Today we are going to discuss how use the PPSA and Personal Property Securities Register to save your business 10’s if not 100’s of thousands of dollars when one or more of your clients goes into administration or files for liquidation.
The PPSA or Personal Property Securities Act is legislation that outlines the changes in Legislation and how those changes affect your business. In short, every business now has a PPSA file where creditors can go to register a security Interest when they extend credit.
The PPSR or Personal Property Securities Register is the government-run electronic register, or notice board, in which creditor can register their security Interest when they extend credit. Depending on the type of Security Interest being registered will determine their security or protection.
Once registered on the PPSR a business automatically becomes a Secured Creditor over the entity in which they registered with the same security as the banks when they extend credit. As a matter of fact, it’s exactly the same place a bank will register their security interest in a vehicle when they provide you with a car loan.
Since the introduction of the PPSA title in goods or equipment no longer exists without a PPSA Registration. This means the minute your goods or equipment leave your premises; you no longer own them. Payment or the lack thereof doesn’t come into consideration.
Under the legislation, if a business hasn’t registered on the PPSR that business is automatically classified as an unsecured creditor. Why Does That Matter?
Under the legislation, if a business goes into liquidation and there are still Secured Creditors that haven't been paid, liquidators now have the legal right to claw back the last 6 months’ worth of payments paid to an Unsecured Creditor.This means that if any of your current or previous clients were to file for liquidation at any point in the future, the appointed liquidator has the legal right to demand the return of any payments made to your business in the previous 6 months. We have even seen this time period extend to 18 months as the legislation outlines that the 6 month Clawback Period is from the point in which the liquidator determines the point of insolvency. (the point the business was trading insolvent)
Having up to date, legally binding Terms and Conditions is the only way you can register a valid PPSA Registration. The reason being that the legislation is very clear on what constitutes a valid registration. Firstly, there must be an agreement incorporating the appropriate legislation, and secondly that agreement must be signed by both parties.
Of the average 8 000 000 PPSA Registrations on the PPSR at any one time, it’s estimated that perhaps as many as 80% or 6 500 000 are possibly registered incorrectly or potentially invalid. Leaving all invalid registrations subject to Preferential Payment Clawback.
Preferential Payment Clawback is outlined in 588FA and part of the Corporations Act 2001. It essentially allows liquidators the opportunity to claw back any payments being made to an unsecured creditor when a company goes into liquidation if there are secured creditors which still haven’t been paid. The liquidators have the legal right to ask for any payments made to unsecured creditor in the previous 6 months from the point of insolvency.
If you like to know more about "How You Can Protect Your Business From Preferential Payment Clawback" please feel free to request our FREE Facts Sheet here.Until Next Time, Have a Great Day
With over 35 years’ experience Collection Consultancy Australia prides itself in offering Products and Services designed to Protect Business Assets and Cashflow. Quite often the process can start from simply making business owners aware that there is option available, through to business specific solutions and education. We are here to let business owners know that there can be a better way to secure their financial future.
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