The Personal Property Securities Act 2009 (Cth) (‘PPSA’), which establishes a single national law for security interests and similar transactions, was due to come into effect on 31 October 2011. However, the commencement of this Act has been delayed with predictions that it will now commence in January 2012. The benefit in this delay is that it will give insurers and insureds alike further time to plan what action they will be required to undertake upon commencement of the act due to the substantial impact the Act will have on the business operations of many industries.
Under the PPSA businesses, other commercial entities and individuals with a “security interest” will be affected by the Act. A security interest will be held where there is a transaction involving an interest in personal property, either tangible or intangible, which in substance secures payment or performance of an obligation. This means that a greater number of transactions will now be regarded as security interests due to this wider definition. Entities leasing chattels for over 12 months or selling on hire purchase or just selling subject to retention of title clauses will need to ensure that their security interests are registered in order to achieve perfection and priority.
For those seeking to purchase a new business or enter a transaction that involves registrable personal property, a search of the new consolidated register should be undertaken to identify what security interests are held in the property, prior to entering any transaction and on order to satisfy due diligence requirements.
Things to consider
Prior to the commencement of the PPSA directors and professional advisers need to consider:
- What steps are necessary to ensure interests in property are recorded and protected;
- Whether usual business transactions require review to ensure maximum protection including by registration of interests under the Act.
- Whether usual transactions require consideration of conducting a search of the national PPS register to ensure there are no competing interests or ownership.
- The extent to which the Act will impact on access to credit from banks or trading partners and debtor insurance.