The biggest challenge that faces business operators is that ‘title is no longer king’. The fact that the business paid for an asset does not mean that the business is able to retrieve the asset at any time, unless the business has taken steps to adequately protect its position on the PPSR.
Millions of dollars have already been lost by businesses, both small and large, caused by:
- ignorance of the Personal Property Securities Act (PPSA); and
- not registering on the Personal Property Securities Register (PPSR).
The title of the legislation ‘personal property’ is confusing to many people who think it only applies to what is traditionally referred to as ‘personal possessions’ but, in fact, relates to ‘all forms of property other than real estate’. This includes a very wide range of business transactions including:
- sale of stock by wholesalers,
- supplying goods on consignment;
- storing goods and other assets on someone else’s property;
- leasing of plant and equipment, motor vehicles etc.;
- livestock on agistment;
- tradesmen’s plant, tools etc. on building sites;
- supply of seeds, fertilizers and pest control for crops;
- artists and sculptors’ paintings and works of arts;
- loans to businesses even closely associated businesses;
- assets held on trust by someone else;
- service entity arrangements, whereby one entity owns the assets and rents or leases those assets to another;
- intellectual property; and
- rental or lease of premises.
Unfortunately, many businesses will not find out anything about this legislation until such time as there has been an ‘solvency event’ within one of their customers or an organisation to which they are leasing plant and equipment; or an organisation where it has stored assets.
There has been some debate in accountancy circles as to who is responsible to advise SMEs on the operations of the PPSA and the PPSR. There is no doubt SME operators should be consulting a commercial solicitor to ensure the ‘Retention of Title’ clauses they are using have been appropriately drafted after the 31st January 2012, to comply with the PPSA. The business owners will also need to ensure that they have drafted appropriate ‘Terms of Trade’ agreements that comply with the legislation.
The big question is, who is going to assist SME operators to introduce appropriate systems and procedures within their business, so that potential risks are easily identified and decisions can be made as to whether to register a particular transaction on the PPSR within the very limited time that is available for registration to be finalised? We don’t believe that solicitors will undertake this work. The organisation, with whom SME operators are in regular contact, is their accountant. For this reason, we believe that accountants, as the ‘trusted advisor’, should grasp the opportunity to offer additional service to their clients, in an attempt to ensure none of the firm’s clients suffer significant problems in the event of an insolvency by one of their customers or organisations where they’ve stored plant and equipment, stock, etc.
The ESS BIZTOOLS’ ‘Personal Property Securities Register Due Diligence System’ offers accountants tools to be able to conduct a due diligence review of every small/medium business client, to encourage an understanding as to how the PPSA works and to ensure that decisions are made, at the appropriate time, as to whether registrations are needed on the PPSR.
ESS BIZTOOLS is conducting a FREE information webinar on the ‘Personal Property Securities Register Due Diligence System’ on Thursday, 24th July 2014 at 12pm AEST.
What will you learn?
- How the ‘PPSR Due Diligence Review’ will assist in reviewing your clients’ systems.
- How the PPSR system will assist you to develop a ‘customised system for individual clients’.
- The ‘individual requirements for specific industries’.
The PPSA is very complicated legislation, which can lead to confusion. ESS BIZTOOLS has produced an article, ‘Top Ten PPSA Myths’, to debunk the PPSA myths and give some clarity on what the legislation is about. If you would like to receive a complimentary copy of this informative article, please send an email to [email protected].
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