The 5 myths of PPSR
Make sure you have the facts

The Personal Properties Security Act (PPSA) is one of the most significant reforms for credit and risk managers in many years and completely overhauls the way in which firms will register and secure an interest in property.

However, as with most complex reforms a number of myths and inaccuracies have entered the marketplace.  These myths have the potential to cost you time and money.  Here are the five biggest myths and what you need to know to prepare for the new laws.

Myth 1:
Businesses needed to have completed the pre-registration process by 31 January 2011 otherwise they will miss the opportunity to register their existing securities prior to the PPSR going live.

Fact:
There will be an opportunity for businesses to submit their data (via the registrar) for inclusion on the PPSR prior to the go live date. At this stage it is anticipated that the registrar will complete the pre-load process during April and May 2011.

To take advantage of the pre-load service businesses had to have registered their intent by February 2010 however, if they missed this deadline they can submit their data through a registered organisation such as Dun & Bradstreet.

Myth 2:
If businesses fail to utilise the pre-load period they will pay full registration fees to register existing interests on the PPSR.

Fact:
If businesses utilise the pre-load service or they opt to register their existing securities during the two year transition period they will not be required to pay the PPSR registrars fee. However, businesses that wish to load existing security interests after the transition period will be charged full registration fees by the PPSR registrar.

The cost to register new securities will be dependent on the type of security and the period of time it is to be registered for.

Myth 3:
Businesses need to load their existing security interests on the PPSR by May 2011 to achieve secured creditor status and ensure priority over other creditors.

Fact:
There are specific rules which are designed to protect secured creditors during the transition period. The transition period will run for two years from the go live date.¹ During this period creditors who have not registered pre-existing security interests on the PPSR will maintain the same rights over their collateral as they do today (i.e. before the existence of the PPSR).

Myth 4:
By simply registering on the PPSR a business can secure its interests.

Fact:
Businesses need to have a legitimate security interest (as defined by the PPSA) to be able to register on the PPSR. In addition, organisations that choose to register must comply with all relevant requirements in order for the registration to be effective.

For more information on the requirements that must be met to achieve a valid registration download a copy of Dun & Bradstreet's Guide to PPS.pdf 

Myth 5:
Service industries can obtain valuable protections by registering their debtors on the PPSR.

Fact:
The fundamental principle of the PPSA is that a creditor is taking security over personal property (collateral). Consequently, businesses which provide a service (rather than a product) do not produce personal property over which they can take a security. However, there may be businesses that supply both products and services and can therefore take a security interest over part of their offering. For example, a garage which supplies labour (services) and parts (personal property) would be able to register a security interest in the parts but not the labour.

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