Does the PPSA Apply to Your Client?
The team at COG Aggregation is committed to helping brokers understand and comply with the PPSA (Personal Properties Security Act) in order to protect their customers and meet lenders’ requirements.
COG has partnered with PPSAdvisory to bring you informative articles that dive into common PPSA issues.
We hope you enjoy our fourth insightful blog from PPSAdvisory. Happy reading!
Does the PPSA Apply to Your Client?
Determining if the Personal Property Securities Act (PPSA) applies to your client’s business is critical, guesswork isn’t an option. Failing to comply can result in serious consequences: lost equipment, unpaid debts, and significant financial losses if your client’s customers become insolvent.
Understanding PPSA compliance is key to protecting your clients’ interests. The legislation impacts far more businesses than many realise, and the requirements are strict. Taking steps now can prevent major financial headaches down the road.
Who Needs to Consider PPSA Compliance?
The PPSA isn’t just relevant for equipment rental and leasing businesses – it affects any business that passes possession of its equipment to a customer. These entities face unique risks under the PPSA and need to understand how to protect their assets.
Equipment Owners Who Pass Possession to Customers
Whether you rent, lease, or supply equipment as part of a service, you face significant risks. Under the PPSA, it’s all about possession; if you lose possession, you are likely to be at risk. If your business allows customers to take possession of equipment, failing to register the correct security interest could mean losing that equipment if the customer becomes insolvent.
Regardless of how the arrangement is structured – whether a formal lease, a services agreement, or an informal agreement – proper PPSA registration is vital. Without it, your equipment could be treated as part of the customer’s assets, leaving you unable to recover it.
Businesses Selling Goods on Credit
Businesses that sell products on credit terms – where goods are delivered before payment – also face risks. Many don’t realise that retention of title clauses or other security arrangements require PPSA registration to be enforceable.
Without registration, these businesses become unsecured creditors in the event of customer insolvency, meaning they lose priority in debt recovery. This could result in significant financial losses when customers collapse into insolvency.
Simple Assessment Tools Available
PPSAdvisory has developed free, practical checklists to help businesses identify whether the PPSA applies to them. Available below, these tools take just minutes to complete and provide clear insight into any PPSA exposure.
The checklists cover a wide range of scenarios:
For equipment owners: Questions focus on whether possession is passed to customers, the terms and conditions of hire/rental arrangements, any finance options and whether those arrangements require PPSA registration.
For businesses selling goods: The checklist examines payment terms, retention clauses, and credit arrangements that might create registrable security interests.
These self-assessment tools help your clients quickly identify risks and understand the steps they need to take to protect their assets.
Who Needs to Consider PPSA Compliance?
Protection for Equipment Owners
For anyone passing possession of equipment to customers, PPSA compliance is essential. Proper registration ensures that your assets are protected and can be recovered in the event of customer insolvency.
Without registration, valuable equipment may be treated as part of the customer’s assets, leaving you with no legal right to retrieve it. This can result in significant financial losses, especially for high-value equipment.
Improved Debt Recovery for Suppliers
For businesses selling goods on credit, PPSA compliance provides a critical advantage. Registered security interests give suppliers priority in debt recovery, ensuring they can enforce claims against specific assets.
This protection dramatically increases the likelihood of recovering debts when customers face insolvency, offering a vital safeguard for your bottom line.
Taking Action
The first step is understanding your clients’ business models and risk exposure. PPSAdvisory’s free checklists provide a straightforward way to identify businesses that need to prioritise PPSA compliance.
Once risks are identified, seeking expert guidance is crucial. PPSA compliance can be complex, and professional support ensures that your clients’ interests are fully protected.
Protecting Client Interests
PPSA compliance isn’t optional for businesses at risk – it’s a necessary step to safeguard against customer insolvency. A small investment in proper registration and ongoing compliance can prevent catastrophic losses.
Visit https://ppsadvisory.com.au/does-the-ppsa-apply-to-my-business/ today to access the free assessment checklists. Help your clients understand their PPSA obligations and protect their assets before it’s too late.