Personal property is everything except land, fixtures, and water
rights. For example, it includes all types of goods (such as cars,
ships, planes, mining equipment, farm machinery etc.), shares,
units, contractual rights and intellectual property, including
trademarks and designs.
In short, the way to take security over practically everything
except real estate will change.
When are the changes happening?
May 2010 – PPS System set up
May 2011 – Commencement
The PPS Register
The PPS Register is not like the Torrens Title system. It is not
a register of ownership and doesn't provide a guarantee of
Nor is the PPS Register a document register, as it is currently
contemplated that documents cannot be registered. Rather, the PPS
Register is a place for notification of security interests.
We need to learn some new words.
Collateral – the property over which security is
taken (like the American use of the word collateral)
Attachment – the time when the property is charged
because a loan is made and security is taken, usually occurs due to
the execution of a document or by taking possession of the
Perfection – an activity to enhance your security
over the collateral created by your attachment. The usual way to
perfect a security will be to register an interest in the PPS
Register or to take possession or control over the collateral
Extinguishment – when a third party obtains ownership
and your security interest is extinguished.
Many types of securities we're used to seeing will be
subject to the PPS rules, such as:
Fixed and floating charges
Bills of sale, hire purchase agreements, leases, bailments
Charges over contracts (e.g. construction contracts)
Charges over shares and units
Charges over deposits
There may be little change to security documents, and it appears
the documents will not be placed on public record. Instead,
mortgagees will register their interest electronically online at
the PPS Register.
The banker's right of set off will continue unaffected by
the PPS legislation without the need to register anything.
Registering gives no guarantee of security. A mortgagee's
interest can be extinguished (one of those new words) pursuant to a
set of rules, which are pretty complex. For example, if a lender
has a charge over all the assets of a company, purchasers in the
ordinary course of business may take priority.
There is some devil in the detail about fixed and floating
charges – see the action plan below.
Identify affected transactions. Many existing registered
charges will be automatically transferred into the PPS Register.
For example, it is expected that ASIC will electronically record
charges in the PPS Register. There may be some registries where
electronic transfer is not achieved, or there may be types of
securities which are not currently registered which should be
registered. These items should be registered during the two year
transitional period and some special rules apply
Amend procedures and documents.
Gadens Lawyers will provide cost effective solutions to document
and procedure changes when the time comes.
This publication is provided to clients and correspondents for
their information on a complimentary basis. It represents a brief
summary of the law applicable as at the date of publication and
should not be relied on as a definitive or complete statement of
the relevant laws.
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