Owner Leasing Plant and Equipment
We have now had the Personal Property Securities Act and the Personal Property Securities Register for 2 years – practically, how has this affected traditional asset protection arrangements?
Owner leasing plant and equipment to a business operator
- Asset Holding Entity
- Lease
- Trading Entity (Business Operator)
Protecting assets requires the Owner to:
- have a written lease agreement in place which meets the requirements of the legislation;
- become a registered secured party; and
- register its security interests on the register within prescribed timeframes.
Failure to do these things will prevent the Owner from enforcing its rights in the assets if the Business Operator goes into financial difficulty. Being able to prove ownership of the assets is not a defence.
If our clients have a PPS lease in place and have registered in time and the correct way, the assets are better protected.
We have heard some people express an opinion that if the Owner and the Business Operator occupy the same premises, they have not parted with possession and therefore need to do nothing. In our view, this view is incorrect for a number of reasons including:
- without the right documentation and registration, a receiver will assume the assets are in the possession of the Business Operator and the Owner cannot prove otherwise;
- a receiver will search for land leases and if it finds a land lease in favour of the Business Operator, it will have further grounds to assume the assets are in the possession of the Business Operator;
- without a PPS lease which also transfers to the extent possible the WH&S risks to the Business Operator, the Owner and its assets is exposed if there is a safety incident.
In the past two years, some myths have been shattered, people have failed to do everything that is required and assets have been lost. Take, for example, the case of Maiden Civil in which an owner of earth moving equipment who leased it to Maiden Civil but failed to register its security interests – lost the equipment to the receivers and managers of Maiden Civil (who did register a security interest in the Caterpillars).
Please contact Matt Bell, one of our business lawyers, if you have any questions or require further information Tel: 07 4616 9898
Other key transactions which have been keeping us busy are:
- Selling goods under a retention of title – we have been preparing new credit contracts, up to date terms of trade and systems which comply with the PPS requirements;
- Leasing serial numbered goods (motor vehicles etc) – documenting dry hire arrangements and registering security interests;
- Leasing other goods – advising on the application (or non-application) of the PPS, documenting arrangements and registering security interests.
We look forward to hearing from you.
