Hire and Rental News - May 2012

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The PPSA and Coates Hire
Andrew Vlachos, Group Counsel and Company Secretary for Coates Hire, responsible for meeting the requirements
of the PPSA at Coates Hire, discusses how the company approached the process, how it has affected the business
and challenges in meeting the January 30, 2012 deadline.
“Coates has adopted
a targeted approach of
managing risk under the
Personal Property Securities Act
(PPSA), where we focused on
protecting our most valuable
assets.
“The effect of the
introduction of the PPSA on
Coates Hire has been to change
the law on ownership of our
equipment. We can’t rely on
the fact we own our equipment
when we hire it out. Previously
the case was if a customer
was unfortunate enough to
go under financially, we still
owned our hire equipment.
But the law has now changed
with the introduction of the
PPSA so now we have no ownership in the
same situation unless we have registered
a security interest in our hire equipment
against our customer. If we don’t do this,
we could lose our equipment to a third
party financier or liquidator, even though
we own the equipment.
“We’ve been working on this legislation
and our response to it for a very long time
now. The legislation actually changed in
2009 so we’ve had plenty of time to think
about it and what our response was going
to be, as well as to get our processes in
place.
“For the past nine
months, I have been
working solidly on the
introduction of this
legislation and how we
would respond to it.
“The first step for us
was to understand how
the legislation works.
It’s a complicated piece
of legislation and even
lawyers are having trouble understanding
it, so expecting hire companies and their
managers to get their heads around it has
been a big ask.
“Certainly Coates Hire has invested a
lot of management time in reading and
understanding and getting legal advice and
in talking to IT professionals about how we
go about registering our security interests
with a minimum of fuss.
“We’ve had to change our standard
terms of hire and introduce a PPSA clause
and we’ve had to register security interests
against Coates Hire customers. We haven’t
wanted to do it, but the legislation has
made it mandatory. When a customer no
longer wants to use our equipment we
remove our security interest from the PPS
Register.
“We’ve taken a conservative view. We’ve
taken the view all our hires are for an
indefinite period and are therefore covered
by the legislation, and we decided to
register a general security interest against
our customers, rather than registering all of
our serialised assets individually.
“We’ve had a good look at the PPS
Register . Many external proprietors told us
it would take about 15 minutes to register
one security interest. I decided to have a go
myself and my first attempt at registering
a security interest took me
seven minutes. We’ve found,
when you’ve done it a few
times, setting up or removing
a security interest only takes
about 4-5 minutes.
“We have nominated
one person at Coates Hire
to be our PPSA registrar.
That person has the security
password and if a customer
wants the security interest
removed, they know to
communicate directly with our
PPSR contact.
“Coates Hire feels it has
adequately protected its
assets and we’ve found we are
now getting all sorts of calls
from customers. An interesting
example is when a customer wants to sell
their business.
“Even though we have only registered
a security interest against our own hire
equipment, many customers and their
banks believe they need our security
interest removed so the business can be sold
clear and freely.
“Basically by registering a security
interest in a customer, it means a
third party is on notice Coates Hire has
equipment on hire with that customer.
“Implementing a PPSA compliance
program has been a costly
exercise. When you think
about the extra value you get
out of the exercise, it is nil.
We’re certainly in a weaker
position now because of the
introduction of this legislation.
“The options for registration
vary and we took up the
standard registration fee of
$7.40 per registration. That
provides seven years of security
interest registration. Businesses can pay a
higher fee and get a longer security interest
period but we considered the seven year
period sufficient initially.
“And we have registered security interest
against every customer we have. That
number is in the thousands. We have spent
continued on p28...
We’ve taken the view all our hires are for an
indefinite period and are therefore covered by
the legislation, and we decided to register a
general security interest against our
customers, rather than registering all of our
serialised assets individually.
Coates Hire has changed its standard terms of hire and introduced a PPSA clause
26 | HIREANDRENTALNEWS | MAY 2012
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