Ignorance of the PPSR is rife and dangerous
Macks Advisory’s recent research and hands-on experience shows that ignorance of the Personal Property Securities Register (PPSR) remains rife, and therefore particularly dangerous for business owners.
For of course the register is vital in safeguarding assets. Fearful consequences inevitably flow from failure, not merely to register assets on the PPSR, but also failing to register them correctly and within specified times.
Court judgements reveal how registration or lack of it has, in various circumstances, been the difference between a business’s salvation and its devastation.
If you’re a business owner, don’t make the mistake of believing that ownership of an asset necessarily protects it. Disputation about ownership during insolvencies can come down, simply to a court’s ruling on the validity of registration. We recommend therefore that business owners and operators learn everything they can about the PPSR, and do their best to ensure business advisers are up to date on the register’s imperatives.
This article offers a better appreciation of the PPSR’s significance. Furthermore, on our web site http://macksadvisory.muchmedia.com.au/ you can type “PPSR” into the search field to access earlier articles on this topic.
And be sure to watch this space in the months ahead for case studies.
The PPSR’s clarification needs
Experience has taught Macks Advisory that whenever there’s a substantial change to law, especially when, it relates to something like the PPSR which affects the interests of so many stakeholders, the need for clarifications -- affecting in this instance such things as asset structure and protection – only become apparent over time.
Post implementation of law, it usually takes between four and six years – sometimes more – for judicial engagement to interpret and clarify the legislative framework.
In subsequent articles we’ll examine a few of such cases, inviting readers to see how findings might affect them as business owners or advisors.
If solicitors, accountants and financiers do little else for their clients they should at least ensure those with leasing businesses, and anyone with concerns about asset protection for succession and estate planning, have their assets properly recorded on the PPSR.
The PPSR was established in 2012 under the Personal Property Securities Act 2009 (PPSA) and already the legislation’s inevitable evolution is apparent in court rulings.
The PPSR is used to register personal or business security in a company for a number of reasons that often are vital in insolvencies.
As advisors, it’s our belief that clients’ registrations should be reviewed regularly at least every three to five years in the light of this evolution.
But operators of Australian businesses involving international activity should also keep a sharp eye on how our laws may relate to those of countries where they’re doing business.
Australian courts cooperate with foreign courts. Generally other countries recognise the jurisdiction of relevant Australian courts in line with the INCITRAL Model Law on insolvency, codified into Australian law through the Cross-Border Insolvency Act 2008 (Cth).
But a number of grey areas exist, particularly important to the many Australian businesses’ dealing with China. (More on this in a subsequent article.
Some forthcoming articles
Here are references to articles we’ll be publishing on PPSR issues brought to the courts.
We're starting with Forge Group Power Pty Ltd (In Liquidation) (Receivers and Managers Appointed) v General Electric International Inc [2016] NSWSC 52.
GE failed to register its interest in turbines leased to Forge. They were worth $60m and GE lost ownership of them as a result of the court’s ruling.
Look out too for an article about what happened when a liquidator as receiver proceeded to realise self managed superannuation fund (SMSF) assets to enforce indemnity over trust assets located in the fund.
It’s impossible to escape the reality of increasing litigation risk as PPSA legislation, especially where it relates to the PPSR, evolves in increasingly volatile economies.
Stay tuned – and remember Macks Advisory is here to help.
