PPSA for borrowers
The PPS Act and businesses that borrow
From 30 January 2012, charges and other forms of security granted by a business in respect of personal property will need to be registered on the Personal Property Securities Register (PPS Register).
The registration of charges is not new for companies. But for businesses run by individuals and partnerships, registration of security interests over their assets will be new.
What should businesses do?
From 30 January 2012 all companies and individuals that have borrowed and granted securities over assets should:
- arrange for searches of the PPS Register to be conducted to ensure it accurately reflects the securities granted;
- carefully review the terms of any new agreements; and
- make sure that registrations are removed when financiers are repaid.
Why search?
Security interests recorded on current registers, such as charges registered on the ASIC Register of Fixed and Floating Charges are being migrated to the PPS Register.
A search of the PPS Register on or shortly after 30 January 2012 will reveal:
- any out-dated, invalid or previously discharged registrations that have been migrated – these should be removed; and
- any errors in migrated registrations – these should be corrected.
Incorrect registrations may affect a business's ability to raise new finance in the future.
New security agreements
New security agreements are likely to include new terms. In particular, the PPS Act provides that parties can contract out of certain provisions, including the right to receive certain notices (eg notice that a registration has occurred or been varied).
Businesses need to understand what rights they are giving up and should take this into account when negotiating the terms of finance documents.
How will securities be discharged?
It is currently common practice for financiers to simply give companies a discharge form (ASIC Form 312) when finance is repaid. The borrower then lodges the form with ASIC to discharge the security.
From 30 January 2012, financiers may prefer to access the PPS Register themselves to record the discharge of securities. Many financiers will not simply hand over the access codes so that the borrower can record the discharge.
Either way, a business should consider asking its financier for a document such as a deed of release that can be used to demonstrate the business fulfilled its obligations in relation to the finance. This will ensure you have evidence that the liability has been paid, in addition to the security being released. It will also assist you to demonstrate credit history.
How do I get further information?
If you would like further information about security interests, security agreements and the PPS Register, speak to your usual Maddocks contact or call a member of the Maddocks Personal Property Securities Team.