The Personal Property Securities Act 2009 (Cth) (PPSA) established a register for recording security interests held by creditors over certain types of personal property of debtors. The register, known as the Personal Property Securities Register (PPSR), may, for a trading company debtor, contain many registrations of security interests created by creditors, such as financiers and suppliers of goods and services on credit.
However, a debtor having many security interests registered over it may unnecessarily risk portraying itself as being a potential credit risk to the business community, by indicating it may be indebted to numerous creditors.
In a recent matter, a client who wished to raise finance with a new major lender was surprised to learn that it had a large number of security interests registered over it, many relating to previous financiers and suppliers. It also became evident that many of the suppliers were not entitled to register security interests as there were no underlying documents between those suppliers and the client which entitled the suppliers to register security interests over the client.
In an effort to improve the client’s apparent credit risk profile and improve its prospects in raising finance, the client took steps to remove from the PPSR all noncurrent and improperly registered security interests.
To achieve this, and with our assistance, the client applied the administrative process in the PPSA for removing those registrations. In short, that process involves:
- the client/debtor sending a written notice (called an amendment demand) to the secured party creditor demanding the secured party creditor remove the registration on the basis that the registration no longer (or never did) secure any obligation from the debtor to the secured party creditor, including any obligation to pay moneys owed;
- if the secured party creditor does not remove the registration within 5 business days of receipt of the amendment demand, the debtor may apply to the Registrar under the PPSA and seek assistance to have the registration removed from the PPSR;
- the PPSA Registrar will then issue a notice to the secured party creditor (called an amendment notice) and consider any response received from the secured party creditor;
- the PPSA Registrar will then make a decision on whether the security interest should be removed from the PPSR.
The process is easily applied and relatively cheap to employ and, as occurred in our client’s case, can improve a business’s credit risk profile.
For more information please on this topic please contact Nicholson Ryan Lawyers on +613 9640 0400