The PPSA's two-year transitional period that granted
temporary protection to interests in personal property expires on
31 January 2014. After that date, many Australian businesses will
lose the protection they enjoyed during 2012 and 2013.
The Personal Property Securities Act 2009 (Cth)
(PPSA) commenced on 30 January 2012. The PPSA
replaced more than 70 different registers with a single, national
online register. It also did away with the formal requirements
previously necessary to create a 'security interest' and
instead expanded the term to include retention of title
arrangements, bailments and long-term leases or consignments of
The main purpose of expanding the scope of security interests
was to ensure that third parties (such as banks and financiers)
were not misled by the apparent ownership of assets in their
customers' possession. The PPSA overcomes that risk by
requiring all interests in personal property in another's
possession (including where ownership is retained) to be perfected
by registration on the Personal Property Securities Register
Who is affected?
The PPSA may impact businesses which:
lease or bail goods
supply goods on hire purchase terms
supply goods on credit or retention of title terms
fund or supply fit outs or other items to tenants
are in a joint venture or partnership with charging rights over
another party's assets.
What interests are protected by the transitional period?
Parties with interests caught by the new regime (known as
secured parties) were granted a two-year
transitional period to register interests that arose prior to 30
January 2012. During that period, such interests (known as
Transitional Security Interests) are granted the
same priority as they were afforded in the pre-PPSA
That transitional period ends at midnight on 31 January
2014 (Canberra time).
What impact will this have on Australian businesses?
Many commercial or security arrangements formed before 30
January 2012 will lose their transitional protection if they are
not registered on the Register by 31 January 2014, exposing
businesses to risks including:
Loss of priority in goods against other creditors (even if an
agreement was entered into before those of other creditors and
regardless of retained ownership of those goods).
An unregistered security interest in the goods will be
ineffective if the party in possession of the owner's goods
becomes insolvent. The owner will be regarded as an unsecured
creditor and title to the goods may transfer to the insolvent
A buyer may be able to buy those goods free of the owner's
What can be done?
Businesses should seek legal assistance to:
review their terms and conditions/agreements to determine
whether they constitute security interests
register all security interests on the Register before
31 January 2014.
Prompt review of supply or sale terms and attending to
registration of Transitional Security Interests on the Register
should protect against third party claims.
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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