Several leading law firms, competitors in the fiercely competitive legal sector, have worked together in the interest of their clients to develop a best practice industry approach to drafting security documents following the commencement of the Personal Property Securities Act 2009 (Cth) (PPSA). This is a welcome example of how leading firms can drive the direction and development of the industry to the benefit of clients and market efficiency.

The recently implemented PPSA established new rules for the creation, priority and enforcement of security interests in most assets other than land.

Since before the operational commencement of the PPSA on 30 January 2012, Australian businesses and their lawyers have been grappling with the legal and practical considerations of how the far reaching legislation will affect their business.

Law firms rewrote their standard security documents in response to the extensive and radical changes introduced by the PPSA. In doing so, firms took different approaches to some essential elements of General Security Agreements (GSA), resulting in extensive negotiations, confusion for clients and unnecessary expense.

In recognition that it is not in clients' interests for firms to be negotiating their differing views on points of PPSA law during live transactions, five leading international law firms have come together to prepare a suggested standard for the core provisions of a GSA. The PPSA model clauses are consensus positions which represent a distillation of the firms' thinking on a range of important issues. The firms involved are:

  • Allens
  • Ashurst
  • Herbert Smith Freehills
  • King & Wood Mallesons
  • Norton Rose.

In an environment where businesses are wrestling with constantly evolving legislative frameworks, this group of firms is pioneering a new approach to reducing uncertainty and improving efficiency for clients and the broader market. With a consensus approach, negotiations where there is no substantive advantage to be gained can be avoided and the focus can be firmly on delivering commercial solutions.

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