Many of you would have read our previous Alerts regarding the
proposed adoption in Australia of wide ranging personal property
securities reforms. As a culmination of the public consultation
process that has already been implemented by the
Attorney-General's Department in relation to the new regime,
the exposure draft of the Personal Property Securities Bill 2008
(PPS Bill) was referred to the Senate Standing
Committee on Legal and Constitutional Affairs on 13 November
This referral brings the introduction of the new regime one step
closer. The Attorney-General's Department has expressed the
view that the proposed timetable for commencement of the new regime
in mid 2010 remains unchanged.
You can view the exposure draft of the PPS Bill on the website of the
Wide ranging implications
A primary aim of the PPS Bill is to provide for the introduction
of one national system to regulate the registration of security
interests granted over all property other than real property, which
will apply irrespective of whether a security interest is granted
by an individual or a body corporate.
The reach of the legislation is however much broader than merely
governing registration of securities granted in favour of banks and
financial institutions. The legislation, by adopting a functional
approach to the meaning of "security interest", will
capture interests other than charges and mortgages. For example, it
will regulate certain leases of personal property, transfers of
accounts receivable and other choses in action and title retention
arrangements. It will introduce a new priority regime to determine
the outcome of competitions between two security interests and
competitions between security interests and other types of
interests. It will also introduce a new, largely optional,
enforcement regime. Other reforms are also included in the
Changes from discussion draft
Since issuing a discussion draft of the Bill earlier this year,
the Attorney-General's Department has consulted with the State
and Territory governments as well as with the banking and financial
services sector and the legal profession. The new exposure draft of
the PPS Bill reflects this extensive consultation process. For
The provisions setting out the rules to determine the governing
law of a personal property security interest have been deleted,
given the general lack of consensus as to what those rules should
be. As one of the primary aims of the legislation is to provide for
legal certainty, the hope is that the Senate Standing Committee
recommends a workable set of rules to be included in the Bill to
replace the uncertainties of the existing laws.
There are special rules in the PPS Bill which apply to
"investment instruments", including the perfection
requirements for securities taken over those instruments. In the
discussion draft of the PPS Bill, investment instruments was given
a narrow meaning. This has been expanded and is now more reflective
of market practice.
Fixtures and water rights are excluded from the operation of
the new PPS regime. At the request of the State and Territory
governments, security interests in fixtures will continue to be
governed by the existing real property statutory regimes. Security
interests in water rights will be governed by legislation that is
being adopted by the States and Territories generally to regulate
The PPS Bill regulates transfers of "accounts" (which
is defined to mean any monetary obligations, subject to exclusions
for investment instruments and certain other categories of
property), irrespective of whether those transfers secure the
payment or performance of an obligation. The Bill, in response to
widespread objections, now limits the circumstances in which such
transfers are required to be registered on the PPS Register. This
is the case as transfers of accounts which do not secure the
payment or performance of an obligation will not need to be
registered to ensure validity on the insolvency of the
Even though the Attorney General's Department has listened
to some submissions, there is scope to further refine the PPS Bill.
The Senate Standing Committee has invited written submissions on
the PPS Bill by 10 December 2008. The Committee will then conduct
its hearings and report in February 2009.
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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