PPSA requires the Secured Party to divulge relevant information about their security interest to any interested 3rd party unless the Secured Party and grantor have agreed they will keep such matters confidential.

The PPSR doesn’t understand Retention of Title!

On 23/07/2018 AFSA, the operators of the PPSR, issued a news briefing regarding how the PPSR could assist a building developer in “using the PPSR to secure its retention of title in the material it supplies”.

Given that it would be unusual for a building developer to be doing the ‘supplying’ when it comes to materials, I thought I’d get a copy of the information sheet AFSA were promoting.

Sure enough the PPSR Case Study 11/V1, started with:

“Scenario – building developer uses the PPSR to secure its retention of title in the materials it supplies ...”

The information sheet goes on to elaborate as follows:

“Developer Sceneview owns land on which it has permission to build a warehouse.

It contracts with Projex to build the warehouse. The contract provides that Projex sources the material needed for the build process.

Projex will submit invoices to Sceneview for works and materials, whether the materials are on-site or off-site.

Sceneview has a security interest, under the contract, in all building materials in the possession of Projex, to secure performance of Projex’s obligations under the warehouse contract.

Sceneview registers that security interest against Projex on the PPSR.”

I don’t know about you, but the first thing that struck me was that it was Projex, as the supplier, that was most likely to hold a Retention of Title over the goods they were supplying.  While Sceneview may be contractually granted a security interest over goods in the possession of one of their contractors, such a right would not be a Retention of Title right.

The information sheet then hints that it knows that what it is describing is not really a Retention of Title right, because it goes on to suggest that ‘Sceneview’s’ registration will only defeat a competing registration by a bank by virtue of having been lodged earlier.  If the registration concerned a true Retention of Title right it would have been eligible for PMSI treatment and the relative timing with a bank registration would have been irrelevant.

I wrote to AFSA drawing their attention to their description of an ROT interest, not actually being an ROT interest and, a couple of days later, got a phone call from quite a pleasant lady who explained that they already had concerns internally over the information sheet in question and had been reviewing it even while it was being actively promoted as part of an email campaign. 

As anyone who has had dealings with civil servants will appreciate, there was no admission that an error might have taken place, nor any explanation as to why a misleading information sheet not only remained as part of the PPSR’s help documents (it’s still there at the time of writing by the way) but was then selected for specific dissemination to a wider audience. They were gracious enough, however, to acknowledge that, I was ‘not necessarily wrong’ in the error I had pointed out. 

Bless them.

Is a PPSR registration still necessary to defend against Preference claims?

In June 2016, I posted an article discussing, among other things, Justice Edelman’s ruling in Hussain v CSR Building products Limited concerning alleged preference payments made by FPJ Group Pty Ltd. 

The Corporations Act allows liquidators to claim back payments made by the insolvent company during the 6 months prior to their appointment – provided that those payments were in respect of an unsecured debt.

In Hussein v CSR,  Justice Edelman found that there were sufficient references in the Corporations Act to a Retention of Title right being, in substance, a form of security that, while in the circumstances CSR may not satisfy the definition of a ‘secured creditor’, their Retention of Title right was sufficient to render the debt they were owed ‘not unsecured’.  This, against the background of CSR not having registered their ROT on the PPSR!

This was a pretty controversial decision at the time but, two years later, we’ve finally got ourselves another judgment effectively reinforcing the idea that a Retention of Title right (whether registered on the PPSR or not) represents sufficient security to ensure that payments made against that security right are not treated as unsecured for the purposes of the Corporations Act.

Trenfield v HAG Import Corporation (Australia) Pty Ltd [2018] QDC 107 wasn’t an entire success for the supplier, however, because even though their ROT was sufficient to make payments eligible for consideration as being ‘not unsecured’, the question as to how much value in payments those ROT rights actually supported needed to be addressed. 

If a supplier sends goods worth $10,000 and invoices accordingly, at ‘day 1’ the supplier (assuming an ROT) will be secured for the full amount owed, however, if, by the time payment falls due $8,000 of those goods have been on-sold, then the supplier will only be a secured creditor for $2,000 of the money owed and an unsecured creditor for the balance. (Note: there's an earlier post looking at the 'value' of security here.)

Using this approach, the Court found that $473,291 of the $696,298.72 of payments received were paid in relation to an unsecured debt and thus were recoverable by the liquidators as the fruits of an unfair preference.

With both legal precedents involving ROTs that were not perfected under the PPSA’s rules, there is a lifeline for suppliers who either haven’t registered on the PPSR or lodged too late or with serious errors – at least as far as defending against preference claims is concerned. 

When it comes to attempting to recover unpaid for goods or their equivalent value from administrators and liquidators, suppliers had best make sure they have a valid PPSR registration in place (lodged in good time) because claiming that their ROT makes them ‘not unsecured’ will not cut it!

When should a PPSR registration be lodged?

In general terms, the answer is ‘as soon as possible’ and, in this context, that means, as soon as the supplier has a reasonable belief that they may be doing business with the grantor in question and that such business will involve the granting of a security interest.

In order to avoid falling foul of the Corporations Act, the supplier’s registration should be lodged within 20 business days of their security agreement being formed. For trade credit suppliers, that security agreement will usually be represented by the signing of the initial credit application by which the supplier’s Terms & Conditions of trade are accepted (provided, of course, that those T&Cs contain the supplier’s security rights – usually in the form of a Retention of Title clause).

If the registration is not lodged within that 20 business day period, the supplier runs the risk that, if their customer falls insolvent in the next 6 months, a liquidator will be able to use section 588FL of the Corporations Act to, effectively, ignore the registration.

I’ve written at greater length on the implications of section 588FL HERE.

Obviously, if the supplier misses that 20 business days window, they should still go ahead and register on the PPSR as soon as possible, it just means that they’ll need to keep their fingers crossed that a liquidator doesn’t get appointed during the next 6 months – once 6 months have elapsed with no liquidator in sight, the supplier can relax.

If we put aside for one moment the Corporations Act provisions, the other key timing issue concerns the effectiveness of your Purchase Money Security Interest (PMSI) rights.

As we know, Retention of Title suppliers, those providing goods on a Consignment Stock basis, and long-term leasers of equipment automatically qualify for having the security arrangements that those trading practices represent designated as PMSIs, thus entitling them to a super-priority over any earlier (or later) registered general security interests.

However, in order to ensure their PMSI right is effective, the registration must be lodged within specific time frames:

Where the Collateral is Inventory	Before the grantor takes possession of the goods
Where the Collateral is not Inventory	Within 15 business days of the grantor taking possession of the goods

Any registration lodged outside of those time frames will still be valid, but it won’t benefit from the super-priority that the PMSI designation would otherwise afford.

If repeat supplies are involved, suppliers should remember that even though they may have registered too late for the first few deliveries, a registration will still be effective over later deliveries.