The Personal Properties Securities Act (2009) (Cth) (PPSA) is a serious reform that is scheduled to come into full force and effect in May 2011. The PPSA will require mining companies, contractors and their suppliers to evaluate their supply contracts, joint venture arrangements, equipment hire and other arrangements that involve ‘personal property’.
This is the first in a series of articles dealing with the Personal Properties Securities Act (2009) (Cth) (PPSA). This article is intended to alert readers to this important legislation and its potential effects on their business.
The PPSA is a serious reform that is scheduled to come into full force and effect in May 2011. The intent behind the PPSA is to create a single register where all forms of ‘security interests’ in respect of ‘personal property’ must be registered. Failure to register an interest may mean that the interest is lost through a subsequent transaction involving the ‘personal property’.
The types of ‘security interests’ which must be registered and the definition of ‘personal property’ is significantly broader than the types of interests and types of property which are currently subject to registration. This is one of the many reasons why the PPSA requires careful consideration.
The government hopes that this single register, together with broader registration requirements for types of security interests and personal property, will mean that when buying or selling ‘personal property’ or taking security over ‘personal property’, entities will be able to transact with confidence because it will be easier to see if the ‘personal property’ in question is already subject to any third party interests.
As far as the resources industry is concerned, the PPSA will require mining companies, contractors and their suppliers to evaluate their supply contracts, joint venture arrangements, equipment hire and other arrangements that involve ‘personal property’.
What is ‘personal property’?
Broadly, ‘personal property’ is defined as all tangible and intangible property (including intellectual property). Land and some statutory licences are excluded from the definition of ‘personal property’.
The PPS Register and ‘security interests’
As indicated above, the PPSA and its associated regulations establish one central register (PPS Register) administered by the Commonwealth of Australia to cover all forms of ‘security interests’ affecting ‘personal property’.
A ‘security interest’ is defined broadly as an interest in personal property arising from a transaction that, in substance, secures payment of money or the performance of an obligation.
How it affects you?
When the PPSA comes into force, mining companies, mining contractors and suppliers will need to carefully consider how they protect ‘personal property’ which they own or which they have an interest in. As indicated above, failure to protect (ie register) an interest may mean that the interest is lost.
Set out below are a number of examples of interests which would need to be registered:
- Joint venture agreements – Interests arising under cross charges and some default clauses in joint venture agreements will fall within the PPSA regime and will need to be reviewed. In particular, new cross charges will require specific drafting changes to deal with the changes introduced by the PPSA.
- Equipment hire – Any equipment lease or bailment involving plant or equipment may require registration in order to protect the interest which the owner of the plant or equipment has in the equipment.
- Retention of title – Any supply contract that contains a retention of title clause will need to be reviewed and may require registration.
- Farm ins/farm outs – Farm in/out arrangements will need to be considered where title is retained by one party or the other where the farm in work is yet to be completed.
- Commingling of product – The PPSA could impact arrangements which involve the commingling of product such as a stockpile.
In the coming months, we expect the government to make more information available about the PPS Register, the registration process, the migration of existing registers (such as the ASIC register) and state legislation which is required to give operational effect to the PPSA