SV Partners were appointed Liquidators of a wholesale wine distributor in February 2015. At the date of appointment, the company had approximately 30,000 bottles of wine on hand, which was supplied to the company for distribution from over 35 wineries in Australia and New Zealand.
Many of these wineries supplied thousands of bottles of high quality wine to the company on a consignment basis. That is, the winery would deliver cartons of wine to the company, but would not raise an invoice until such time as the company had on-sold the wine to its retail customers.
At the date of our appointment, the company owed over $1,000,000 to the various wineries.
Upon our appointment, we took possession of all the wine and contacted all known creditors and suppliers.
To the Liquidators’ surprise, only 5 suppliers had registered their security interest on the PPSR. These suppliers held approximately 10% of the total stock.
The Personal Property Securities Act 2009 (Cth) (‘PPSA’) commenced in January 2012 as a single national register for personal property security interests. The operation of PPSA is particularly relevant in the circumstances of insolvency. Without doubt, one of the first tasks of an insolvency practitioner is to conduct a search of the PPSR to see what assets are secured.
Many suppliers were shocked to learn that the PPSA effects goods held on consignment.
Retention of title clauses and consignment agreements were traditionally a source of dispute in the fight for assets with insolvency practitioners and creditors. The introduction of the PPSR means that suppliers now have the opportunity to be in a much stronger position if they register their security on the PPSR.
It is all too often that suppliers have what they believe to be a valid and enforceable agreement (such as retention of title clauses in a credit application or a consignment agreement) and upon the appointment of an insolvency practitioner they will promptly attempt to repossess stock it had supplied to the company. However, unless the supplier has registered their interest on the PPSR, the stock will vest in the company on the date it becomes externally administered and accordingly, the insolvency practitioner may deal with the assets and stock as they deem appropriate.
In this case, some of the wineries who failed to register their interest on the PPSR were concerned the Liquidators would sell their stock via an online auction and damage the integrity of their brand. To prevent this from occurring, these suppliers were forced to put in an offer to purchase their stock directly from the Liquidators.
It is vital that suppliers understand the importance of registering on the PPSR. Failure to do so may not only result in the loss of stock, but suppliers may lose all control of the distribution of their stock.
How to register
SV Partners has extensive experience in assisting their clients with the PPSR. If you would like some assistance with a PPSR matter, please contact one of our advisors on 1800 246 801.