The Personal Property Securities Act:
How it will affect YOU
The Personal Property Securities Act 2009 (Cth) (PPSA) provides a system for the registration and regulation of security interests in personal property. The PPSA was originally due to commence on 31 October 2011 but is now targeted for commencement sometime before 1 February 2012.
The legislation will introduce a Register, wherein security interests in property will be recorded. This searchable Register will indicate whether or not the personal property is already subject to a security interest. In turn, individuals and businesses will be able to make better informed judgments as to the credit-worthiness of those with whom they deal/may deal.
WHO WILL BE AFFECTED?
The broad definition of ‘security interests’ - transactions which create an interest in personal property to secure payment or performance of an obligation - means that a large number of transactions will fall within this legislation.
The PPSA is a system based on priorities. If your interest is ‘perfected’ (such as by registration, taking possession of collateral or assuming control over certain financial assets) it will elevate your interest above competing security interests.
Although the order of priority may seem irrelevant now, it is an important safeguard for the future. For example; imagine that the company with which you are dealing becomes insolvent. Would you want your interest to be ranked above that of other creditors, thus giving you a greater chance of recovering money owed, or would you rather try your luck alongside unsecured creditors? If you would prefer to be prioritized, then it is vital to ensure that you are prepared for the PPSA before its commencement.
HOW DO I PREPARE MY BUSINESS FOR THE PPSA?
Registration
Registration is simple. All you need to do is complete a ‘financing statement’ or ‘financing change statement’ in accordance with the Personal Property Security Regulations.
Retention of title
It is particularly important for businesses that conditionally sell by retention of title to be PPSA ready. Previously, the retention of title until payment was received by a buyer was sufficient to secure the seller’s interest in the property. The PPSA is a system based on priorities, and the order of priority largely hinges on the date of perfection. Thus, if you (as the seller) do not take steps to perfect your interest, your ownership of the goods conditionally sold by retention of title will cease. Accordingly, you will simply join the queue of unsecured creditors if the buyer were to go into liquidation or administration.
Migration dates
Security interests that are registered on existing registers will be transferred to the PPS Register. However, not all registers will be automatically migrated across (A list of registers that will be migrated are found on the Government’s PPSR website).
The migration process will begin, at the latest, 28 days prior to commencement. Importantly, registration on the PPSA Register will only take effect from the commencement date. Thus, regardless of when you interest is migrated, it will be effective only from the commencement date.
The legislation will introduce a Register, wherein security interests in property will be recorded. This searchable Register will indicate whether or not the personal property is already subject to a security interest. In turn, individuals and businesses will be able to make better informed judgments as to the credit-worthiness of those with whom they deal/may deal.
WHO WILL BE AFFECTED?
The broad definition of ‘security interests’ - transactions which create an interest in personal property to secure payment or performance of an obligation - means that a large number of transactions will fall within this legislation.
The PPSA is a system based on priorities. If your interest is ‘perfected’ (such as by registration, taking possession of collateral or assuming control over certain financial assets) it will elevate your interest above competing security interests.
Although the order of priority may seem irrelevant now, it is an important safeguard for the future. For example; imagine that the company with which you are dealing becomes insolvent. Would you want your interest to be ranked above that of other creditors, thus giving you a greater chance of recovering money owed, or would you rather try your luck alongside unsecured creditors? If you would prefer to be prioritized, then it is vital to ensure that you are prepared for the PPSA before its commencement.
HOW DO I PREPARE MY BUSINESS FOR THE PPSA?
Registration
Registration is simple. All you need to do is complete a ‘financing statement’ or ‘financing change statement’ in accordance with the Personal Property Security Regulations.
Retention of title
It is particularly important for businesses that conditionally sell by retention of title to be PPSA ready. Previously, the retention of title until payment was received by a buyer was sufficient to secure the seller’s interest in the property. The PPSA is a system based on priorities, and the order of priority largely hinges on the date of perfection. Thus, if you (as the seller) do not take steps to perfect your interest, your ownership of the goods conditionally sold by retention of title will cease. Accordingly, you will simply join the queue of unsecured creditors if the buyer were to go into liquidation or administration.
Migration dates
Security interests that are registered on existing registers will be transferred to the PPS Register. However, not all registers will be automatically migrated across (A list of registers that will be migrated are found on the Government’s PPSR website).
The migration process will begin, at the latest, 28 days prior to commencement. Importantly, registration on the PPSA Register will only take effect from the commencement date. Thus, regardless of when you interest is migrated, it will be effective only from the commencement date.
SUMMARY
The new regime imposed by the PPSA is likely to have a profound impact on your business, especially if you are not PPSA prepared. For more information as to how the new legislation will impact you and your business, please contact Geoffrey Roberson.
The new regime imposed by the PPSA is likely to have a profound impact on your business, especially if you are not PPSA prepared. For more information as to how the new legislation will impact you and your business, please contact Geoffrey Roberson.
LAUREN DRAGICEVICH AND CELESTE WHITE
Law Clerks,
Litigation and Dispute Resolution
