29/03/2012

To help our clients in a practical way through the complex web which is the PPSA, we are finding answers to the real life questions we receive. 

We recently received the following question from an accountant:

Can we incorporate into our engagement letters a clause that would mean we can register our WIP onto the PPSA??

As a general guide only, the answer is as follows:
1. The short answer to this question is yes, you can. This could be done by incorporating a guarantee into the engagement letters for any clients from whom the accountant may want additional security eg a new client with a long-running major piece of work or a client with which the accountant may have financial concerns.

2.   It is important to ensure that the guarantee includes a provision specifically charging some or all of the guarantor’s personal property with repayment of amounts owed by, or performance of obligations by, the client company. (Personal property is effectively all property other than interests in land, and includes goods, plant and equipment, shares, intellectual property such as trademarks and copyright, negotiable instruments and debts, among others).

3. The following clauses should be sufficient to specifically charge the personal property of the Guarantor, as required by PPSA:

• The Guarantor expressly charges all their interest in their personal property, of whatever type and wherever located, both present and after-acquired, with payment of any amounts duly payable by the Guarantor or the under this letter.
• The Guarantor agrees and acknowledges that, by virtue of the previous clause, this letter is or represents a security interest under the Personal Property Securities Act 2009 (PPSA) and that the intends to register its security interest under this letter under the Personal Property Securities Register under the PPSA.
  

4. The next question is to consider how the accounting firm could market this type of clause to its clients. We do not suggest it is appropriate to do this with every client, as, for example, it may be too costly and time-consuming to administer for all clients. However, for certain clients, this could be an advantage to the accounting firm.

For further information on Guarantees and the PPSA, please go to the following link:

http://www.townsendslaw.com.au/uploaded/How%20to%20Guide%20-%20PPSA%20and%20Guarantees%20230112.pdf

If you have any questions in relation to this article, please contact TOWNSENDS BUSINESS & CORPORATE LAWYERS on (02) 8296 6222.