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PERSONAL PROPERTIES SECURITIES ACT (PPSA) - LAST CALL! 1 February 2012 marks the effective commencement of the Personal Properties Securities Register at which point in time, dramatic consequences could occur if immediate steps are not taken now. Do you supply goods on credit and retain title in those goods until you are paid? If you supply goods on credit and have as part of your usual standard terms & conditions, a provision that provides that the purchaser or recipient of those goods does not obtain ownership of those goods (title) until such time as your invoices are paid, then you will be subject to the PPSA. This provision is commonly called a retention of title or ROT clause and all "security interests" which are the subject of an ROT clause are required to be registered on the PPSA Register. In particular, if after 1 February 2012 you have not registered your security interests which are the subject of an ROT clause on the Register and the purchaser or recipient of those goods subsequently becomes insolvent then your claim to ownership or title in those goods may be lost in favour of the liquidator and the liquidator may use or deal with those unpaid goods that you have provided, as he or she sees fit. This is a dramatic reversal of the current law. To ensure your security interests are protected, you must register your security interest on the Register. Between 1 January and 31 January 2012 "security interests" already registered under other legislation (for example registered fixed and floating charges that were registered on the ASIC register) will be migrated across to the Register but other unregistered security interests will need to be registered. What is a security interest? A security interest can be any of: A fixed and/or floating charge A chattel mortgage A conditional sale agreement (including an agreement to sell subject to retention of title) A higher purchase agreement A pledge A trust receipt A consignment agreement A lease of goods An assignment of goods A transfer of title of goods So what can you do to protect your goods? Update your documents: If you are a supplier, seller or lessor of goods, if you haven't already we recommend you take immediate steps now to review your terms & conditions and contracts in order to ensure that from 1 February 2012 you are not exposed. For a security interest to be registrable and therefore enforceable under the PPSA, the purchaser or recipient must sign what is called under the Act a "security agreement" which must meet the requirements of the PPSA. Although you may have terms & conditions which meet the requirements of your business, unless they meet the requirements of the PPSA and have been signed, they will not be able to be registered and therefore provide the protection under the Act. Send them out ASAP: As you will expect, it will take some time for revised terms & conditions to be issued out to all your suppliers and for them to be executed in time for the commencement of the register on 1 February 2012. Review your engagement processes: Not only should you be revising your terms & conditions and contractual arrangements with your customers but also, reviewing your businesses practices and staffing needs to include appropriately trained people in the registration processes and procedures of the Register so that your security interests can be properly registered and protected. It is also opportune to consider undertaking credit checks on your customers and obtaining personal guarantees where appropriate. Register your security interest: Once you have your terms & conditions reviewed and executed by your customers, you should register your security interest. If you supply goods on credit and register your interest, you will have priority over other interests in those goods. Once the Register commences, you will be able to access online and update details, register security interests, and also view other peoples security interests. Strict timeframes for registration apply and failure to do so within those timeframes could expose your business to significant losses, so now is the time to do so. With increasing numbers of individuals and businesses defaulting on payment and disputing accounts, and in the current economic climate, informal supply arrangements for goods and services are simply not prudent business practice. The commencement of the Register on 1 February 2012 should not be ignored. If you require any further advice or wish to discuss this, please contact Walter MacCallum or Claire Owen.

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