The Personal Property Securities Act – important changes for businesses supplying goods on credit


Businesses and individuals that provide finance secured by personal property, or who supply goods on a retention of title (ROT) basis, should be aware of the introduction of the Personal Property Securities Act.

The new legislation will require that, where businesses are supplying goods on credit, their interest should be registered on the new Personal Property Securities Register (PPSR) to secure the interest in the credit provided to the customer.

In order for the legislation to apply to you, your sales terms are required to include a “retention of title clause” (“ROT clause”).  The ROT clause seeks to retain your ownership in the goods until such time as the buyer has paid for the goods in full.

To ensure that your ROT arrangement is enforceable against your customers, the legislation provides that the ROT must have “attached” itself to the goods.  In the case of an ROT clause, attachment occurs where you give value for the security interest arising from the transaction, or otherwise do an act by which the security interest arises.  In the context of an ROT agreement, the value given by the supplier will be the delivery of the goods or use of the goods pending payment.

If your customer defaults or becomes insolvent, there is a risk that other creditors who hold an interest in the same goods as you (such as banks), will have better rights in the goods than you.  To ensure that this does not happen, you will need to register your ROT agreement on the Personal Property Securities Register (“PPS Register”). Where the requirements of the PPS Act have been complied with, registration of an ROT agreement will ensure that your security interest takes priority over all other, including earlier, security interests in your goods.

In circumstances where you make repeated supplies to the same customer, you are only required to make a single registration against the customer.  This is because a single transaction is valid for one or more orders against the customer.

At this stage it is anticipated that the PPS Register will be up in running in October 2011. It is important that you review and amend your Sales Terms now, in preparation for the commencement of the PPS Register. If you have any questions regarding The Personal Property Securities Act, please don’t hesitate to contact me.

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