PPSR or Personal Property Securities Register is simply a government run electronic register, or notice board, that allows businesses to register a security interest in personal property, when they extend credit or sell goods or services to their clients.
As detailed in the cover of the PPSR Guidebook for Businesses,
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If you are,
• Wholesaling
• Selling on Terms, which is extending credit
• Hiring, Renting or Leasing Goods
• In the Building or Construction industry
• Or the automotive services or supply industry.
Then the PPSR is now the only way to protect your business and its cash flow.
At Collection Consultancy Australia or CCA we understand the biggest hurdle that faces most businesses, is that they simply don't understand how the PPSR legislation can protect their business, and allow them to become secured creditors, with the same protection as the banks.
For example, most businesses don't understand that for a measly $6 government fee, they can register on their client's PPSR file becoming secured creditors for the next 7 years. No matter if they are selling goods, providing services, or just wanting to protect rental payments.
Essentially, if a business extends credit in any form, they can become a secure creditor.
Now why is it important?
Because if a business hasn’t registered and become a secured creditor, then they are automatically an Unsecured Creditor.
And being an unsecured creditor when a company goes into administration or liquidation can now have dire consequences.
It all goes back to section 588FA(1) of the Corporations Act 2001.
Since the introduction of the PPSR it is now much easier for a liquidator to recognise an unsecured creditor and use a Corporations Act to identify any payments made to that unsecured creditor which they class to be preferential.
In its simplest form, preferential payments are any payments made to an unsecured creditor, by a company who files for Administration or Liquidation, in the preceding 6 months, or the relation back period, if there are any secured creditor who remain unpaid.
In other words, if there are any secured creditors which haven't been paid when a company goes into liquidation, the liquidator will, in most instances, demand the return of all payments made to any unsecured creditors in the previous 6 months, in order to ensure that the secured creditors get paid.
Finding this hard to understand?
Here is a copy of a letter of demand served on a business in 2015. Of course, for privacy reasons we have redacted the company's details, but the clearly shows,
The of demand for the return of $171,521.
Outlines the relation back period.
The transactions the liquidator considers as unfair preference payments.
And gives the company 7 days to make payment.
And here is another one, exactly the same circumstances, but
This demand is for $48,240.
Outlines the unfair preference payment transactions,
A gives the same 7 days to pay.
And you think you will have a choice?
Here is an extract from a 2016 / 2017 Creditors Report concerning preferential payments made to the
ATO totalling $52,636. You'll notice the ATO settled for 50,000 in the early stages of the liquidation.
Why?
Because the ATO knows that the legislation applies to them exactly the same as any other business.
Now we are not trying to shock businesses into action, but these examples could have easily been avoided with a simple $6 PPSR Registration.
Given the fact is the PPSR legislation has been in place since 2012, if it's not an everyday part of your business, you may need to make a couple of changes.
With over 35 years’ experience Collection Consultancy Australia are the experts on using the PPSR to protect your business. For more information please call on 1300 565 988.
info@collectionconsultancy.com.au
