Retention of Title and the PPSR
A retention of title clause is not enough if the PPSR registration is missing or defective in the event of insolvency.
A retention of title clause is a clause in a supplier’s terms and conditions that says ownership of goods does not pass to the customer until the supplier has been paid.
That is an important contractual step, but it does not necessarily protect the supplier in a liquidation or administration. For that, the PPSR position matters.
A retention of title arrangement will generally be a security interest under the Personal Property Securities Act. If that security interest is not perfected, usually by registration on the PPSR, it may vest in the company when the company enters liquidation or administration.
In practical terms, the supplier may lose the benefit of its ROT claim and rank as an unsecured creditor if the security interest is not registered correctly.
Retention of title arrangements are not the only security interests that may require registration. PPS leases, hire purchase arrangements, general security agreements, equipment finance and other security interests may also need proper registration.
