Most businesses and many individuals will be asked to either give a security interest over their personal property or will want to benefit from a security interest over another's personal property. Personal property is any property which is not land.
The Personal Property Securities Act 2009 (Cth) (PPSA) provides a uniform system of registration for many security interests over personal property.
A key feature of the PPSA is the Personal Property Securities Register (PPSR). The PPSR is a publicly accessible register of security interests over personal property. Registration on the PPSR is the most common way to effectively protect a security interest over personal property.
Some of the key issues with dealing with the PPSA and the PPSR are:
- Strictness: there are a number of rules for registering security interests on the PPSR. Failing to strictly comply with the rules can invalidate the registration. Invalidation will generally result in a loss of priority and possibly a loss of the security interest, particularly in an insolvency situation. This can lead to significant losses. For example, In the Matter of OneSteel Manufacturing Pty Limited (administrators appointed),1 Alleasing Pty Ltd (‘Alleasing') utilised OneSteel's ABN instead of OneSteel's ACN when registering Alleasing's security interest on the PPSR. This error invalidated Alleasing's attempt to register its security interest on the PPSR. The loss of priority caused Alleasing a $23 million loss.
- Complexity: the PPSA uses concepts and jargon which are specific to the PPSA. Sophisticated parties report that the PPSR is unintuitive and difficult to navigate. Most businesses fail to effectively navigate the PPSR registration process. As PPSA requires strict compliance, it is a serious risk to try and “self-register” security interests on the PPSR.
- Non-exhaustive: the PPSR does not operate as an exhaustive record of security interests. There is no requirement to register on the PPSR. Parties can also protect their security interests in other ways, for example by possession or control of the property. This can lead to false assumptions about the property's existing security interests.
- Priority disputes: the priority between security interests is a complex area of law. The priority granted by PPSR registration, possession and control will differ depending on factors such as the type of property, the nature of the security interest and whether the parties are solvent or insolvent. In some circumstances registration on the PPSR may be insufficient to give priority.
1  NSWSC 21.
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.