Another way of supplying goods is on consignment, which is an arrangement whereby a business supplies goods to be sold by another business. The business selling the goods on behalf of the supplier does not own the goods, but rather holds them until sold and then pays the owner an agreed amount of the sale price. Artworks are often sold on consignment to galleries, although there are other industries that also use this type of arrangement.
A commercial consignment is considered to give rise to a security interest under the Personal Property Securities Act and as a result, businesses who supply goods on consignment are urged to register the security interest on the PPSR. There are certain requirements which must be fulfilled prior to registration of the interest, and professional advice should be sought.
If a commercial consignment is not registered on the PPSR and the company selling the goods is wound up, the goods may vest in the company and may not be able to be recovered from the liquidator.