On 30 January 2019 it will be seven years since the Personal Property Securities Register (“PPS Register”) under the Personal Property Securities Act 2009 (Cth) (“PPSA”) took effect. The PPSA established a new regime for the perfection of security interests, including by registration of a financing statement on the PPS Register.
Security interests in certain types of collateral, including most notably ‘consumer property’ and personal property that the PPSA and associated regulations provide may or must be described by serial number, may only be registered for a maximum duration of 7 years. Other registrations may have been made for a period of 7 years at the election of the secured party.
As such, any registration you made shortly after the commencement of the PPSA in 2012 will expire automatically at the end of that seven year period unless renewed prior to that time. If any such registration is not renewed and expires, the relevant security interest will (unless perfected by another means) become unperfected and:
- another party may acquire an interest in the collateral free of your security interest;
- another security interest in the same collateral may take priority; and
- you may not be able to enforce the security interest against a grantor who becomes insolvent (because your security interest will vest in the grantor).
If the registration is not renewed before it expires and you subsequently make a new registration, that new registration (whilst re-perfecting your security interest) will not protect you against the risk that:
- you may lose your priority position to another security interest in the same collateral, even to a registration that was made after your original registration; and
- your security interest becomes subject to a six month ‘hardening period’ from the date of re-registration (during which the security interest could vest in the grantor if the grantor goes into administration or liquidation during that period).
We recommend that you take steps now to identify any expiring registrations in advance and take the necessary steps to renew them in order to ensure that your security interests are continually perfected. The PPS Register provides a reporting function to provide a list of registrations in a specific secured party group that are due to expire in a specified time, see PPS Register website.