26/11/2013

The Personal Property Securities Act (2009) Commonwealth ("PPSA") continues to impact the business community in serious ways.

The purpose of this article is to advise of an important deadline which is coming very soon and which could well affect you and your business or company. Your eyes may glaze over at this news, but be warned - there may be unfortunate consequences for you if you ignore this deadline.

The deadline concerns TSIs. What is a TSI? Don’t worry, it isn't a disease and you can't catch it. A TSI essentially is an interest in personal property which secures payment or performance of an obligation which existed before 30 January 2012 (the date when the PPSA came into force); in other words a charge, property mortgage or bill of sale.

TSIs also include security interests that were not in existence as at 30 January 2012, but which were created after that date under a security agreement which commenced before 30 January 2012 and remained in force after 30 January 2012. An example is goods supplied under a retention of title agreement which came into force on 30 July 2011 but where the goods were only supplied in July 2013.

Why is it important to know what a TSI is?

If you are a secured party, that is, a party which has the benefit of a security interest such as a retention of title clause and you have a TSI which has not yet been registered on the register created under the PPSA ("PPSR"), you need to register it on the PPSR before 12 midnight on 31 January 2014. If you register, you preserve the priority status of your TSI.

However, if you don't register your TSI, temporary perfection for your TSI will not apply from 1 February 2014. While you will still be able to register your TSI after 31 January 2014, its perfected status is only calculated from the date you register it. So if another secured party has an interest in the same goods as you do and registers its TSI before 12 midnight on 31 January 2014, and you haven’t registered, you will lose your priority. The other party will be paid out before you if the grantor, ie the company giving the security, defaults. If the grantor becomes insolvent or is wound up and you haven’t registered your TSI, you may lose your security interest completely.

Examples of commercial arrangements which may be TSIs include retention of title arrangements, commercial consignments, chattel leases, commercial hiring agreements, as well as what we used to call 'bills of sale' and company charges.

There is one very good feature of TSIs to note - registration is free!

This article covers in a general way only a very small part of the PPSA. It is designed to help you understand one situation where the PPSA may apply to you. It is not a substitute for legal advice, which you should seek and rely on in every specific case.

If you need help to register your TSIs or with any other aspect of the PPSA, or you simply want to know how and when the deadline discussed in this article may apply to your company or business, please contact Townsends Business & Corporate Lawyers on (02) 8296 6222.