In January 2019, security interests which were originally registered on the Personal Property Securities Register upon the commencement of the Personal Property Securities Act 2009 (Cth) (PPSA) for a period of seven years will expire.
The PPSR and the expiry of security interests
If your business registered seven year security interests on the commencement of the PPSA in January 2012 and the security interest is still current, you should seek to renew those registrations to ensure that they do not lapse. If the registrations are not renewed, there is a high risk that you will become an unsecured creditor.
Registrations made in respect of goods with a serial number, such as motor vehicles, watercraft, aircraft and intangible property such as patents and trade marks, have a maximum registration period of seven years and as such, registrations made upon the commencement of the PPSA in respect of these items will be due to expire in early 2019.
What are the consequences of an interest expiring?
The expiry of a security interest on the PPSR can present significant disadvantages for a secured party. Where a security interest expires in January 2019 and a secured party has failed to renew their registration:
- the security interest will lapse;
- the security interest in the personal property will become unsecured such that it ranks behind other creditors with renewed security interests; and
- the interest in the property may vest in the entity who granted the interest if that entity becomes insolvent.
Importantly, the PPSR only allows businesses to renew a registration before its expiry date. For example, if a security interest expires on 30 January 2019, it cannot be renewed after 30 January 2019. In such circumstances, the secured party will be left with a lapsed interest in the personal property.
To inform secured parties ahead of time, the PPSR publishes a ‘Registrations Due to Expire’ report which sets out current security interests due for expiry in the near future. This can be obtained through the PPSR website via a registered PPSR account and using the details of the secured party.
If you have not already, you should seek advice in relation to security interests you have over personal property that were registered upon the commencement of the PPSA regime in 2012 and which were initially registered for 7 years. These registered interests need to be reviewed and updated in order to ensure that they do not lose their priority amongst other secured interests in personal property.
The process to renew a security interest, or to amend the details of a security interest before applying for a renewal, is not always straightforward. Please contact our experienced team if you have any questions or require advice on renewing your expiring PPSA registrations.
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.