PRE- AND POST- PPSA INTERESTS - OUT WITH THE OLD? NOT
It's now just over four months since the commencement of the
Personal Property Securities Act (PPSA) and we are
starting to see some interesting outcomes that highlight the
importance of considering whether you should be registering certain
security interests, and the dramatic impact of the transitional
provisions of the PPSA as the 2 year transition period ticks
We also looked at how a properly drafted and implemented ROT or
commercial consignment that was on foot before 30 January would
enjoy transitional protection for up to 2 years after commencement
of the PPSA. A post-PPSA ROT that was not duly registered could
still theoretically be enforceable, but it would not enjoy priority
over other security interests that had been duly registered.
Customers and consignees in the red: Recent
insolvency situations involving ROTs and consignments have borne
this out. When weighing up the competing priorities of interests of
suppliers on ROT or commercial consignment arrangements against
other security interests, the following basic principles apply:
An unregistered but properly drafted and implemented pre-PPSA
ROT or commercial consignment can still trump other earlier,
migrated security interests as well as later, registered security
interests, as it did under the 'old law'.
However, a post-PPSA ROT will only have priority over other
interests if duly registered meaning that it must be registered
within the relatively tight timeframes specified in the PPSA (which
vary according to the nature of the goods in question). Even then,
like all ROT arrangements, it will also need to have the supporting
machinery (separate storage, separate accounting for proceeds etc)
to be effective.
What ROT and consignment suppliers should be
doing: This puts ROT and commercial consignment suppliers
in an interesting spot, especially in these economically uncertain
Those suppliers with pre-PPSA ROT and consignment arrangements
should revisit how their arrangements are documented and
implemented to gauge their effectiveness and duration having regard
to the 2 year transition period.
Those suppliers who have put in place, or intend to put in
place, ROT or consignment arrangements after 30 January 2012 must
get them registered within the mandatory time limits if they are to
enjoy super-priority – if not duly registered they get no
priority and the ROT supplier will in effect rank with other
That is not to say that suppliers should necessarily register
each and every ROT or consignment arrangement. ROT suppliers will
need to weigh up the benefits of registration against the
administrative and cost burdens (especially those suppliers with
very numerous ROT customers) and consider the other ways of
managing the risks that ROT arrangements are designed to
ROT and consignment suppliers have a lot to think about.
TEETHING PROBLEMS WITH THE REGISTER – SAME, SAME, BUT
Whilst remediation works on the
anomalies with data migrated to the PPSR from pre-existing
databases continue, the difficulties that we had experienced as
to time lag between on-line registration or amendment and the
registration or amendment being searchable have not recurred and
there is no evidence that they will. Accordingly, searches for
security interests registered after 30 January 2012 should be
reliable, and we have been in communication with the office of the
Registrar about this.
In the years following the global financial crisis of 2008 many Australian investors lost their life savings as financial products failed and the Australian Stock Exchange shed over 3,000 points.
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