Legal Update – Equipment Ownership

Equipment Ownership

Can someone else take ownership of your Equipment?

If you rent, lease or hire equipment that you own to a third party (even a friend) you can lose ownership and any equity in the equipment. This can happen when the third party you are hiring too becomes insolvent, even though you legally own the equipment.

See one of our previous posts on PPSR Update.

This is also true for asset entities. Be aware when your company has an asset entity that receives income from an operating entity within the same group. If the operating entity becomes insolvent the assets can disappear.

The Property Securities Act (PPSA) is the reason for this. The Act impacts the way asset ownership is treated in the event of an insolvency.

The PPSA is established in January 2012.  As a result, various state registers of assets are combined into one Register.

Initially when the PPSA was introduced assets could be lost as a result of hiring periods as little as 90 days. In October 2015 this changed to a period of one year. On 20th May 2017 this changed to two years.

So what should you consider?

A number of companies that we deal with have an operating entity.  This entity pays for the use of equipment owned by the property holding entity of the same group.

This structure is to protect the assets in the company. We suggest if you have this arrangement is to seek advice.  If you have not already done this. You can avoid potential issues with ownership in the event of the operating entity becoming insolvent.

Protect the Asset Owning entity:

  • Put a formal agreement in place
  • Register the interest on the PPSR

Seek advice if you hire, rent or lease equipment to a third party. Check if you need to register your interest in the asset on the PPSR.

Further information on the changes can be found via the PPSR website – https://www.ppsr.gov.au/legislation/pps-lease-change-2017

As this is a complex area we recommend that you seek professional assistance.

If you want further details please do not hesitate to Contact Us.

Call 02 9453 0300.