If you didn’t catch our Part 2 webinar series on PPSR: Getting It Right, here is a summary of the main points we covered.
Recently, Paul Mead, CreditorWatch PPSR Specialist and Terry Ledlin, Special Counsel at Ledlin Lawyers, held the second webinar of the PPSR series which explored the importance of registering accurately, avoiding common mistakes, and more.
*Please keep in mind that every case is different, and you should not rely on this general advice below but take separate legal or other advice about your particular circumstances.
1. The Importance of Registering on Time
The PPSA provides strict time frames for registration:
- Customer is a company – register your financing statement within 20 business days of the security agreement coming into effect.
- Collateral is inventory – register your financing statement prior to the customer taking possession.
- Collateral is NOT inventory – register your financing statement within 15 business days after the customer takes possession.
If you fail to register within these times, you may lose ownership of your goods if your customer goes into Liquidation.
Our tip #1: Register as soon as possible after approving credit or entering into an agreement with your customers. Make it part of your on-boarding process.
2. The Importance of Registering Correctly
The PPSR is highly prescriptive and any errors may leave your registration ineffective and therefore unperfected.
To register on the PPSR you need:
- The Secured party details (namely, your details)
- The Grantor details (your Customer’s details)
- The description of collateral and proceeds (i.e. what your products is / what you’re selling or leasing)
- The end time for registration
- Whether it is a PMSI
- If the collateral is inventory
- If it is subject to control
- If it is a transitional security interest
Our Tip #2: Review your credit application and how you obtain information about your Customers. If the information provided in your Credit Application is wrong, your registration may be wrong too.
3. Some Common Mistakes When Registering
Common mistakes in registrations can be split up into two categories:
|Fatal Defects||Potentially Fatal Defects|
Our Tip #3: If using the free text box, be careful with the wording and ensure it covers the collateral (i.e. not too wide or too narrow). Errors in the free text could be considered misleading and potentially fatal.
4. What to do when things go wrong
If you realise a registration has a defect or you haven’t registered on time, a remedial registration needs to be made as soon as possible. If that registration has missed the deadlines, you will need a Court Order to grant an extension of time for registration. The Courts can’t rectify defects but can grant extensions of time.
Our tip #4: Think of the Register as an online notice board. You need to ensure that anyone searching the notice board (i.e. the Register) is not misled.
5. What is so important about January 2019?
The PPSA commenced in January 2012. At that time, many businesses registered financing statements in respect of security interests for the minimum 7-year period. This means that those registrations will begin expiring at the end of January 2019.
Our Tip #5: Remember that ‘continuous perfection’ of a security interest (usually by registration) is implicit in its effectiveness. If there is a gap in continuous perfection because a registration has lapsed, validity and priority will be affected.
6. What you should be doing now?
Obtain a PPSR Report to see which of your registrations are due to expire. To ensure continuous perfection, consider renewing your registrations, amending your registrations or creating new registrations with a link to the current registration. Remember that you can only amend certain things and changes only takes effect from the date of amendment.
Our Tip #6: Don’t leave this to the last minute! Make sure that any renewal, amendment or new registration is undertaken well before the current registration expires. You can’t remedy an expired registration.
7. Should you take this opportunity review Terms and Conditions at the same time as tending to any PPS registration issues?
Start by checking the state of your current terms – are they up to date for changes to legislation e.g. privacy, unfair contracts? Then look at the nature and extent of changes you want to make – are they minor in nature or significant? Then look at how your current terms allow for amendments (if at all). These answer to these three points will confirm whether you are in ‘brand new contract’ zone and require a new registration or if any changes are considered ‘mere amendments’ which allow you to rely on your current registrations.
Our Tip #7: These answer to these three points will confirm whether you are in ‘brand new contract’ zone and require a new registration or if any changes are considered ‘mere amendments’ which allow you to rely on your current registrations. Depending on the circumstances, you could streamline the process by doing everything at the same time.
Whatever you do, do it soon as time is running out!
For more information visit Ledlin Lawyers Insights Page
Sign up for the next webinar in the PPSR series on October 9th: PPSR Logic – Create, Manage, Renew
More articles like this: PPSA Made Easy – Webinar Recap
About the author
Terry Ledlin is Special Counsel of Ledlin Lawyers, a boutique CBD law firm with 50-years of experience specialising in Credit Management and Collections, Commercial Litigation, Insolvency and Commercial Documentation. Terry is a practical and experienced lawyer who has worked with government agencies, private and publicly listed national and multinational companies across many industries. His specialty is helping to solve complex commercial issues.