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!