The commencement of the new Personal Property Securities regime is just over 3 months away. It is essential that businesses consider how the PPS regime will impact upon the way they do business and to ensure they put in place systems to ensure compliance with the laws.
The implications of this new regime will be far reaching for all business,not just those in the finance sector. The definition of "personal property" under the Act can be somewhat deceptive and it is vital that business understand that the regime will encompass securities over not only the typical consumer goods, but a wide range of commercial goods.
The Act defines 'personal property' as 'property other than land' with two particular exclusions being any right that is granted under a commonwealth, State or Territory law and anything particularly declared not to be personal property. This definition will result in security interests taken over a very wide range of both consumer and commercial property being subject to the new regime.
The result of this wide definition is that many security interests previously not required to be registered will now need to be included on the Personal Property Security Register ("the Register") to ensure businesses protect their priority. Failure to register existing and newly created securities will result in those securities being exposed to subsequent interests being created over that property and those interests in turn obtaining priority through registration.
The new regime significantly expands the traditional concept of 'security interest'. Again the Act includes a wide definition that includes any interest in personal property provided for in a transaction that in substance, secures payment or the performance of an obligation. The effect of this wide definition, combined with the wide definition of 'personal property' is that transactions that have previously not been registrable security interests will now need to be registered under the new regime.
The commencement of the new regime in October 2011 will now bring into the scheme business transactions that previously did not fall within any registration system. For example, consignment agreements, retention of title arrangements, hire purchase agreements.
In order that businesses ensure they protect their current and future security interests it is essential that they act now to undertake the following steps;
- Review all existing business contracts and consider whether they must be registered ;
- Check whether any of the above ccntracts comply with the necessary requirements under the Personal Property Securities Act;
- Set up any process for identifying and managing registration of security interests.
This new regime introduces significant new priority rules and in order to ensure businesses do not lose existing security protection and to ensure they obtain priority on security interests created post PPS, action should be taken before the commencement of the scheme in October 2011.
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.