Protect Your Client’s Business with PPSA
At COG Aggregation, we continue to see growing challenges across our broker network when it comes to understanding and navigating the PPSA (Personal Property Securities Act). That’s why we’ve partnered with the experts at PPSAdvisory to deliver a series of practical blogs breaking down common PPSA pitfalls and providing valuable guidance.
This is the third article in our ongoing PPSA series, and it explores why brokers should take a proactive role in supporting their clients with PPSA compliance.
We hope you find this blog just as insightful and relevant as the last. Happy reading!
Why your clients need to comply with the PPSA?
Explaining the benefits of complying with the PPSA can be challenging for Equipment Finance Brokers, but it’s crucial. Helping protect your clients from the insolvency of their customers is a huge value add service.
As you know, for equipment owning clients, compliance with the PPSA ensures the return of their assets from an insolvent customer.
However, for clients selling goods on credit, the benefits are equally significant, though less recognised.
We always turn to our members’ experiences for real-world examples of the benefits of PPSA compliance. As former insolvency practitioners we understand why the PPSA is so critical. Not only do we ensure our clients comply, but we also help them exercise their security rights to recover their equipment and debts.
Equipment owners
We’ve advised hundreds of equipment owning businesses across Australia and since adopting our recommended PPS Registration policy none have lost equipment to insolvent customers.
Every now and again, an Insolvency Practitioner might try and claim a member’s equipment, but without success.
CASE STUDY
Last year, one of our members recovered 6 of their forklifts from an insolvent customer after the Voluntary Administrator disputed our PPS registrations. We resolved the issue easily, but without those PPS registrations the forklifts would have been lost.
Why? Because our member hires forklifts on long term hire, he knows he must register his interest in them, and we ensure he does so correctly.
It shouldn’t be hard to explain the benefits of PPS compliance to equipment owners. If the PPSA applies, comply, or lose your equipment on the insolvency of a customer.
Sale of goods
Whilst most brokers are aware of the PPSA’s impact on their clients who own equipment, not many are aware of the very significant benefit compliance with the PPSA provides any of their clients selling goods.
CASE STUDY
This month, we successfully helped a member recover $82,000 on a long-outstanding debt. When Scott’s Refrigerated Logistics entered insolvency in early 2023, our member, who sells and repairs heavy transport trailers, had serviced Scott’s trailers in Western Australia.
The Receiver faced a significant task selling hundreds of trailers and is only now finalising the administration. Unfortunately, our Member’s claim had been overlooked. However, the parts our member supplied and affixed to Scott’s trailers remained their property under their retention of title rights, and because they comply with the PPSA, we were able to enforce those rights and recover the value of those goods.
We intervened and, within a month, negotiated the full repayment of our members’ debt for the parts they had sold. And the key difference between our member and the 820 unsecured creditors of Scott’s receiving nothing? PPSA compliance.
Secured vs. unsecured creditors
Complying with the PPSA ensures you’re a secured creditor with priority over all unsecured creditors. And the cost of compliance? The Government charges $6 for a seven-year registration covering every transaction with the customer for the seven-year period.
By complying, you can enforce your security for payment. Non-compliance means losing your security and, consequently, your ability to recover payment.
CASE STUDY
Another of our members recently recovered 83% of their debt from an insolvent customer. Unsecured creditors of the insolvent customer are likely to get only a fraction of this return.
Owed almost $59k, our member was dubious of any chance of recovering their debt. Not so. $48k of the stock they supplied remained on hand when the customer collapsed. Their PPS registration ensured we could exercise their retention of title rights and recover the goods or their value.
After some help from us, they settled with the Administrators and were paid out the $48k. Had they not complied with the PPSA, the Administrators would have simply taken their stock.
Combined risk: selling goods and hiring equipment
Many of our members sell goods as well as hire equipment. One of our fuel distribution members recently recovered all their equipment and all their debt.
CASE STUDY
Having provided over 1 million litres of fuel storage capacity and infrastructure, and being owed more than $800k for recent fuel deliveries, our member was relying on their PPS registrations to recover their equipment and debt when their mining client collapsed into insolvency.
Because of their registrations, they retained ownership of the fuel tanks and were able to recover every cent they were owed, all within weeks of the start of the Administration.
And again why? Because they comply with the PPSA and had registered their security on the PPS Register. Suppliers who failed to register their security recovered 5 cents in the dollar.
One $6 PPS Registration was the difference between recovering over $800k and our member ranking as an unsecured creditor and receiving only $40k. Not to mention the loss of their tanks and infrastructure.
The bottom line: PPSA is essential protection
The importance of compliance with the PPSA cannot be overemphasised. Equipment owners really must comply with the PPSA where they lose possession of their equipment. Equally, selling goods on credit without taking security and complying with the PPSA is extremely unwise.
If you have any clients who lose possession of their equipment and/or sell goods on credit, we’d be happy to explain the benefits of PPSA compliance. Just give the PPSAdvisory a call.