PPS Regime - Selling or Financing Goods

How does the PPS Regime affect my business?

From the perspective of a manufacturer, distributor or supplier of goods, “security interests” under the PPS Regime include any agreement or terms of trade which incorporate:

n     retention of title

n     consignment

n     conditional sale agreements

n     an assignment or transfer of title from the acquirer of goods back to the supplier

From the perspective of a financier or lessor of goods, “security interests” under the PPS Regime include:

n     a lease of goods

n     a bailment of goods

n     hire purchase

n     chattel mortgage

n     fixed charge

n     floating charge

What processes and procedures should an organisation put in place to prepare itself for the introduction of the PPS Regime?

We recommend a process of identification and awareness by means of a review or audit of business operations, products, documents and types of collateral.

This is a good opportunity to reacquaint yourself with your business as you apply the PPS Regime to it.

How does an organisation undertake the identification process?

Here are the steps which should be followed:

1.                   Compile a list of all types of sale and finance products and documents used in your business. 

These would include:

n     sale – retention of title or terms of trade

n     consignment

n     wholesale financing

n     rental/lease/hire purchase

n     chattel mortgages

n     statutory licence funding

n     relationship documentation

n     all types of traditional security agreements

2.                   Identify all types of goods sold or financed by the organisation by categorising them into:

n     whole goods

n     parts

n     those goods which are identified by serial number e.g.: motor vehicles or watercraft

3.                   Ascertain the use of goods in the hands of the purchaser/lessee e.g.:

n     inventory

n     personal, domestic and household or business

4.                   Classify documents and securities according to those which are:

n     existing traditional security interests currently registered on a statutory register (these registrations will be migrated to the PPS Register and will be “security interests” under the PPS Regime) e.g.:

§          ASIC charges

§          REVS notifications

n     existing traditional security interests which are not currently registered but which will be security interests for the PPS Regime (transitional securities);

n     new documents and securities which you will need to introduce on or after commencement of the PPS Regime

Armed with this information what steps need I take?

Prepare a matrix or flow chart based on the information which will identify:

n     the products, documents and types of collateral in your business

n     whether they are affected by PPS

n     the type of security interest they will become e.g.:

§          general or

§          purchase moneys security interests

n     the registration requirements

n     exclusions e.g.: some statutory licences

n     exceptions from registration

n     documentary requirements

What do I do with my existing agreements?

Once the matrix has been prepared you can determine which documents require amendment or substitution for PPS purposes.

Will I need to draft new agreements to properly secure my interest in personal property?

Because the PPS Regime introduces new concepts, agreements such as a General Security Agreement and a Specific Security Agreement may be required.

These can either be drafted or can be converted from existing fixed and floating charge and fixed charge documents.

Will my business processes change because of PPS?

Yes. Your business processes need to change to reflect the move from a title based system to a registration based system for all security interests in personal property.

Registration of all security interests in all personal property will now be undertaken on the PPS Register.