On 23 June 2020, here in Melbourne, in the calm between the lockdowns (which seems like an eternity ago now) I delivered an update to lawyers on COVID implications for the operation of the PPSA to the Leo Cussens Institute via Zoom. A copy of the paper presented is attached at this link.
The key takeaways were:
- as a practitioner, know the basics: what is a security interest, why to register and how to register
- make sure that clients take steps to protect themselves from simple mistakes;
- in an environment where a pandemic of insolvency is a real risk, errors in dealing with the PPSA will be costlier than ever.
I suggested the minimum basics that a practitioner should know were:
- The main impact of the PPSA is difficult times is in insolvency. The first thing a liquidator, administrator or bankruptcy trustee will do when appointed is search the PPSR for relevant registrations.
- In most appointments of liquidators or bankruptcy trustees, unsecured creditors will either receive nothing or very few cents in the dollar. Therefore, if you propose to offer funds or goods to a person or entity on credit, considering security for the obligation should be the first thing at front of mind.
- A first-ranking secured party can then generally choose whether to enforce their security and take the property or get priority of payment from the sale of the property.
- To take security over personal property, clients will need two things:
- a security agreement that is well drafted: usually within the terms of trade, or in a separate document; and
- to register that security on the PPSR.