Farming and Agriculture :
What you should know such as seed and fertiliser and pest
about the PPS Register control, financiers are now able to obtain
priority over a general security interest
New personal property security (PPS) laws which also covers the crop.
introduced by the Australian Government may
This will lower the risk where financiers
make it easier for vegetable growers to borrow
lend for this purpose.
against crops, livestock, farm machinery,
agricultural products and other assets (other than The PPS Act also contains special rules
land). for crops and livestock under which
priority would be given to an otherwise
PPS reform is an overhaul of the current
lower-ranking interest where value is
Australian Government, state and territory
given for the purpose of growing,
systems for using personal property as collateral
feeding or developing the crops or
when obtaining finance. Having commenced on
30 January 2012, the Personal Properties
Security Act 2009 (Cth), applies to Australian For example, if a bank provides finance
vegetable growers. for a farmer to plant a crop or feed
livestock, the bank’s security interest
The changes allow for greater simplicity as all
would have priority over another security
personal property provided as security is now
interest in the same livestock granted by
recordable on a single online PPS Register,
the same farmer for the purposes of
rather than the former array of Australian
obtaining working capital.
Government and state and territory registers
such as registers of stock and crop mortgages However, for this rule to apply, the
and ASIC’s Register of Company Charges. livestock must be held by the farmer
when the security agreement is made or
Crops and livestock are personal property under
be acquired within six months.
the PPS Act and may be used as collateral.
Benefits may include making it easier to obtain
WHAT IS THE PPS REGISTER?
finance to buy seed, to build and repair green
houses, to purchase farm machinery for seeding The PPS Register provides a single
and harvesting crops and for irrigation. means for registering security interests
in personal property. It is available to
WHAT’S IN IT FOR CROP AND VEGETABLE
search and register 24 hours a day,
GROWERS? seven days a week, allowing potential
purchasers to buy with confidence.
The PPS Act supports a number of financing Financiers now have greater protection
arrangements which now make lending to over their interests which have the
farmers an attractive proposition for financiers. potential to open the market to farmers
For security interests related to the purchase of to obtain finance.
particular goods to be used for growing crops,
CASE STUDY I: FINANCING CROPS
Under the PPS Act, arrangements under which
farmers supply produce and retain ownership of Nathan owns a small mixed produce
it pending payment are likely to create security farm near Dubbo, NSW.
interests. Farmers should seek professional
Nathan has granted a security interest to
advice whether they should record such interests
Dubbo Bank over all his current and
on the PPS Register.
future personal property to secure a
PPS reform will affect the supply chain and working overdraft.
retention of title arrangements
Later Nathan decides to increase the
Vegetable growers may sell their vegetables and size of his potato crop and seeks a
fruit to local markets directly. Quite frequently purchase money security interest
they supply their produce to canneries or to food (PMSI).
wholesalers for co-mingling with other goods to
This is a security interest in collateral
become processed foods. Goods such as
created by a person who finances or
vegetable crops supplied or purchased on
provides the value to purchase the
retention of title terms are considered ‘security
interests’ under the PPS legislation. The holders
of these interests (ie suppliers) are no longer be Agri-Finance is happy to lend to Nathan
able to rely on their legal title to protect their because it knows it has first claim to the
interest in the goods and will no longer have potato crop if Nathan defaults, providing
automatic priority over other secured parties. it records its security interest on the PPS
Suppliers may continue to include the retention
of title clause in their terms of trade, orders and In advance of his yearly beetroot and
invoices. However, to be enforceable against carrot harvest, Nathan gives a security
third parties, the purchaser must have signed or interest in this crop to Agri-Finance in
accepted the documents which incorporate the return for a loan to buy the seed and
retention of title and title holders (suppliers) must fertiliser.
have registered their interest on the PPS
Register. Under the special rules in the PPS Act,
this means that Agri-Finance’s interest
If used correctly under the PPS Act, a supplier in Nathan’s growing of the beetroots and
using a retention of title arrangement has the carrots would take priority over all
opportunity to provide themselves a much higher general security interests in this crop,
level of protection under Australian law. providing Agri-Finance does record its
security interest on the PPS Register.
CASE STUDY II: RETENTION OF TITLE
Vegetables Ltd is a supplier of fresh produce to a
range of food markets.
Vegetables Ltd supplies its produce on a
‘retention of title’ basis. That is, it retains PPS reform may affect you and your
ownership until the buyer pays for the produce. business in a number of different ways.
Seeking professional advice in relation
The retention of title clauses add a substantial
to the specific issues affecting your
amount of complexity to the terms under which
business is recommended.
both Vegetables Ltd and its customers are
required to work. Furthermore, as Vegetables
Ltd’s terms are unique to them, liquidators and
creditors of Vegetables Ltd’s customers need to Visit the PPSR website
be persuaded of Vegetables Ltd’s rights in each www.ppsr.gov.au or call 1300 007 777
case. and talk to your business advisor.
The new PPS Act will treat Vegetables Ltd’s
retention of title based rights as security interests
because they secure payment for the produce
supplied. As security interests they will need to
be perfected by Vegetables Ltd, most usually by
registration on the PPS Register, to be fully
effective under the PPS Act.
Generally after PPS commencement a single
registration in respect of each customer will
cover ongoing supply agreements with that
Once Vegetables Ltd’s interest is perfected, it will
be able to rely on clear, statutory rights in the
produce, and, if it is sold, in proceeds from its
Finally, the PPS Act provides Vegetables Ltd
with nationally applicable statutory enforcement
processes that it can rely on to validly exercise