Franchise Agreement and Trading Terms PPSA Update
Most well drafted Franchise Agreements provide for the Franchisor to be able to register a debenture chargeover the assets of the franchisee as security.
Since 30 January 2012, fixed and floating company charges are no longer capable of registration in Australiathrough ASIC.
Security Interests must now be registered under the NEW Personal Properties Securities Register (PPSR) fromMonday 30 January 2012.
A Security Interest with the characteristics of a fixed or floating company charge but now called a GeneralSecurity Interest Agreement should be registered on the PPSR on and from Monday 30 January 2012.
Existing registered company charges will automatically migrate to the PPSR from Monday 30 January 2012.They will enjoy a temporary registered status for 24 months as “Transitional Security Interests” however theyneed to be re-registered during this period.
Under the new regime created by the Personal Properties Securities Act 2009 (Cth) (PPSA), rights to goodssubject to a retention of title clause contained in trading terms need to be registered on the Personal PropertiesSecurities Register as a Purchase Money Security Interest (PMSI) in order to perfect the security.
A failure to register the security interest could lead to the retention of title rights being subordinated in the eventof appointment of an administrator, liquidator or receiver. It would also mean that any registered Security Interest Agreement would take priority.
The PMSI must be registered before the customer take possession of the goods (where the customer is usingthe goods as inventory) or otherwise within 15 business days after the customer takes possession of the goods.
Where goods are being supplied on an ongoing basis under agreed Trading Terms it may be sufficient to registerone financing statement for each customer however there needs to be a system in place to allow the tracingof unpaid invoices to particular goods supplied. It will also be necessary to put in place a process to be able torespond to any Requests for Information or Amendment Demands in relation to PMSI under the PPSA.
What this means for you
- The security provisions in your current Franchise Agreement should be updated to include PPSA provisions
- Your Terms of Trade documentation should be updated to include PPSA provisions
- If this has not already been attended to, your Franchise Agreement and Trading Terms should be updated toensure that they are consistent with the Competition and Consumer Act 2010 which replaced the old TradePractices Act 1974