The Personal Property Securities Register, launched three months ago, has been criticised by a commercial law expert who claims the register is a user’s nightmare.
Daniel Turk, a corporate and commercial partner with TurksLegal, said the PPSR forced businesses to rack up unnecessary time and extra costs in professional advice to perform what should be straightforward registrations.
“The overwhelming feedback from business is that the functionality of the PPSR is off the mark,” Turk said.
“Businesses seeking to enter their securities on the new online register are encountering questions laden with legalese and impractical requests for unnecessary or difficult to obtain information.”
The Personal Property Securities Register is the register where details of security interests in personal property can be registered and searched. The Insolvency and Trustee Service Australia (ITSA) is the Australian Government agency responsible for administering the PPSR.
Registrants are required to provide the dates of birth of individual customers and asked if they have an Australian Registered Scheme Number, which Turk said is not relevant to the vast majority of businesses, which are more likely to have an Australian Company Number.
“Confusing or unreasonable requests like these simply hold up the process and make the register very cumbersome to use”, Turk said.
“The registration process is so complicated and time-consuming, that many businesses are simply opting to pay external consultants to do the job for them – a cost they should not have to bear in the current economic climate.”
Turk said there were also signs that incorrect registrations were becoming commonplace.
“This means many registrations may actually be invalid and a business’s financial interests are not, in fact, legally protected. It also casts doubt more broadly, over the reliability of information on the register.”
Turk added that even at this early stage, it was “abundantly clear” that the sheer volume of register entries was becoming difficult to navigate, particularly for financiers seeking to investigate the credit-worthiness of a business.
“The PPS Act recasts a wide range of common commercial transactions such as operating leases, retention of title arrangements and consignment agreements as registrable security interests,” says Turk.
“As such there has been a flood of new entries onto the register in addition to the pre-existing interests migrated over from pre-PPSR registers such as the REVS and ASIC charge registers.
“At the same time, the quality of information on the PPSR about particular securities is not as comprehensive compared to what was available on many of the former registers.
“The upshot is that creditors must exercise much greater caution when conducting due diligence into a potential customer or counterparty and brace themselves for the logistical nightmare of having, in some cases, to make direct inquiries with customers where the register simply does not provide enough useful detail.”
Turk said that in view of the major flaws in the PPSR that were now coming to light, it was critical for the Federal Government to act quickly to address them.
“The PPSR has not been around for long, but already it’s creating ample problems for a significant number of businesses that stem from a basic failure to put the user’s needs first.
“It is now up to the government to fix these design flaws without delay.
“That will involve making changes to ensure the PPSR is not overly complex to use; does not assume the user has a sophisticated level of legal knowledge; does not expect the user to undertake a myriad of impractical steps; and actually records information that’s relevant for the business community.”
The PPSR replaces 70 separate Commonwealth and State laws and came into effect on January 30, 2012.
Attorney-General Nicola Roxon previously claimed the PPSR would be simpler than the existing registers, would help make secured financing more accessible, and reduce transaction costs, which, in turn, would make lenders more willing to accept different kinds of personal property as security for loans.
“Instead of checking a number of registers, consumers and businesses can now check just one,” Ms Roxon said.