Are You at Risk of Losing Millions Overnight?

Local companies have literally lost millions of dollars of equipment overnight in the collapse of Caledon’s Cook Colliery mine. This is a scary reminder of the importance of correctly registering on the Personal Property Securities Register. It is a cut throat system and ownership means nothing!

We see many mining contractors that try to diligently register, but make simple errors which invalidate the registrations.

The top 5 mistakes we see made are:

1.Registering over the wrong party: You NEED to know who the true hirer is. Is it Joe Bloggs? Or Joe Bloggs Pty Ltd; or Joe Bloggs Pty Ltd as trustee of the JB Trust; or Joe Bloggs in partnership with John Citizen?

2.Using the wrong identifier: There are strict rules about which identifier you must use for the relevant Grantor – ie. ACN or ABN;

3.Not ticking the “PMSI” box appropriately. If you tick the PMSI box in a registration when the nature of the security interest is not a Purchase Money Security Interest (PMSI), then the whole registration is invalid!

4.Not registering within the correct timeframes to ensure priority and validity:

For example, to obtain “super priority” as a Purchase Money Security Interest, you need to register:

a) If the Collateral (ie equipment) is inventory – BEFORE the supply;

b) If the Collateral is not inventory – within 15 business days of the supply;

Also, if hiring to a Company, you need to register within 20 business days of the written agreement. Otherwise, if the Company goes into liquidation within 6 months, your equipment will go to their creditors!

5.Not ensuring perfection over the “chain” of registration:

You hire your equipment to A and register on the PPSR properly over A. Unbeknown to you though, A cross-hires/gives possession of your equipment to B. A does not register over B.

B goes into administration…creditors take YOUR equipment!!

Unfortunately in this scenario, because A has not registered over B, the “chain” of registration has not been perfected and so, the equipment is not necessarily protected by your registration over A.

This is a huge practical issue in the industry. We have some practical tips on how you can manage this risk.

Registering on the PPSR is a very complex process and requires legal knowledge of the system.

It is essential to obtain legal advice from a lawyer experienced in the PPSR regime and ensure your registrations are completed properly. Otherwise, it may be you that I am writing about in the next edition, having lost equipment to creditors!

Suzanne Brown

Director
sbrown@mckayslaw.com
07 4963 0820