The PPSA offers so much for businesses selling goods on credit

Whilst the PPSA can be a pain for the hire industry it’s fantastic news if your selling goods on credit.  In the past you may have retained title to the goods until they received payment.  This wasn’t always successful.  Now it is.  The PPSA provides legal backing for Retention of Title (ROT).  In fact ROT clauses won’t work unless the supplier is also complying with the PPSA.

Here’s a current example.  Over the past six weeks Strong Steel Pty Ltd supplied $240k of steel to its fabricating customer, Ezi Fab.  When Ezi Fab collapsed, Strong Steel sought to rely on its ROT.  As Strong Steel hadn’t spent the $6.80 and registered its interest on the PPSA its ROT claim is worthless.  Strong Steel is now an unsecured creditor for the $240k.  Good luck.

Had Strong Steel complied with the PPSA its position would be:

  • As secured creditor over any of its steel stock held by Ezi Fab;
  • As secured creditor over any of its steel incorporated in WIP held by Ezi Fab; and
  • As secured creditor over any debt due to Ezi Fab for past sales that includes their steel.

That’s a much better result.  This applies to anyone selling goods, equipment, materials, in fact about anything sold on credit.

Source: Simon Read, Director, EDX


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