I had the pleasure of speaking to the first Zoom meeting of the CPA Insolvency & Reconstruction Group on Monday night about the Small business Insolvency Reforms, at the invitation of Hugh Milne. A copy of the paper I presented and the overheads from the night are linked below.
As yet there is no indication yet of the date when the final bill or the regulations will surface. Since the legislation is supposed to commence by 1 January 2021, and the last sitting of parliament is in the two weeks from 30 November, we could assume that we will see some drafts by the end of the month. Here is hoping anyway.
I suspect the bill will end up being delayed and the commencement date pushed back to a date in March. I have no reason to say that other than that the first draft was very undercooked, and that job keeper has been extended again. One wonders whether the moratoriums on statutory demands, bankruptcy notices and insolvent trading will be too.
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