This legal update follows our client alert dated 8 September 2010 available here, about the Personal Property Securities Act (C’th) 2009 (the PPSA). That alert describes the far-reaching impact of the PPSA beyond banking and finance transactions. For example, retention of title arrangements can give rise to a security interest under PPSA that the supplier will need to register or risk losing.
The start date for the Personal Property Securities Act 2009 (Commonwealth) (PPSA) has been deferred to October 2011. This gives clients more time to get ready for this far-reaching law about security interests in personal property. Further changes to the PPSA are expected before it starts. This client update will bring you up to date with what is happening with the PPSA.
COAG confirms deferral of PPSA to October 2011
For most of 2010, the Commonwealth Government clung to a May 2011 target date for operational commencement of the Personal Property Securities Act 2009 (C’th) (PPSA), despite concerns expressed by lawyers and industry groups.
However, the registration commencement time, that marks operational commencement of the PPSA, has now been deferred to October 2011.
This was confirmed by a meeting of the Council of Australian Governments (COAG) on 13 February 2011.
Another round of PPSA amendments expected
The PPSA will be amended again before the registration commencement time. The Attorney General's Department has indicated that we can expect further legislation to amend the PPSA to be passed in May 2011.
What’s the gist of the expected amendments?
Based on communications from the Attorney General's Department, likely amendments include:
- amendments to address certain transitional issues, including about when a buyer or lessor of personal property can take free of transitional security interests
- a regulation making power to clarify that a registration would not be seriously misleading in certain circumstances; This is important because a registration that is seriously misleading will not be effective
- amendments to correct some drafting inconsistencies.
Changes to the Corporations Act
Changes to the Corporations Act were made last year to deal with the PPSA. These included treating PPSA retention of title property as part of a company's property for certain purposes. Retention of title property is property that a company uses, occupies or possesses but does not own, over which the company has given a security interest that has attached to the property.
The Corporations Act amendments have caused some debate as to whether an existing charge would cover the whole or substantially the whole of a company's property. This is critical because under the Corporations Act, the holder of a security interest over the whole or substantially the whole of a company’s property has certain advantages, namely, it can appoint an administrator to the company, and, if an administrator is appointed, it can enforce its charge in the 13 day decision period after an administrator is appointed (as an exception to the moratorium on enforcement).
It is anticipated that the Corporations Act will also be amended so that PPSA retention of title property will be disregarded for an existing charge when determining whether it covers the whole or substantially the whole of a company's property.
More detail about the PPSA amendments for those familiar with PPSA
The main anticipated amendments are summarised in the Schedule at the end of this Legal Update.
PPSA regulations finalised
The regulations are no longer in ‘exposure draft’.
The finalised regulations dated 24 November 2010 (registered 26 November 2010) have been put in place despite some ongoing concerns from stakeholders.
Among the changes, the new regulations clarify that it will be possible to notify a “purchase money security interest” (PMSI) for any type of collateral where a PMSI arises under section 14. Under the exposure draft regulations, a PMSI could only be notified for certain collateral, and could not be notified in the collateral class "all present and after acquired property".
Referral of powers and consequential amendments
All States except Western Australia have now passed legislation to refer powers to the Commonwealth to support the PPSA.
All States and Territories except Western Australia have also now passed legislation or presented bills to Parliament for consequential amendments of affected legislation. The amendments include declaring certain statutory rights and licences not to be personal property for the purposes of the PPSA.