Plant and equipment hire companies have been celebrating
amendments to the Personal Property Securities Act 2009.
These amendments have been welcomed as allowing hire companies to
save on compliance costs where:
They lease out serial numbered goods (mainly motor vehicles) in
the course of their business; and
the term of the lease, or, where the lease is renewable, its
aggregate term, is between 90 and 365 days.
On one view, the amendments may, in practice, help hire
companies whose standard practice was to register a separate
Personal Property Security Interest ("PPSI") for each
individual hire, regardless of the circumstances, to save some
money. In such cases, hire companies may instead choose to register
a single "All Present and After Acquired Property"
interest (All PAAP) against all the personal property owned from
time to time by each of their customers. This will basically enable
the hire company to secure each customer's debts against all of
that customer's goods. That way, when the customer becomes
insolvent, the hire company will have a priority claim against the
proceeds of sale of the customer's goods that are not subject
to any superior security interest.
So far so good, but the All PAAP that is now available to secure
payment of rent and other charges due under short-term plant hire
has always been available; and
unlike a PPS Lease, will not help the hire company which owns
the equipment to protect that equipment from being seized and sold
by its insolvent customer's liquidator to pay out the debts of
other, priority creditors, even though those other creditors do not
own the equipment and may never have owned it.
Does that mean nothing has changed, then? Not quite: in fact,
far from giving plant and equipment hire companies more legal
rights, the amendments have taken away rights that they used to
have (but often did not know they had). Before 1 October 2015, a
leasing out its mobile, serial numbered P&E for a term, or
for renewable terms in the aggregate, of between 90 and 365 days;
seeking to protect its P&E from being seized and sold in
the hands of its insolvent customers in order to pay out the debts
of that customer's priority creditors,
were automatically given this protection under the Act without
having to register anything. This is because:
section 13 provided that the terms of hire and the nature of
the hired goods meant that the hire arrangement itself constituted
a PPS Lease;
section 267 provided that the liquidator could seize and sell
goods where the owner's security interest in those goods was
unregistered, but only if section 268 did not say otherwise;
before 1 October 2015, section 268 did say otherwise, in
relation to a "security interest of a lessor...under a PPS
Lease" for a definite, non-renewable or extendable term of
between 90 and 365 days; and
as at 1 October 2015, that exemption, which favoured short-term
P&E hire companies, has been removed; and further
from 1 October 2015, non-renewable/extendable P&E hire
arrangements of 90 – 365 days' duration are no longer
recognised as PPS Leases at all, even if they are registered.
before the 1 October 2015 amendments, hire companies were
automatically protected from losing their P&E to the
liquidators of insolvent customers, even if they did not register
their PPS interest in that P&E, as long as the hire term was
between 90 and 365 days; and
after the 1 October 2015 amendments, hire terms of between 90
and 365 days do not attract this protection, even if the owner of
the P&E registers its security interest in that P&E.
For most hire companies whose standard practice was simply to
register every transaction on the PPS Register regardless of the
nature of the P&E being hired out or the aggregate term of the
hire arrangement, the amendments may well simplify compliance. But
they do so at the expense of protections that hire companies once
enjoyed from seizure and sale of P&E under medium-term (90-365
day) hire agreements.
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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