Insolvency

COVID PPSA Update

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:

  1. as a practitioner, know the basics: what is a security interest, why to register and how to register
  2. make sure that clients take steps to protect themselves from simple mistakes;
  3. 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:
  1. a security agreement that is well drafted:  usually within the terms of trade, or in a separate document; and
  2. to register that security on the PPSR.

Enjoy!

Categories: Insolvency, PPSA

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