Why your ‘security’ may not be as secure as you think

29 May 2017

If you supply or hire goods to customers or include credit terms in your customer agreements then the Personal Properties Securities Register (PPSR) is an important tool that you should be using to maximise your protection as a creditor.

In simple terms, using the PPSR to your advantage involves 2 steps:

  1. Your terms and conditions need to be worded in such a way that they create an interest that can be registered on the PPSR.  All creditors should review their terms and conditions to ensure that their terms and conditions have the necessary requirements; and
  2. You must register your interest in a customer’s property on the PPSR as soon as possible after the interest is created as strict time limits apply.

If you do not follow these two essential steps to register your interest on the PPSR and your customer becomes insolvent, you may lose your entitlement to claim as a priority creditor from the customer.

A recent Supreme Court decision has again highlighted the importance of registering an interest on the PPSR within the statutory timeframes.

In particular, for a creditor to be able to claim a priority entitlement to a general security interest (such as money owed), the registration must occur within 20 business days of the date of the customer agreement or at least 6 months before the customer (debtor) company becomes insolvent.

Contact us to discuss your terms and conditions of trade, PPSR registration options and enforcement of your security interest where your customer becomes insolvent.

Richard Waring, Partner: (07) 3307 4545 or rwaring@shandtaylor.com.au

Rod O'Sullivan, Partner: (07) 3307 4568 or rosullivan@shandtaylor.com.au

Kimberley Forman, Senior Associate: (07) 3307 4523 or kforman@shandtaylor.com.au

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