The Importance of ABN vs ACN Registrations on the PPSR

Understanding the PPSR and Security Interests

The Personal Property Securities Register (PPSR) is a public noticeboard which allows businesses to register security interests (a type of encumbrance) over personal property such as cars, company assets, or equipment.

In brief, a security interest allows the secured party to take property of the grantor if a debt is not repaid.

Should the ABN or ACN be Used?

It is essential to correctly register security interests for the registration to be effective. Simple mistakes can mean that the security interest is worthless.

Knowing whether to register over the ABN or ACN can be confusing, particularly where there is a trust involved.

The Personal Property Securities Act 2009 (PPSA), and its associated Regulations, set out the requirements for a valid registration. Whether the ACN or ABN should be used depends on the underlying security agreement (i.e. the contract that gives the secured party the right to register a security interest, such as a general security deed, supply agreement etc).

Generally, if the grantor entered into the agreement as a:

1. company (but not as trustee of a trust) – then the registration should be made over the ACN;
2. trust with an ABN – then the registration should be made over the ABN of the trust – not the ACN of the trustee; and
3. trust without an ABN, but has a corporate trustee - then the registration should be made over the ACN of the trustee.

Major Consequences for Incorrect Registration

Although it may seem like a minor difference, making the incorrect choice between an ACN or ABN can have fatal consequences for a registration.

In the case of OneSteel Manufacturing Pty Limited (administrators appointed) [2017] NSWSC 21, registration of an interest using the incorrect identifier caused the loss of a $23 million asset owned by Alleasing.

Alleasing entered into a lease agreement with OneSteel. The agreements leased the asset to OneSteel in its corporate capacity (not as a trustee of a trust). However, Alleasing registered its security interest using OneSteel’s ABN - not its ACN.

In 2016, OneSteel went into administration and appointed an administrator. The administrator notified Alleasing that their registrations were defective and ineffective. Alleasing attempted to lodge new registrations to amend the original registrations, but had lost their rights to reclaim the asset when the administrator was appointed.

Similarly, in IBM Global Financing Australia v Applied Business Technology Pty Ltd [2018] NSWSC 1984, IBM used its ABN to describe itself as the secured party, over the course of numerous transactions spanning five years.

As a corporate entity acting in its own capacity, IBM should have used its ACN. The mistakes impacted hundreds of registrations and meant that IBM was at risk of losing its priority to other creditors. It was an expensive and lengthy exercise for IBM to rectify their mistakes.

What if the Trust does not have an ABN and Later Obtains One?

If a registration is correct when it was made, but subsequently becomes incorrect (for example, if a trust obtains an ABN after the registration was made), the secured party must amend their registration within five business days of becoming aware of the change.

In the case of Psyche Holdings Pty Limited [2018] NSWSC 1254, the secured party (Ridgeway), registered an interest over the ACN of the trustee of Psyche’s. At the time of the registration, this was the correct method because Psyche did not have an ABN. However, Psyche then obtained an ABN and Ridgeway did not amend the registration (despite knowing that an ABN had been obtained). A failure to amend meant that the security interest was no longer valid.

Secured parties can mitigate this risk by:

• requiring the grantor to have an ABN before the underlying security agreement is entered into; and
• include terms in the security agreement obligating the grantor to maintain its ABN and advise the secured party immediately of any change to its structure.

Should a Secured Party Register Dual Interests?

Some commentators have suggested that where the grantor is a trust, the registration should be made against both the ABN of the trust and the ACN of the corporate trustee. Doing so means that the secured party has protection even where the grantor is acting in, and owns assets in, dual capacities and where there is a change of circumstances e.g. a restructure.

However, the downside to this approach is that where the grantor is a trust, the only registration required by the PPSA is over the ABN. Section 151(1) of the PPSA prohibits a person from making a registration unless they believe that they have a security interest in relation to that collateral. An additional registration over the ACN of the trustee is potentially a breach of this section and could expose the secured party to penalties.

Proposed Amendments to the Regulations

It is currently critical to register security interests over the ABN of the trust. However, this may change if the proposed legislative reforms become law.

On 22 September 2023, the Australian Government proposed substantial amendments to the PPSA. The reforms are intended to clarify regulatory framework and the simplify the process of making effective registrations. ¹ 

One proposed change is the removal of the requirement to register over the ABN for trusts. ²

The Government’s draft legislation is yet to be introduced to Parliament.

Conclusion

Although it appears to be a minor difference, choosing correctly between the ABN and ACN is essential for an effective registration. A mistake in registration, or a failure to update registrations, can be fatal.

This article in no way constitutes legal advice. It is general in nature and is the opinion of the author only. You should seek legal advice tailored to your individual circumstances before acting on anything related to this article.

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¹ Attorney General’s Department, Public Consultation on the Government's response to the statutory review of the Personal Property Securities Act 2009 (Index of recommendations made by the Whittaker Review and the Government’s response, 22 September 2023) <https://consultations.ag.gov.au/legal-system/government-response-to-pps-review/user_uploads/recommendations-index-pps-framework-reforms.pdf>.

² Personal Property Securities Regulations Amendment 2023 (Cth) https://consultations.ag.gov.au/legal-system/government-response-to-pps-review/user_uploads/exposure-draft-of-the-pps-regulations-2023.pdf>.