It is almost 12 months since the Personal Property Securities Act 2009 (Cwlth) (“PPSA”) and the Personal Property Securities Register commenced operation. The PPSA did not just introduce a new registration system for security interests in personal property; it also made some radical changes to the law. Financial institutions and corporates have spent the year grappling with the new registration system and those changes in law.
As we head towards the first anniversary of the PPSA, and reflect back on our experiences this year, there are many areas where we think the PPSA and the operation of the register could be improved and a degree of certainty of outcome re-introduced into commercial dealings between parties. Here are some suggestions at the top of our wish list:
- Ensure a consistent approach to releases of collateral. The register does not permit collateral classes in a registration to be amended. But the PPSA permits a person with an interest in collateral described in a registration to require a secured party to amend the registration to omit collateral described in the registration which does not secure any obligations owed. This inconsistency between the PPSA and the functionality of the register should be resolved, and parties afforded a way of disclosing releases of collateral on the public register.
- Modify the 20 business day deadline for registrations against aircraft. Security interests granted by a company must be registered within 20 business days after the date the agreement giving rise to the security interest came into force. If a registration is made after this time, the security interest remains subject to a vesting risk for 6 months after registration. If a security is taken over all the assets of a company and it later acquires an aircraft, the secured party will need to register the serial numbers of that aircraft if the secured party wants a perfected security interest in the aircraft. However, if the aircraft is acquired after the expiry of the 20 business day period, the registration will already be out of time, with potentially material and adverse consequences for the secured party.
- Give courts the power to provide relief for minor errors in registrations. An error can invalidate a registration, and the design of the PPSR and the complexity of the PPSA makes it very easy to make a minor error. The PPSA does not give a secured party the ability to seek court orders to rectify errors in a registration (although the court can grant an extension of time if a secured party fails to register against a corporate grantor within the prescribed 20 business day period ). Enabling the court to make ancillary orders to allow correction of registrations when appropriate would protect secured parties from harsh consequences for minor registration errors. Such provisions are included in PPS legislation in other jurisdictions (such as in Canada).
- Give secured parties more time to react to certain events. Various provisions require secured parties to take action to protect their interests. This period is usually 5 business days. Failure to meet the deadline can have serious consequences for a secured party. For example, if the grantor of a registered security interest changes its name, and the secured party acquires actual or constructive knowledge of the change, they must register a financing change statement within 5 business days to ensure that the registration remains effective. This time period is far too short for a large organisation to react. Longer time periods apply in PPS legislation in other jurisdictions (such as Canada, New Zealand and the United States).
- Allow parties to maintain confidentiality in relation to security agreements. Under the PPSA, copies of security agreements are not necessarily recorded on the register, but secured parties must provide copies of security agreements to certain persons on request unless exceptions apply. Since the concept of a security interest under the PPSA is broader than under pre-PPSA law, many commercial agreements may constitute disclosable security agreements. As a result, secured parties and grantors are concerned that documents containing legally or commercially sensitive material may become publicly available. These concerns could be alleviated if the PPSA permitted secured parties to redact information which does not relate to the security interest or the nature of the obligation secured.
- Allow translation of foreign names to be entered in the register. When registering a security interest, a secured party must enter the name of the grantor (and the secured party) as set out in various authorised sources. It is not possible to enter foreign characters (or accents for that matter). Where the exact name in the authorised source includes such characters or accents, this means that it is not possible to make an effective registration. One way to overcome this would be to permit translations of foreign names to be entered, and accents in names to be omitted.
- Verify grantor details as part of the registration process. When a security interest is registered, the register does not verify the grantor details against other registers such as the National Names Index (for ACNs) or the Australian Business Register (for ABNs). Such a verification process would reduce the risk of error in grantor names.
- Streamline searches so multiple searches can be performed using single criteria. It should be possible for multiple searches to be made against single criteria. For example, a grantor search using the ACN should search for the ACN in all the unique identifier fields in case the ACN has been entered in another field (for example, if the ACN has been entered in the grantor name field, which is both possible and effective).
- Present search results in a more user-friendly way. Where a search discloses multiple registrations, users must click on separate search results to view and print each individual search result. It would greatly enhance the user-friendliness of the register if it were possible to review multiple search results in a single screen and to print a report with all the results.