From October 2011, Australia will have a new Commonwealth law for the registration and enforcement of security interests over all kinds of personal property. The Personal Property Securities Act 2009 (PPSA) will have a wide-ranging impact on Australian businesses.
The PPSA will regulate the creation of a security interest over personal property, the priority of competing security interests, and their enforcement. All businesses may need to take care to protect their rights in personal property through the PPS Register, which will replace numerous existing Federal, State and Territory registers (including the ASIC register of company charges, and REVS).
The PPS Register will be like an online noticeboard of charges and other rights over personal property. This will include tangibles such cars, machinery and equipment, as well as intangibles such as shares, intellectual property and contract rights.
There will be numerous arrangements that can be registered under the Register and regulated by the PPSA, including interests that are not currently capable of registration on any existing registers. While this will give the holders of these interests the benefit of a legislative priority and enforcement regime, interest holders will need to take care to ensure that their rights are recorded and protected within the required time frames.
Businesses which lease equipment, or which rely on retention of title clauses or consignment contracts, have never before had to register an interest in their own goods to protect their ownership of them. Now, those businesses must look at whether they need to register their ownership on the PPS Register, otherwise they might lose their ownership rights in certain circumstances, including where a customer goes into liquidation or where a customer illegally sells the goods to a third party.
All security interests granted after the commencement date can be registered to obtain “perfection”. Perfection is necessary to ensure a security interest has priority over other security interests and is effective in a winding up. Perfection can also be via possession, or control, or the personal property involved.
Some existing registered security interests (including ASIC charges and on REVS) will be electronically migrated to the Register. However parties that hold interests should take all necessary steps to ensure their interests are recorded and maintained, and all future interests will need to be recorded on the new register.
‘All assets’ charges will continue to be possible. However, there will be a longer list of circumstances in which the secured party can lose priority or security over the asset, even when the party buying or taking security over the asset has knowledge of the earlier security interest. This weakens the current position and will require secured parties to take additional steps to protect their position.
Anyone who has been granted a security interest or has entered into any form of arrangement that may be regulated by the PPSA should now review their documents and consider what steps they need to take, as the PPSA will have wide a ranging impact. The PPS register is expected to take effect in October 2011 and will be accessible via http://www.ppsr.gov.au.
By engaging Owen Hodge Lawyers you will be able to get advice on the changes you need to make to your processes, agreements and contracts to ensure they remain valid under the new legislation. For more information please contact the Commercial Law team at Owen Hodge Lawyers.
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