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Effect of New Security System on Trading Companies – By Barry Van Heerden – Partner


New legislation that commenced on 31 January 2012 has changed the way parties have always secured their interest in personal property and has created a complete new system for personal properties securities.

One of the important areas to consider the effect of the new legislation is the relationship between trading and holding companies.  Many business owners make use of a holding company (the owner of all the plant and equipment) which then licence the plant and equipment to a trading company to conduct the business.

The Licence Agreement entered into between the holding company and the trading company usually specifies that the holding company remains owner of the plant and equipment.

However, if the holding company does not register its interest (ownership) on the new Personal Property Security Register it may be possible that the holding company loses its ownership of the plant and equipment.  If the trading company is placed under receivership or is liquidated, the liquidator appointed may very well be entitled to claim ownership of the plant and equipment in possession of the trading company.

This is because the trading company was in possession of the plant and equipment and it forms part of its liquidated estate.  If there are no prior interests (ownership of holding company) registered, the liquidator will claim ownership.

It is therefore important that all business clients who have any doubts about securing their interest in personal property, to contact us to discuss the registration of their securities on the new Register.

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Jeff Garrett

Jeff Garrett

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