Do you supply goods on a retention of title basis? The PPSA Act is coming!

Today, as a 'retention of title' (ROT) supplier of goods you can rely upon your ownership of the goods as adequate protection against the insolvency of your customer. However, once the Personal Property Securities Act (PPSA) is in force, your ownership or title to the goods you have supplied will be worthless.

If you supply goods to your customers after the introduction of the PPSA and take no action you will lose ownership of the goods and be an unsecured creditor in the liquidation or voluntary administration of your customer. No longer would you be able to enter your customer's premises and tell the liquidator or administrator to return your goods to you.

If you take the appropriate steps under the PPSA your position can be protected.

As part of taking protective measures, you should be aware that:

• You can extend your protection to include the book debts referrable to the sale of the products you supply to your customer.
• You can now create protection for yourself where your assets are commingled with other assets (which under the existing law has always been problematic).
• Equally, you can protect yourself where your goods form part of, or are attached to, other goods (which again, under the current law has been problematic).

However, if your supply arrangements extend beyond the goods you supply to the book debts created upon sale of those goods, you should be aware debt factorers or other financiers taking security over those book debts after you can rank in priority to you without your consent.

Finally, if you have protected your position under the PPSA (including extending your security interest to receivables and your goods where they are commingled or added to others) are you happy with the extensive enforcement requirements under the PPSA? Do the terms of your supply contract need to be reconsidered as some of these enforcement requirements, including various notices requirements, can be avoided?

Johnson Winter & Slattery are developing packages for presentation to in-house legal counsel and management about the impact of the legislation, including training packages and changes to documentation.  Please contact us if you are interested in our presentation packages for your in-house counsel and management teams.

Click here to see David Proudman, Partner, discussing the PPSA.