In the event that a director or key person was to suffer an unexpected departure from the business due to death or disability, there are several important factors that every business needs to consider.
For the purpose of this article we will assume ABC Pty Ltd has 3 directors, Allan, Bart,and Cindy, and director Allan has recently passed away unexpectedly.
Since the commencement of the PPSR, retention of title clauses are ineffective against the interests of a registered creditor or a liquidator, unless the supplier’s continuing interest in goods supplied is registered. If the supplier fails to register their interest then they will at best be considered an unsecured creditor in the event that the purchaser goes into liquidation or bankruptcy.Security interests under retention of title and leasing agreements are capable of being registered (and should be) as ‘Purchase Money Security Interests’ (PMSIs). The major benefit of a PMSI is that, if registered correctly, the PMSI takes priority over all other security interests (registered and unregistered) in the same collateral notwithstanding that some of the other registrations may be earlier in time. This priority survives the purchaser going into liquidation or becoming insolvent. It therefore makes it easier for the supplier to prove their interest as against any liquidator or trustee.
The Australian Personal Property Security Register was due to commence in May, then October this year and now, will commence in early 2012. It will affect most businesses and it is worthwhile looking at the impact of these new laws as soon as possible. Financiers, Lessors and Suppliers will need to make sure that they do not lose their rights over assets which they have secured. Buyers will need to make sure that no-one else has an interest in the item they are buying.
The new register will replace most traditional securities including bills of sale and company charges.
So what should you do to ensure that you are not affected?
We are fielding an increasing number of calls from business people who are anxious to know what they can do to ensure, that their assets and in particular their homes, are protected from creditors. There are simple steps that can be taken that greatly improve your chances of avoiding the loss of your home. In recent times this has become more difficult, but it remains possible. The aim of asset protection strategies is to remove creditor access to certain assets entirely. When this is not possible then the aim instead should be to put significant obstacles in the way of creditors. Although some determined creditor may still suspect a way to penetrate your defences the cost of the taking these steps and the risk of failure may prevent a creditor from even trying.