Selling goods on credit terms subject to retention of title
There are very powerful benefits available to suppliers of goods to customers on credit terms subject to Retention of Title (“ROT”) that register on the Personal Property Securities Register (“PPSR”) and the loss of previously available debt recovery sources for those that do not.
The Personal Property Securities Act (“PPSA”) elevates suppliers that sell goods subject to ROT and that register on PPSR to ‘secured creditor’ status. This means that in an insolvency administration, secured creditors, benefit from a higher priority and get paid before other creditors including the customer’s bank.
Specifically, a supplier of goods, subject to ROT, that registers will be able to:-
• Repossess its goods if they are still in the customer’s possession
• Recover goods that have become affixed to other goods – such as tyres installed on a motor vehicle
• Retain rights in commingled or mixed goods – such as grains mixed together in a silo or chemicals mixed together to make paint even where other separate suppliers are involved
• Obtain security in manufactured goods where the goods supplied form part such as where wood has been supplied to make a table or meat has been supplied to make pies or ready meals
• Have security in ‘accessions’ which are goods that have become affixed to other items – such as steel or windows in a construction project
• Have security in ‘proceeds’ – which are book debts derived from the sale of the ROT supplies.
In addition, registering on PPSR for ROT suppliers often means:-
• A defence against a claim for a unfair preference or preferential payment claim from a liquidator.
• Customers selling their businesses will need to obtain a discharge from you meaning you are sure to get paid.
There are wonderful benefits to be gained by ROT suppliers that register on PPSR. It is a very different story for those that do not. Many suppliers aren’t aware that their ROT clause became ineffective in 2012 with the advent of PPSR. If their customer becomes insolvent, and they haven’t registered, they will lose their goods and become an unsecured creditor for the debt due to them.
The message is clear. It is easy and cheap to register. Most ROT registrations only need to be done once against each customer and last for 7 years. The benefits are incredible. Why wouldn’t you do it?
Contact us to get started.
We look forward to welcoming you as a valued client.