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01 Feb 2019

Your PPSR registration may be expiring!


4 min

And if it has already, you can still reduce your exposure.

It may be hard to believe but the Personal Property Securities Act 2009 (PPSA) turned seven years’ old on 30 January 2019. That’s right, on 30 January 2012, over 40 different registers were replaced with the revolutionary national system that is the Personal Property Securities Register (PPSR). Seven years on, a lack of intensive awareness campaigning and education has left many small businesses still grappling with some basic PPSA concepts and/or accurately registering their security interests on the PPSR. Some key amendments to the legislation catered for the short-term hire industry, which made headlines over the years, and 30 January 2019 marked another key milestone for many businesses with registrations.

More than 100,000 PPSR registrations are estimated to have expired on 30 January 2019, with many more over the coming months. Why? Well many businesses may have either registered a security interest for the minimum seven-year period as it is the cheapest registration or because it is the default and maximum period that applies to interests over serial numbered goods (e.g. motor vehicles, watercraft, and aircraft).

The critical issue is that the registration cannot be renewed and extended once it expires.

That means for the registration to remain valid (and to maintain its priority) it is vital that the registration is renewed and extended before expiry. Otherwise, the registration will be considered invalid, potentially impacting on the ability to enforce the security interest against the grantor or maintaining a priority to the personal property.

An example of this is where two registrations create competing interests:OTP_ppsr

  • A Purchase Money Security Interest (PMSI), which holds a super-priority over other registrations, is registered against a motor vehicle.

  • A financial institution registers a security over the grantor’s assets as security for a loan as an All present and after-acquired property (ALLPAAP).

In the scenario of the PMSI registration lapsing, the super-priority is gone (due to expiry) and the financial institution with an ALLPAAP registration takes priority.  In short, the entity or person who gave that motor vehicle—loses out. In the scenario of no competing interests—if a registration lapses and the grantor enters into external administration—any interest over personal property may vest back to them.

So, how do you check when a registration will expire?

The PPSR (administered by the Australian Financial Security Authority) populated a list of registrations due to expire shortly. Users can search this free tool by the party holding the security within a specific date range. This service will assist to review and manage registration renewal. This will also be an opportunity to remove any registrations no longer required. Another advantage in extending any registrations is rectifying any errors or updating any changes since the original registration. This may be as simple as correcting the error when renewing the registration, or if the issue is more complex, it may require some specialist advice.

What happens if the registration has expired? There may still be an opportunity for a new security interest to be registered against the personal property, however the downside is potentially losing the original priority status, which the original registration held. The new registration may also not cover inventory currently in the (i.e. customer) possession. Further, the risk remains that the new security interest will vest in the grantor if it enters external administration within six months of the new registration. Regardless, we strongly recommend that you register the new security interest as swiftly to minimise the exposure that may result in the future.

Given that seven years has now passed, businesses should establish protocols to regularly review its registration/s expiry dates and respond to the need for renewal and extension before expiry. The PPSR anniversary is a timely reminder of how important it is to ensure that registrations are compliant, as getting it wrong can be far-reaching and costly!

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