Legal experts warn SMEs understanding of new personal securities register is crucial to doing business

Too many small businesses are unaware of the upcoming Personal Properties Securities Register, legal experts have warned, saying it will fundamentally change the way business is carried out in Australia.

Experts say businesses must quickly become knowledgeable about their requirements under the new act. The register comes into effect on Monday.

“If anyone is in the business of supplying goods instead of services, then the issue of security is likely to come up in any business, and any form of supply of goods on credit including leases and hiring,” Alex Moriarty from law firm TressCox told SmartCompany this week.

“These should be registered on the PPSR, and businesses should know about it.”

The Personal Properties Securities Register was passed in Parliament in 2009, but will only be introduced in a preliminary format on Monday, January 30.

The register is designed to act as a sole register for any form of personal property security.

For the purposes of the register, any personal property security is a form of property other than the land, buildings or fixtures which form part of that land. This includes assets such as cars, other plant and equipment, and intellectual property.

A personal property security occurs when a secured party, such as a bank, takes an interest in personal property as security for a loan or any other type of agreement that includes the use of secured finance.

For example, if a person or business borrows from a bank and offers something up as collateral, that asset is referred to as a personal property security.

While registers for those assets already exist, they will now be migrated over the PPSR in order to simplify the entire process. It means more than 40 current registers, including the Register of Ships, Fisheries Register, Register of Encumbered Vehicles, the Security Interest of Goods Register and each states’ vehicle securities registers, will now be included in the PPSR.

But many small businesses are unaware of their obligations under the new act, and Moriarty says this may cause disappointment when there is an argument over a secured property.

“There are many situations where you record security interest in a property. Usually that happens when you secure a loan, and businesses often have featherweight charges that are traditionally recorded on the national charge register,” he says.

“This is all to make it simpler to have it all on the one register.”

According to credit insurance company Coface Australia, 82% of 533 companies surveyed aren’t looking to register assets under the new PPSR scheme.

Moriarty says this is a mistake.

“There are some interests in property that haven’t been registrable that need to be registered. The key ones to focus on are lease arrangements, property and equipment leases, and hire arrangements.”

“If you leased your car to someone and they go insolvent, you never had to register securities. Now, the legislation provides that you need to do that.”

He warns those who don’t could lose out to another secured lender that has claimed security over a company’s assets. The situation commonly happens when there are two or more secured parties claiming ownership of a company or individual’s assets.

“The other common situation is where there are retention of title arrangements in the course of supplying goods. Companies using those need to be aware there are transitional provisions that protect security and retention of title for two years.

“But they only apply to security interests that have been created or registered before 30 January.”

Although the issue is technical, Moriarty says the PPSR has now become an essential part of doing business in Australia.

“Every business, no matter how small or large, will need to at least have a basic understanding of what’s happening here.”

Legal experts warn SMEs understanding of new personal securities register crucial to doing business