BEING CRAFTY AT RETAIL RETAINING RIGHTS IN YOUR PRODUCTS

BEING CRAFTY AT RETAIL RETAINING RIGHTS IN YOUR PRODUCTS

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Consignment of your goods Retention of Title

SELLING GOODS ON CONSIGNMENT

Personal Property Securities Act 2009 (PPSA) – so what?

In 2012 the PPSA introduced widespread changes for dealings in “personal property” which affect many everyday business transactions

If your business sells goods to business on consignment, has retention of title arrangements in place, or takes (or gives) security over most types of assets, you need to know about PPSA.

Failure to understand and comply with the PPSA may have significant adverse effects on your creative enterprise.


Personal Property Securities Act 2009 (PPSA)

What is ‘personal property’?

Personal property is all property (other than interests in land), and includes goods, plant and equipment, intellectual property such as trade marks and copyright and debts


Personal Property Securities Act 2009 (PPSA)

What is ‘consignment’?

Title in the goods remains with the supplier (you).

Title passes directly from the supplier to the retail purchaser without passing through the retailer.

The retailer is not required to pay for the goods until they are sold to a third party.

The supplier may demand that the goods be returned by the retailer at any time.

The retailer holds the proceeds of any sale on trust for the supplier.

SELLING GOODS ON CONSIGNMENT Personal Property Securities Act 2009 (PPSA)

Consignments will always be caught by the PPSA if:

goods are delivered by the supplier to the retailer for sale by the retailer;

the supplier retains an interest in the goods; and

both the supplier and the retailer deal in those goods in the ordinary course of their business.


How do you register your ‘security interest’?

Your interest as a supplier who delivers goods to the retailer under a commercial consignment is called a “Purchase Money Security Interest” (PMSI) under the PPSA

To ensure maximum protection, you should register your interest as a supplier under the commercial consignment as a PMSI on the Personal Property Securities Register (PPSR).

This gives you a ‘super-priority’ over other registered security interests – your PMSI defeats all other registered security interests in the goods supplied by the supplier to the retailer under a commercial consignment even if those other registered security interests were created and registered before your PMSI.


Registering on the PPSR

You register on the PPSR by properly completing a financing statement and lodging it with the PPSR within the required times.

To obtain the maximum protection for a commercial consignment and a super-priority as a PMSI for goods which are NOT inventory, you must register the commercial consignment within 15 business days of the retailer obtaining possession of your commercial consignment goods.

To obtain the maximum protection for a commercial consignment and a super-priority as a PMSI for goods which are inventory, you must register the commercial consignment before the retailer obtains possession of the commercial consignment goods.


What if you miss those dates?

If you don’t register the commercial consignment on the PPSR within the required time, you will lose your priority against registered PMSIs but your PMSI will have still have a lower ranking priority.

SELLING GOODS ON CONSIGNMENTCosts of registration

Currently, it costs:

$8.00 to register online a financing statement on PPSR for seven years

$40 to register a financing statement where the duration is more than 7 years but less than 25 years

$140.00 to register online a financing statement with no end date

http://www.ppsr.gov.au/AbouttheRegister/AboutFees/Pages/default.aspx#feesjuly13

SELLING GOODS ON CONSIGNMENTHow do you enforce your security interest?

1. by seizing the goods you supplied either from the retailer or from any party who has the goods and has a lower ranking priority than you

2. once you have possession of the goods, you can either keep them or sell them

3. The enforcement provisions in the PPSA do not replace, but rather complement, other rights and remedies available

SELLING GOODS ON CONSIGNMENTBeware! Your consignment agreement may contract out of most enforcement provisions of PPSA.

Suppliers and retailers should always seek and rely on specific legal advice before they take or defend any enforcement action.

RETENTION OF TITLE What is retention of title (ROT)?

If you sell goods to a customer but do NOT receive full payment on delivery the parties may agree in their contract that:

payment for the goods will be made later, and

you own the goods until the customer pays for them.

Because you retain the title in the goods until payment (even though the customer has possession of the goods) the arrangement is referred to as ‘retention of title’

RETENTION OF TITLE How do I retain title?

by having a ROT clause in your sale or distribution agreement or ensuring it is included in the negotiated sales terms and conditions

get advice on the wording of a ROT clause to ensure it creates a valid security interest under the PPSA.

RETENTION OF TITLEROT as a security interest under the PPSA

To protect your interest in the goods you must:

1. ensure the customer signs an agreement (a ‘contract’) containing an ROT clause and keeps a signed copy of it

2. register your security interest in the goods on the PPSR.

Often ROT clauses are included in the standard terms of sale of a business and printed on the back of quotation forms or invoices. Unless specifically signed by the customer such clauses will not be capable of registration and will therefore lose all priority to other security interests created over the goods at any time.

RETENTION OF TITLEIf you have registered your interest in the goods which the customer then holds,

if the customer, as an individual, goes bankrupt, or

as a company, has a liquidator appointed

the goods do NOT vest in the customer’s trustee in bankruptcy or liquidator.

Those goods are yours!

RETENTION OF TITLE

If you regularly supply goods to a customer you do not have to register on the PPSR each time.

Providing your first registration of your interest in the goods sold to the customer subject to a ROT describes the goods accurately, that registration will cover all of your supplies of goods to that customer.

Ensure your registration is lodged before the customer takes possession of the goods

RETENTION OF TITLEWhat if you don’t register on the PPSR?

you cannot seize the goods on bankruptcy or liquidation of the customer and your only rights are as an unsecured creditor.

your interest in the goods will be defeated by any registered security interest which includes the goods – for instance a registered security interest covering all of the customer’s personal property.

If you didn’t register within the required time, you lose the benefit of the PMSI super- priority but you still have a security interest and the default priority rules will apply - in that event, the earlier registered security interest takes priority.

RETENTION OF TITLEUpholding your ownership in the registered ROT goods

You would either:

issue a letter to the customer demanding payment of the amount(s) owing

or

seize the goods if this is allowed under the ROT clause in your contract with the customer/retailer.

You should seek and rely on legal advice before enforcing your security interest and other possible actions (such as breach of contract)

[email protected] | 0405 404 931 | 4/55 Reid Street Fitzroy North VIC 3068

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BEING CRAFTY AT RETAIL RETAINING RIGHTS IN YOUR PRODUCTS