Australia: Personal Property Securities Act (PPSA) - commencement date announced

Last Updated: 12 December 2011
Article by Richard Winter, Sarah Howarth, Adam Howell and Phil Hustler

The Attorney-General has confirmed the registration commencement time for the Personal Property Securities Act (PPSA) is Monday 30 January 2012 (commencement date). If you haven't yet done anything about PPSA, time is running out - there are only eight weeks to go, including the Christmas/New Year holiday season!

The PPSA will change the way businesses and individuals deal with personal property (ie essentially all property except land). The PPSA will introduce a new national system for registering security interests, and also changes what is considered a "registrable" security interest. If you own, lease, buy or sell personal property, then you need to be aware that the game is changing soon.

The Attorney-General's announcement also confirmed the migration of data from current security registers (eg the ASIC company register and REVS) to the new personal property security register (PPSR) as of Monday 21 November 2011 (migration time). A practical analysis by businesses is necessary to ensure that secured parties can effectively navigate the period between the migration time and the commencement date (migration period).

Migrated security interests

A transitional security interest (TSI) is created by a security agreement which is currently in force and that will continue to be in force after the commencement date. The PPSA only applies to TSIs from the commencement date.

TSIs that are currently registered on a transitional register will, subject to certain requirements, become a migrated security interest. To be migrated, the security interest must be:

(a) a TSI

(b) registered on a transitional register that was effective immediately before the time the data was migrated to PPSR

(c) accepted by the PPSR Registrar (Registrar).

In addition, the registration in the transitional register must have been duly authorised by the law under which the register was maintained.

Complications in the transitional provisions

Under Division 7 of the PPSA the Registrar may accept an application for registration of a TSI after the migration time and before the commencement date. That is, if the Registrar is satisfied that a TSI will (whether before, at or after the commencement date) be:

(a) "attached" to the collateral

(b) held by the applicant

(c) operationally practicable for the Registrar to register the financing statement or financing change statement before the commencement date.

If the Registrar accepts the application for registration, the Registrar may register the security interest before the commencement date. Though, the temporary perfection afforded to TSIs will commence no sooner than the commencement date.

This sounds fantastic, however currently this part of the legislation cannot be utilised as the PPSR is currently not accessible. So despite providing legislation that allows for preparatory registrations to be made for TSIs, the reality is that Division 7 of PPSA cannot be relied upon until PPSR is accessible. It is unlikely that the PPSR will become available before the commencement date.

Migration period issues

Some questions that may arise are:

  • what do you do if your migrated TSI needs to be amended during the migration period?
  • how should you deal with a partial release of a migrated TSI?
  • should all current registrations, including provisional charge registrations, be lodged with the current register, or should you simply wait until the commencement date to put a financing statement in place on PPSR?

What approach should businesses take to obtain the highest priority, or best security, as a secured party during the migration period?

Given the likely inability to effect "pre-registration" under the PPSA as referred to above, the most prudent approach is to register all new securities, amendments and releases now, on all current registers, including ASIC, and not delay any action until the commencement date. You should then check the PPSR on or shortly after the commencement date to ensure registrations effected during the migration period have indeed been migrated. Any error or non-migration can be fixed at that time by lodging a financing statement.

Next steps

If you want to ensure your relevant interests in any personal property is secured and you haven't yet reviewed your current business arrangements, you are running out of time.

If you are not sure how the PPSA will affect your business, please contact one of our team to discuss and we can provide you with practical solutions to deal with any personal properties securities (PPS) issues you may encounter.

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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