Frustrated at how long it takes and how much it costs to agree the Personal Property Securities Act (PPSA) clauses in Australian security documents?
The good news is that a solution has been found to introduce some consistency into the process.
The bad news is, it depends which Australian law firm you use.
Cutting a track through the regulatory bush
Since the PPSA came into effect in Australia in January 2012, different law firms have approached its application differently, and sometimes those differences have been significant and very wide-reaching.
But now five of the internationals with a presence in Australia - Allens, Ashurst, Herbert Smith Freehills, King & Wood Mallesons and Norton Rose – have got together and developed a set of model PPSA provisions, including suggested clauses and associated definitions.
Footnotes have been included to explain why they have been drafted the way they have.
Chapman Tripp comment
The model provisions take a balanced approach between the interests of security takers and providers. They should be broadly acceptable to both parties although, inevitably, there will be negotiation from time to time.
Those relating to the granting of security, contracting out of the PPSA and exercise of powers are similar to what we would see in New Zealand. But the Australian provisions retain the concept of revolving or circulating assets which would not normally be in New Zealand documents. These provisions are read in conjunction with the disposals or negative pledge provisions in other transaction documents so should not be more onerous than what we are used to.
These terms have not necessarily been agreed to by the other firms so may not be used by them. However, we are hopeful that these clauses will limit the amount of negotiation on what are relatively mechanical provisions.