The Personal Property Securities Act 2009 (Cth) (PPSA) regime commenced on 30 January 2012. It applies to security interests arising both before and after that date.
Prior to commencement of the PPSA regime, many security interests were registered on various State, Territory and Federal registers (such as the ASIC register of company charges and the State and Territory registers of encumbered vehicles). Registrations on many of these pre-PPSA registers (Migrated Registrations) were automatically migrated to the Personal Property Securities Register (PPSR).
Migration of registrations to the PPSR was a complex process which resulted in a number of issues. For example, in some cases, there was a mismatch between the data required for a registration under the PPSA and the data available on the migrated register. In other cases required data was not recorded on the migrated register at all. Because of this, statutory protections were enacted to preserve the validity of Migrated Registrations affected by certain migration issues (Statutory Protections). A number of Migrated Registrations still benefit from those Statutory Protections.
The Statutory Protections will cease at midnight (Canberra time) on 29 January 2017 (we are aware that others may have differing views on the precise end date, which could be as late as midnight on 31 January 2017).
Secured parties who may currently benefit from the Statutory Protections should consider whether remedial action is necessary before those protections cease. While there are a number of issues which could result in a registration on the PPSR (including a Migrated Registration) failing to meet the requirements of the PPSA, this article focuses on some key risks you should be considering.
Migrated security interests over trust property where the trust has an ABN
Before the PPSR commenced operation, security granted by a company or natural person over property held in trust (Trust Property) was registered on the applicable Federal, State or Territory register by reference to the trustee's details (since a trust is not a separate legal person). For example, a charge over Trust Property by an Australian company would have been registered on the ASIC register of company charges by reference to the ACN of the trustee.
When these registrations were migrated to the PPSR, the identifier applied to them was generally the identifier for the trustee used on the migrated register.
The registration requirements for trustee grantors under the PPSA are open to different interpretations. As a result, the correct identifier for registration of some migrated security interests over Trust Property may be the ABN for the trust (if it has one). Where a migrated security interest covers Trust Property and the trust has an ABN, the appropriate course is to register against that ABN before the Statutory Protections cease.
Migrated security interests covering property with a serial number
In some cases, a registration which covers property with a 'serial number' for the purposes of the PPSA must include the prescribed serial number. If this rule applies, failure to include the serial number will result in the registration being defective in respect of the relevant serial numbered property.
Registrations affected by the above are:
- registrations covering an aircraft engine, airframe, helicopter or small aircraft;
- registrations covering the following types of property where the property is described as 'consumer property' in the registration:
- motor vehicles;
- watercraft; and
- certain intellectual property being a design, patent, plant breeder's right, trade mark or licence over any of those things.
Many Migrated Registrations did not include the prescribed serial number. Some of those Migrated Registrations may only be effective by virtue of the operation of the Statutory Protections. Secured parties with Migrated Registrations affected by the above rule should ensure that registrations which record the prescribed serial number are made before the Statutory Protections cease.
Note that the Statutory Protections do not extend to the operation of the PPSA "taking free" rules. Therefore, even though a Migrated Registration covering property of a kind referred to above may currently be effective absent a serial number (by virtue of the Statutory Protections), the absence of a serial number means the secured party faces a significantly increased risk of a buyer or lessee of that property taking it free of the security interest.
Migrated registrations missing grantor details or with incorrect identifiers
Registrations which were migrated from various State and Territory registers of encumbered motor vehicles did not include details of the grantor. Instead, those registers only recorded the serial number for the vehicle.
Where a motor vehicle is not held as 'consumer property', the applicable identifier is not the serial number for the vehicle (although the operation of the PPSA "taking free" rules means there are significant advantages in including the serial number in the registration). Instead, the applicable identifier is dictated by the nature of the grantor. For example, for a corporate grantor this may be its ACN or, for a natural person, it may be the name of that person based on their driver's licence.
Some other migrated registers, such as the various State and Territory registers for bills of sale, co-operative charges, deeds and stock, wool and crop mortgages, used an ABN or organisation name to identify the grantor. As migrated, these registrations may not meet the requirements of the PPSA (depending on the nature of the grantor entity and the capacity in which the security was granted).
Secured parties who have not already checked the status of their Migrated Registrations will need to ensure that, where a Migrated Registration is affected by a missing or incorrect identifier, additional registrations on the PPSR are made by reference to the grantor's prescribed details before the Statutory Protections cease.
ASIC migrated registrations with incomplete secured party details
Approximately 27,000 registrations migrated from the ASIC register of company charges were migrated without details of all of the secured parties (where there were multiple secured parties recorded on the ASIC register).
The Registrar of the PPSR has since identified Migrated Registrations affected by this issue and has inserted an alert against those registrations. A list of affected registrations is available on the PPSR website. The Statutory Protections may currently apply to security interests affected by this issue. However, affected secured parties who have not already addressed this issue should do so as soon as possible. How this is addressed will depend on the current status of the relevant security interest. In some cases it may be appropriate to create a new secured party group with all relevant secured parties included and transfer the affected Migrated Registration to that new secured party group.
Even if a security interest affected by this issue is currently perfected by virtue of the Statutory Protections, a secured party missing from the registration could be adversely affected by actions taken by the named secured party with respect to the registration.