Types of transactions where you should use the Personal Property and Securities Register
Back to Part 2 - When does PPS apply?
Secured Loan Agreement – This is the most obvious example of a security interest. You should take steps to register your interest as soon as possible.
Lease of goods or equipment – As the owner of the goods or equipment being leased, it is imperative you register your interest so you avoid the pitfalls suffered by QES in the example described above.
If you are participating in any of these types of PPSR contracts then you need to ensure that you register any interests you might have.
Purchase of a business – if you are the purchaser, you should search the register to make sure that any equipment, fixtures or fittings being included in the sale of the business, are unencumbered, and if they are, ensure that the vendor provides clear title.
Sale of business on vendor finance – it is imperative you register your interest in any property the subject of the business sale, on the PPS Register.
Licence to use intellectual property – although an IP Licence is not a security interest that is capable of being registered under the PPS Act, it may be subject to a security interest by a third party. You may wish to include a clause restricting the licensee from granting security over the licence (or if you are the licensee, preventing the licensor from granting security in the licence or the licenced property).
Retention of title transactions such as Distribution arrangements – where a purchaser has possession of property but may not acquire title from the seller until such time as the goods have been paid for.
Consignments where one entity holds the goods of another entity and only makes payment when the goods are sold.
Charges, fixed and/or floating: A fixed charge secures payment by attaching to the non-trading or specific assets of the business such as real property cars, plant and equipment, intellectual property and generally things that are easily defined.
A floating charge secures repayment of a loan by attaching to the more fluid assets of the business such as stock in trade, book debts or cash.
In the event of a default, the floating component is said to “crystallise” which then converts to a fixed charge over all of the assets of the business and prevents any dealing with those assets.
The PPSA does not provide for fixed and floating charges as such apart from stating that they are a PPSA security interest.
Lease to own Agreements / Hire Purchase Agreements are arrangements, whereby the hirer takes possession of certain goods such as plant and equipment, vehicles or furniture upon payment of an initial deposit to a financier. Over a defined period the hirer contracts to pay regular hire charges for use of the equipment, however legal title to the goods remains with the financier until all payments are finalised. Once the final instalment is made legal title to the goods will pass to the hirer.
Bailments are the temporary placement of control, custody and safekeeping of Personal Property owned by an individual bailor, into the hands of another, the bailee.
By Ian MacLeod