PPSA for financiers
The PPSA establishes a new regime for creating, perfecting, recording, enforcing and determining priority between security interests in personal property in Australia. The PPSA regime covers most forms of personal property (which is generally any property other than land) including:
- plant and equipment
- intellectual property
- motor vehicles, aircraft, watercraft
- financial property such as listed and unlisted securities, accounts, debentures and derivatives
The PPSA impacts all businesses with interests in personal property located in Australia in which interests are granted to other parties. The PPSA will particularly affect financiers, lease and hire purchase suppliers, and retention of title and consignment suppliers (secured parties under the PPSA). Such transactions were not previously registrable as they were not traditionally regarded as 'security interests'.
From 30 January 2012, secured parties must 'perfect' their security interests to have priority over competing security interests in the same personal property. In most circumstances, a secured party will perfect its security interest by registering it on the new Personal Property Securities Register.
Secured parties must ensure that their security interests are registered on the Personal Property Securities Register before other security interests are registered. This is because, in most circumstances under the priority regime, the first registered security interest has the higher priority. Ideally, secured parties who advance finance should register their interests before the advance is made.
The PPSA replaces, amongst many others, the fixed and floating charge regime in the Corporations Act 2001 (Cth). Charges created and registered before 30 January 2012 have been migrated across the Personal Property Securities Register. Under the transitional rules, these charges will maintain their existing priority. However, there is a risk that in the migration, there have been errors and omissions. In those circumstances, the perfection afforded by the registration may not be effective.
Maddocks recommends that financiers:
- conduct searches on the Personal Property Securities Register to determine if the security interests that they had on pre-PPSA securities registers have migrated correctly – this is called a 'Find and Claim'
- review previous transactions to determine whether they have security interests that have not migrated across to the Personal Property Securities Register, in particular, those transactions giving rise to interests that were not previously registrable, and register those interests as soon as possible
- review their financing and securities documentation to ensure that they are able to claim the full protection afforded by the PPSA
- update their internal procedures to ensure that advances of finance are not made before a security interest is registered on the Personal Property Securities Register.
How do I get further information?
If you would like further information about security interests, security agreements and the PPS Register, speak to your usual Maddocks contact or call a member of the Maddocks Personal Property Securities Team.