Why you need to protect your interests under the Personal Property Securities Act (PPSA)
Many Franchisees upon deciding whether or not to purchase a franchise will often ask for clauses relating to the PPSA to be removed from draft documents.
As a franchisor it is never a good idea for you to immediately agree to remove these items as the PPSA can assist you in the following circumstances:
- Where you provide goods on credit to a franchisee;
- Where you lease goods to a franchisee;
- Where you wish to sell a franchise business to a franchisee on a deferred payment basis; and protect its interest in capital equipment provided to the franchisee.
If a franchisor provides goods to a franchisee on credit or lease basis but does not register its security interest in the goods there may consequences to the franchisor, namely
- if the franchisee’s financier does register its security interest in the franchisee’s assets, then if the franchisee defaults, the financier’s security interest will take priority over the interest of the franchisor;
- if the franchisee becomes insolvent or enters into administration, title to assets leased by the franchisor to the franchisee will transfer to the franchisee; and
- if the franchisee were to deal with the leased assets or assets provided on credit, in certain circumstances the third-party transferee of the assets may take them free of the franchisor’s interest in the asset.
To avoid such adverse consequences, the franchisor should register its security interest via the PPSA. Ask us how.
Don’t Hesitate to Reach Out!
If you would like to learn more about how DC Strategy Lawyers can be of assistance, we are happy to talk. We know that each business is unique and it is not a case of one size fits all. Our initial meetings are an investment on our behalf. We take the time to assess your needs and determine an action plan to move forward together.
Call 1300 993 624 or firstname.lastname@example.org