To register your debtors on PPSR

By: Edx  06-Dec-2011
Keywords: Debtors, Credit Controllers, Initial Registration

  1. For goods you supply under a retention of title clause, or sell on consignment, as a secured creditor you will have a “Purchased Money Security Interest” or PMSI in the goods, which under certain circumstances will have a “super priority” over all other creditors.
  2. PPSA gives you powerful rights of entry in to debtors premises to seize goods.
  3. Even if the goods have been incorporated in to new goods during the manufacturing process, you can acquire rights in the new goods.
  4. If the goods have been onsold in the ordinary course of business, you lose title, but in certain circumstances can still have a PMSI in the debt created by the sale.

These are all direct benefits that derive from PPSA. There are however indirect benefits of registration:

  1. You may have a valid defence against a voidable preference claim in a liquidation, although this has yet to be tested by the Courts.
  2. You may find your old debtors lining up to pay you when they try to sell their businesses and the purchasing solicitor searches PPSR. The sale will not go through until you have been paid and have discharged your security!

With a list of benefits like this, it is surprising that the levels of registration have not been higher. From conversations with clients we think that the delay has been caused by (a) a strong economy with a low level of bad debts and (b) the perceived difficulty and expense of the initial registration exercise.

The economy is now slowing and from conversations with credit controllers around the country we get the impression that bad debts will start to increase.

If you have not yet registered your debtors, it may be time to reconsider that decision before you get "stung" with a bad debt. Remember - your registration will only be effective for goods supplied after the date of registration.

We have developed tools to reduce the difficulty and expense of initial registration.

If the debtors ledger in your business looks like this:

  1. More than 50 but less than 1,000 debtors for registration, and
  2. On an ongoing basis you would open less than 10 new debtor accounts per month

Then you need a solution to help you with the initial bulk registration and a simple, inexpensive method for ongoing registration of new debtors. We have found that the best solution for clients like you is:

  1. We will provide you with a “Guide to Registration” document that clearly sets out all the steps that need to be taken to prepare for registration. It is essentially a project guide to enable you to prepare for registration without incurring consultancy or project management fees.
  2. We will provide you with a templated spreadsheet to capture all mandatory data for the debtors you wish to register on PPSR.
  3. When you return the spreadsheet to EDX we will validate the debtors and upload your registrations electronically to PPSR through our G2B link.
  4. On completion of registration we will populate the spreadsheet with PPSR generated data including Financing Statement number, Financing Statement PIN, Debtor PIN, date of registration and date of expiry.
  5. The updated spreadsheet is your database of securities for ongoing registry maintenance purposes.
  6. On an ongoing basis you would register new debtors and amend or discharge registered debtors through the publicly available PPSR website. It is advisable to update the spreadsheet so as to keep a complete and accurate record of all registrations.
  7. As we approach the 5year anniversary of initial registration – where all financing statements need to be renewed or expire, you provide the spreadsheet back to us and we will complete the renewal exercise.

This is by far and away the most economic way to approach the registration exercise for debtor volumes within the stated parameters. If you have a higher level of ongoing registry maintenance than indicated, it may be worth investing in our Securities Information Database (SID) which provides an automated registration solution.

If you need a greater level of project support we will:

  1. Meet with you to review the nature of your business, volume of debtors and the risks you seek to protect through registration. By the end of that meeting you will have a clear picture of what is involved and if you wish to proceed further, we will produce a scoping document and proposal.
  2. Customise the project plan (contained in the Guide) to clearly identify the work to be done.
  3. Provide as much help as you may need to complete the work.
  4. Provide any training that is required

Our fees for this greater level of support are charged on an hourly basis at varying rates, depending on the exact nature of the work.

We are completely customer focused and we will provide whatever level of support you need to make the exercise successful.

Example of fee calculation (GST exclusive). We will calculate the total fee for registration of 70 debtors and 200 debtors to show the impact of the minimum charge.

Up front payment for the "Guide to registration" - $250 in all cases.

Registration of 70 debtors
Total cost
Credit - up front payment for Guide
Total payable on registration

Registration of 200 debtors
Total cost
Credit - up front payment for Guide (250.00)
Total payable on registration 1,284.00

If you require additional support, or if we are required to manipulate data or revert back to you for missing information, we charge for this work on an hourly basis. This cost is of course within your control and we have several clients who have not paid any additional fees above those shown in the worked examples.

The information in this article was current at 02 Dec 2011

Keywords: Credit Controllers, Debtors, Initial Registration

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