Clients who lease/hire/licence third parties to use goods or operate a business are at risk under the new PPSA rules

The Personal Property Securities Act 2009 (PPSA) commenced operations on 30 January 2012 and implements fundamental changes to the rules affecting ownership of ‘personal property’ in Australia.

One area of significant change affects clients who have multiple entities. Often these arrangements provide for the lease/hire/rental/licence of property (such as trademarks or plant and equipment or vehicles) from one entity to another.

It is also quite common for clients that own business goodwill to licence a related entity to operate the business as an asset protection strategy.

Under the PPSA, an owner of ‘personal property’ who allows a third party to use that property will need to register the fact that they are the owner of the property on the PPS Register.

If they do not and the entity that has possession of the property goes into liquidation, the liquidator will effectively be able to claim ownership of the property in priority to the actual owner.

The registration process is not entirely straightforward and, if it is not done properly, the owner will be at risk of a third party such as a liquidator claiming ownership of the goods.

Many of these non-arms length arrangements have not been properly documented (or are not documented at all). As a starting point it will be advisable to make sure all lease or licence arrangements in respect of personal property assets are documented and that the interest created by the documents are registered under the PPSA.

We can assist in documenting these arrangements and providing advice and guidance on how to effectively register interests under the PPSA regime.
For more detailed information on PPSA, please click here.