The introduction of the Personal Property Securities Act 2009 (Cth) ("PPSA") in October 2011 will see the launch of new rules that govern how security interests are created and most significantly, how they are enforced.
Impact of Franchising
You may be surprised at how many of your franchise agreements contain terms that could fall within the PPSA definition of security interest.
For example, each of the following terms will constitute a security interest for the purposes of the PPSA:
- deferred payment terms for the franchise system
- deferred payment terms for the purchase of plant and equipment
- goods on credit and/or
- equipment leases
Those security interests must be registered on the Personal Property Securities Register for each franchisee to protect your security interest in the franchise should your franchisee become insolvent. A failure to register your security interest may result in you losing title to those goods/equipment.
You will also need to take steps to protect your interest in goods/equipment if you acquire those items from suppliers on retention of title, credit, lease or similar terms.
What you need to do
If your franchise business involves any of the above activities, you need to consider:
- ensure your interest in goods/equipment you provide on credit or lease remain enforceable, and
- review your terms of trade & franchise agreements to ensure they will be enforceable after the PPSA commences.
The implementation of the PPSA will require careful planning as it will impact every franchise system.
How we can help
Thynne & Macartney are prepared to guide and assist our clients in navigating through the risks and compliance issues associated with the PPSA.
We can offer general PPSA advice and advice on specific issues of concern. We can also assist in registering your security interests. If required we can have a member of our team attend your workplace to conduct a PPSA seminar specifically tailored to your business needs.
Please contact Amanda Bull or Michael Goss for further information.
The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.
