26/04/2017

Providing a company's ABN instead of ACN for the purposes of registering a security interest on the Personal Property Securities Register ("PPSR") renders the interest ineffective.

Alleasing Pty Ltd found that out the hard way when its security interest in certain goods were declared ineffective.  In OneSteel Manufacturing Pty Limited (administrators appointed) [2017] Alleasing Pty Ltd leased particular goods to OneSteel Manufacturing Pty Ltd.  The registration of the security interest on the PPSR contained OneSteel Manufacturing Pty Ltd’s ABN instead of ACN.

OneSteel Manufacturing Pty Ltd subsequently appointed administrators for the company and it was at that point in time when Alleasing Pty Ltd was advised that due to their registration being defective, the goods (the subject of the security agreement) vested in OneSteel Manufacturing Pty Ltd.  Alleasing Pty Ltd then took the matter to the courts.
 

The difference between a company’s ACN and ABN is as follows:

•         “ACN” (or Australia Company Number) is a unique 9 digit number that is issued to a company when it is incorporated or registered with ASIC.
•         “ABN” (or Australia Business Number) is a unique 11 digit number that identifies a business and is issued to entities that carry on an enterprise by the ATO.

It is common for the ABN to have the 9 digit ACN incorporated into the ABN (ie, if a company’s ACN were 000 000 000, its ABN could be 12 000 000 000).

Because some companies have both an ACN and ABN, a person who is not familiar with the difference between these numbers could quite easily get these mixed up and when it comes to the PPSR the difference is critical in terms of whether or not a registration is valid.

The PPSR requires certain details of the ‘grantor’ (the entity who owns or has an interest in the personal property subject to the security interest) to be provided when registering a security interest.  If the grantor is a company its ACN is required under the Personal Property Securities Regulations.

In this particular case, OneSteel Manufacturing Pty Ltd’s nine-digit ACN was a part of the company’s ABN and Alleasing Pty Ltd tried to argue that the registration was not defective due to the nine digit ACN appearing in the ABN.

The Personal Property Securities Act 2009 (Cth) (“PPSA”) sets out circumstances in which there is a defect in a registration which results in the security interest being ineffective.  The defect needs to be ‘seriously misleading’ or where a search by reference to the grantor’s details does not disclose the registration.  The PPSA contains reference to other circumstances in which a registration will be considered defective.

The court concluded that the registration was ineffective because a search of the grantor’s ACN would return no search results on the PPSR website (https://www.ppsr.gov.au/) and this was considered to be seriously misleading.

As a result, when OneSteel Manufacturing Pty Ltd went into administration Alleasing Pty Ltd became an unsecured creditor ranking behind other secured creditors due to its security interest on the PPSR being defective.  

The ‘perfection’ of a registration of a security interest on the PPSR is critical to protecting the relevant party’s interest in personal property.  This case shows that it is critical to not only register the interest but to also ensure the registration is not subsequently found to be defective due to an ABN instead of an ACN being provided.

If you need assistance with the preparation of loan and security documents and the subsequent registration of the security interest on the PPSR please contact Townsends Business & Corporate Lawyers on 02 8296 6222.