The introduction of the PPSA has changed the process for releasing registered security interests on the completion of a transaction. Parties may find that the absence of a signed ASIC Form 312 raises the practical issue of how a borrower or incoming financier receives assurance that the registered security will be released from the PPSR.
Prior to the introduction of the Personal Property Securities Act 2009 (PPSA) and the Personal Property Securities Register (PPSR), notification to ASIC of partial or full discharges of securities over personal property occurred through the lodgement of an ASIC Form 312. During settlement of a transaction, the security holder would hand over the ASIC Form 312 to the borrower or other incoming financier.
However, ASIC no longer accepts Forms 312 due to the new regime under the PPSA, as all registrations of security interests in respect of companies are now made on the PPSR. Accordingly, all releases of securities are now conducted online on the PPSR.
This raises a practical issue of how a borrower or incoming financier receives assurance at settlement of a transaction, because no document is handed over signifying that the security will be released. Except in certain circumstances, only the secured party has the right to remove a registration of a secured interest.
Under the PPSA, for those transactions where the collateral (i.e. the property) is consumer goods or registered by serial number, the secured party has a statutory obligation to register a Financing Change Statement to discharge any associated registered financing statement within 5 business days of the customer and/or grantor paying all amounts outstanding.
There is no equivalent requirement for other collateral.
This essentially leaves the parties at settlement with three options.
First, the parties could bring a computer (connected to the internet) to the settlement and the secured party could discharge the security in front of the grantor/incoming secured party and provide acknowledgement or verification from the PPSR system on which the incoming party could rely.
Second, the secured party could provide the grantor/incoming secured party with the security registration number, secured party group number and a code (known as a ‘token’) so the grantor/ secured party can discharge the security at their convenience – this option poses security risks if the token is revealed. It is unlikely that this practice will be adopted, particularly by larger financiers such as banks.
Third, the secured party could sign/ execute at settlement a deed poll stating that they will register the release of the security interest.
We recommend both the first and the third options as the most practical solutions. Even when a discharge of the security is done by computer at settlement, the security holder should execute/sign a deed poll of release whereby the security holder undertakes to register a Financing Change Statement within 10 business days to deregister and release the security interest on the PPSR.
It is prudent practice for the grantor to undertake a search of the PPSR in due course to ensure that the security interest has been removed from the Register.
In the event that the registration is not removed, an application can be made to the Registrar for assistance by lodging an Amendment Demand. This allows a grantor and certain other parties to require amendment or removal of a registered financing statement.