Personal Property Securities and the Taking Free provisions
Business Succession Update – Autumn 2013
Business owners have been bombarded by their advisors with the threat of disaster if they do not comply with this new regime. Rightly so. However, the PPSA also provides for numerous situations where you can buy or lease personal property free of any security interest whatsoever. So no matter what efforts the owner/lessor goes to, these exceptions can cause havoc unless the owner is aware of them.
Take Women’s Day for example, which sells an old printing press, already encumbered to ANZ, to a printing press broker. The broker is in the business of buying and selling magazine printing presses. Woman’s Day is not. It sells magazines. The ANZ security interest stays with the printing press when the broker sells it and the broker must remit what’s owing to the bank from the proceeds. Otherwise the purchaser buys the press with the ANZ security interest in tact.
But if before the sale, the broker raises further money on the press by borrowing from a private lender, then the security interest of the private lender evaporates upon the sale by the broker and the purchaser takes the printing press free of the broker’s lender’s security interest. However, the ANZ security interest remains!
We will be running seminars on the “taking free provisions” for our clients and others in the near future and you will be notified in due course.