Personal property securities regime

Article Series

This article is part of a 7 part series. Other articles in this series are shown below:

1. A Word from the Chairman
2. Personal property securities regime
3. Employment law changes that will impact your business in 2011
4. Markhams - meet our newest member firms.
5. Funding business expansion
6. Division 7A - another sting in the tail
7. Have you overpaid GST?

The Personal Property Securities Act 2009 (Cth) ("PPS Act") was passed as legislation in December 2009. Although the PPS Act has not received extensive exposure and attention, it is likely to have far reaching consequences for many businesses and the function of providing credit and finance.

The legislation applies to "personal property", which includes most forms of tangible assets, (although there are some exceptions such as land and certain government licences). For example, stock, equipment, vehicles, intellectual property, financial products and debts. It also can include intangible assets such as intellectual property and trade marks.

The PPS Act will impact on those businesses and organisations dealing with a "security interest", such as:

• fixed and floating charges, (including prescribed charges registrable under the Corporations Act)
• certain types of leases of personal property
• hire purchase agreements and
• retention of title (Romalpa) claims.

The legislation introduces significant changes to the manner in which securities are dealt with and even concepts such as to legal title and will have far reaching consequences for many businesses.

The intention of the PPS Act is to provide single uniform rules, within a national system and to reduce the complexity of laws regarding security interests.

The PPS Act will amongst other things:

• require the registration of prescribed securities, including those types of securities which currently may not be required to be registered, (eg. retention of title claims)
• establish rules of priority between competing securities
• set out rules governing when securities can be enforced
• determine when an asset is purchase free of any security.

Under the legislation a new national PPS register will be created to replace existing state and federal registers for securities, including the existing registration of registered mortgage debentures granted by companies and currently registered with ASIC. The PPS register will be a searchable register, with 24 hour online access.

Based on current timetable expectations, this legislation and the new national register is expected to come into effect in October 2011.

It is important that businesses obtain appropriate legal and financial advice to determine what they need to do to prepare for the PPS Act. Some suggested points to consider are as follows:

• for businesses providing credit, the terms of trading should be reviewed to determine,whether a security interest is created and registration of any security interest is required. Terms of trading should also be reviewed to ensure that enforcement rights are appropriately protected
• where a retention of title claim is obtained over goods supplied, these arrangements should be reviewed and appropriate steps taken to have the retention of title arrangement registered as a security interest
• the National PPS register will provide an important source of information for businesses and others wanting to confirm whether an asset is subject to a registered security interest, as such businesses should become familiar with this register
• existing securities granted by businesses, such as fixed and floating charges may need to be reviewed, to ensure appropriate security structures are maintained with no unintended consequences. This may affect borrowers, with existing facilities, secured by fixed and floating charges
• the PPS Act introduces new terminology and concepts and familiarity with these concepts will assist businesses in dealing with the Act and its impact on businesses.

This publication is issued by Moore Stephens Australia Pty Limited ACN 062 181 846 (Moore Stephens Australia) exclusively for the general information of clients and staff of Moore Stephens Australia and the clients and staff of all affiliated independent accounting firms (and their related service entities) licensed to operate under the name Moore Stephens within Australia (Australian Member). The material contained in this publication is in the nature of general comment and information only and is not advice. The material should not be relied upon. Moore Stephens Australia, any Australian Member, any related entity of those persons, or any of their officers employees or representatives, will not be liable for any loss or damage arising out of or in connection with the material contained in this publication. Copyright © 2009 Moore Stephens Australia Pty Limited. All rights reserved.