The Australian Personal Property Securities Act 2009 (the
"PPSA"), and its accompanying Personal
Property Securities Register ("PPSR")
are due to come into force in early 2012, replacing more than 70
existing national, state and territory laws. The PPSA fundamentally
changes the rules governing security interests in personal property
in Australia by adopting a system similar to those in place in the
U.S., Canada and New Zealand.
The PPSA establishes new rules for creating valid and
enforceable security interests in Australia. It will also establish
the PPSR, a new central register for the registration of security
interests in respect of personal property. The PPSA will allow for
registration on the PPSR of a broader range of interests in many
more types of property than are currently capable of registration
on existing registers.
Investors currently holding outstanding debt investments secured
by pledges of interests in the personal property of Australian
entities should consider contacting issuers and trustees of such
debt, as applicable, to ensure that those security interests remain
valid, and retain their current priority after the new law takes
effect. Investors will want to receive confirmation that existing
security interests that have been registered have been, or will be,
migrated to the PPSR, and that interests that have not previously
required registration will not need to be registered under the PPSA
(or if registration of such interests is now required, that steps
have been, or will be, taken to register such interests). What
follows is a brief overview of issues that will be of interest to
investors as Australia transitions to the new law.
Types of Interests Covered:
The PPSA applies to any security interest in personal
property, and focuses on substance over form. What were previously
known as "Fixed" and "Floating" charges will
now be called security interests over "Non-circulating"
and "Circulating" assets, respectively. Secured
parties' rights in these assets will not change when the PPSA
Registration of Security Interests:
Under the PPSA, most security interests in personal
property must be registered on the PPSR. The PPSR will be
computer-based, updated in real time, and accessible to the public.
Registration will be effective upon the filing of a financing
statement that contains the names of the parties to the transaction
and a description of the collateral being pledged as security. The
existence of the PPSR removes the need for holders of security
interests to research and meet the requirements of various
jurisdictions in order to protect their interests.
More than 20 existing registers (but not all registers) will be
automatically migrated to the new PPSR when it is launched.
Interests not migrated and those that previously have not been
required to be registered will receive temporary perfection for 24
months after the PPSR is launched. During this "transitional
period", secured parties will retain the priority they had
before the PPSR was active. Failure to register a pre-existing
security interest prior to the end of the transitional period may
result in that secured party losing its priority to another secured
party that registers during this time. It is therefore important
that investors in secured notes issued by Australian companies
ascertain from the relevant issuer or trustee whether all
applicable registrations have been made.
A financing statement filed on the PPSR is effective for seven
years for consumer property, or property identifiable by serial
number, unless an earlier end date for the registration is
specified. For commercial property, parties can specify the length
of time up to 25 years or indefinitely. Financing statements can be
renewed if the renewal is filed before expiration of the original
statement. Statements can be discharged for free when a debt has
Enforcement of Security Interests:
The PPSA moves away from enforcement based on common law
and equity principles and contains enforcement provisions that make
the ability to collect on collateral statute-based. These new
enforcement rules will apply only to security interests created on
or after the date that the new registration rules take effect. For
security interests existing before the enactment of the PPSA, the
enforcement rules in effect at the time of entering into the
security agreement will apply.
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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