In brief - PPSA commencing in May 2011

The Personal Property Securities Act is expected to commence in May 2011 and will have a dramatic impact on the Australian legal landscape. It draws on similar reforms in New Zealand, Canada and the USA.

Elimination of duplication, inconsistencies and anomalies under the PPSA

Currently, there are more than 70 separate acts and related statutes across Australia which regulate personal property securities. These instruments give rise to multiple registration requirements, inconsistent priority rules and many cross-border anomalies. The Act intends to harmonise law and practice on personal property securities and will be supported by a single online register which will be operated by the Insolvency and Trustee Service Australia (ITSA).

The purpose of this article is to provide a quick introduction to how the Act will affect you. More information about Personal Property Securities Reform can be found on the website of the Attorney- General's Department.

Applicability of the PPSA

The Act applies to all security interests in personal property which secure payment or performance of an obligation, regardless of the form of the transaction, the legal personality of the grantor or the jurisdiction in which the property or parties are located or in which the transaction occurs.

Personal property includes all forms of both tangible property, such as goods, and intangible property, such as intellectual property.

Some of the changes under the PPSA

  • Financiers will be required to modify security documents and procedures in relation to charges, mortgages over all property other than land, vehicle and equipment leases and hire purchase agreements.
  • The company charge registration system under the Corporations Act will be replaced and the concepts of a floating charge and crystallisation will be redundant. Instead, extinguishment provisions in the Act will protect a third party which acquires an interest in a circulating asset. State and territory registration systems for motor vehicle and boat encumbrances and for bills of sale will be replaced.
  • Security interests given by individuals which were not formerly registrable will now become registrable and subject to a statutory priority and enforcement regime giving greater certainty to financiers.
  • Rights of manufacturers and suppliers in respect of consignments and retention of title arrangements will constitute security interests that will need to be registered to minimise the risk of being defeated.

Registration of financing statements

The Act authorises the registration of a "financing statement" that describes personal property before or after a security agreement is made covering the property, or a security interest has attached to the property. This allows prior registration, thus alleviating the risks associated with delays in attending to registration of a security interest after settlement in a finance transaction.

Necessary changes to business processes under the PPSA

The introduction of the PPSA and the changes to the Australian legal system that it brings will have a significant impact on most business within Australia. We will be holding a seminar covering these changes in detail, examining the ways in which your business processes will need to change to adapt to the new legislation. Please refer to our website in the coming weeks for further details.

Swaab Attorneys was the highest ranking law firm and the 13th best place to work in Australia in the 2010 Business Review Weekly Best Places to Work Awards. The firm was a finalist in the 2010 BRW Client Choice Awards for client service and was named the winner in the 2009 Australasian Legal Business Employer of Choice Awards.

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.