SELLING AGRICULTURAL GOODS AND REGISTERING A PERSONAL PROPERTY SECURITY INTEREST
It is not unusual for a farmer/grazier to sell grain or wool or other products on terms that payment shall occur at a later date.
A risk which arises in this scenario is the possibility of the buyer becoming bankrupt or entering into liquidation prior to paying the farmer for the grain or wool.
In such cases, the farmer could potentially not be paid at all for the farmer’s produce.
Where a person or entity becomes bankrupt or is liquidated, then secured persons, such as a bank with a registered mortgage will always be entitled to receive payment from a liquidator prior to unsecured creditors.
It is possible however for a farmer who has sold agricultural products on terms for payment in the future, to become a secured creditor and this can be done by utilising the Personal Property Security Interests Act 2009 (“the PPSA”).
WHAT DO YOU NEED TO EFFECTIVELY REGISTER A SECURITY INTEREST
Firstly, for a security interest to be registered and to be effective, then you need to ensure that:
(a) You have the right to register a security interest; and
(b) You need to know sufficient information about the buyer of your produce to be able to register a security interest; and
(c) The security interests needs to be “attached” to the collateral; and
(d)The security interest needs to be perfected.
The simplest way to ensure that you have the right to register a security interest is to have a written agreement with the buyer of your produce that grants you the right to retain title in your produce until you receive payment for it AND a right to register a security interest on the Personal Property Securities Register. If required we can assist with preparing such an Agreement.
The information that you need to know about the buyer includes:
- The full and correct legal name of the buyer of your produce (ie whether they are a company, trust, partnership or an individual);
- The buyer’s ABN (where they have one); and
- The date of birth of the buyer (but only where the buyer is an individual or a partnership of individuals).
The security interest attaches to the grain or wool or other produce (“the collateral”) in a number of different ways, but the simplest way to meet the requirement for “attachment” is to ensure that the written security agreement is completed and signed prior to delivering your goods to the buyer.
The easiest way to “perfect” an interest in the collateral and to therefore become a secured party, is to register your interest electronically on the Personal Property Securities Register at https://www.ppsr.gov.au/ and we can also assist you with that process, if required.