The Personal Property Securities Act 2009 (Cth)
("PPSA") is now expected to come into
effect in October 2011. All financiers and
businesses that supply goods to their customers or distributors, on
the basis that they retain title until payment is made, are at risk
if they do not appropriately prepare for the PPSA.
What is the PPSA and how will it affect you and your
The PPSA is a Commonwealth Act that became law at the
end of 2009. Hunt & Hunt has been updating those affected in
the business community on the progress of the reform since an
Exposure Draft of the PPSA was released in 2008. The PPSA was
scheduled to come into effect on 1 May 2011 but the Council of
Australian Governments recently postponed its commencement until
The PPSA replaces over 70 pieces of law in relation to
"security interests" in "personal property".
Personal property is not just consumer property; it is all forms of
property other than land and certain statutory licences. Commercial
equipment and stock are common examples of personal property.
Security interests include charges, conditional sale agreements
(e.g. consignments and agreements containing retention of title
clauses), leases of goods and hire purchase agreements. All of
these arrangements will be now under a single Federal regime.
Businesses that do not have possession of their personal
property (e.g. stock and equipment supplied or hired to customers)
Have a security agreement in place that satisfies the
requirements of the PPSA; and
Register their security interest on the PPS Register.
Businesses that do not take these and other steps may not have
the ability to seize or otherwise deal with their personal property
upon a debtor's default.
What businesses will be affected by the PPSA?
The PPSA will affect a variety of industries, including:
Banks and other financiers and businesses that use finance
(e.g. loans to finance business vehicles and other equipment);
Manufacturers, distributors and suppliers that supply
Accountants, insolvency practitioners and business
Transport and logistics companies that provide transport or
warehouse services and freight forwarders and carriers;
Leasing companies that lease vehicles, equipment or other
What do businesses need to do now?
If your business is not already prepared, you will now need to
act urgently. The PPSA will require some very significant changes
to the way your business operates and it is important that you are
ready and understand how the PPSA may affect your business.
To provide you with an example of the operation of the PPSA, if
a manufacturer were to supply goods to a business under usual 30
day trading terms and that business were to later become insolvent,
the manufacturer's security interest would become void. This
applies even though the manufacturer may have title (i.e.
ownership) in the goods.
The manufacturer would still be able claim as an unsecured
creditor but would rank behind any other financier that had a
registered security interest (e.g. a bank with a PPSA equivalent to
a registered fixed and floating charge).
The manufacturer can avoid this situation if its trading terms
and other documentation comply with the requirements of the PPSA
and if it registers its security interest within the
PPSA-prescribed time frame. However, if the manufacturer fails to
register its security interest within the necessary time frame, it
will rank behind other secured parties that have registered their
Some other brief examples of necessary action are as
You should be considering reviewing all security documentation
to accommodate new terminology and practices.
There will need to be educational work within organisations to
ensure that employees are aware of new terminology and new
Organisations will need to alter their due diligence and
settlement practices to reflect new provisions.
Organisations will also need to consider the steps it will take
to "perfect" its "security interest". For
example, some parties with retention of title arrangements will
need to consider whether they will always perfect their
You should undertake a full review of your trading terms,
security registers and other arrangements.
This E-Alert only touches the surface in terms of the impacts of
the PPSA. All unsecured and secured transactions will be affected
by these changes and the changes are complex. Hunt & Hunt will
be conducting more presentations in 2011 in our offices across
Australia and will be providing further updates throughout the year
the operation of the PPS Register.
Please contact us if you require any assistance in understanding
or preparing for the changes.
The content of this article is intended to provide a general
guide to the subject matter. Specialist advice should be sought
about your specific circumstances.
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The recently enacted National Consumer Credit Protection Act 2009 (National Credit Act) establishes a new national licensing regime for the regulation of consumer credit in Australia. The new regime includes a licensing requirement. If you currently engage in a credit activity, such as providing credit or advice in relation to credit, you may need to register with ASIC before 30 June 2010. Failure to register in time will result in you being required to cease the credit activities as of 1 July 2
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