The Personal Property Securities (PPS) regime was first enacted in 2009 and is proposed to take effect in October 2011 (deferred from May 2011).
The PPS regime will apply to most security interests in personal property and will not only affect all financiers but also many other businesses that will now need to ensure they adequately protect their property rights.
The PPS regime was established and is governed by the following legislation:
- Personal Property Securities Act 2009 (Cth) (PPSA); and
- Personal Property Securities Regulations 2010 (Cth) (PPSR).
Who should be concerned?
If you have been granted a security interest or entered into any arrangements with respect to personal property that constitutes a security interest under the PPS regime you should be aware of the operation PPS regime and how it will affect your business.
Changes introduced by the PPS regime
The PPS regime will replace around 70 pieces of legislation and establish one Personal Property Securities register to replace some 40 registers across Australia.
The PPS regime will create consistency for personal property securities regardless of the:
- Nature of the personal property;
- Type of security;
- Legal personalities of the parties; and
- Australian jurisdiction in which the grantor and personal property are located.
Broadly, personal property is any form of property other than land or buildings and fixtures which form part of that land or anything declared by law not to be personal property for the purposes of the PPS regime.
- Tangible property such as machinery crops and operating equipment; and
- Intangible property such as shares, licences and intellectual property.
The PPS regime employs a wide definition of "security interest" and introduces the concept of deemed security interests.
Broadly, any right or inertest regardless of the type of personal property used as “collateral”, or the party that has title to the collateral, will be regulated as a “security interest” under the regime.
The PPSR provides important details in respect of the operation of a number of aspects PPS regime.
- Limitations on the temporary provisions that will be in effect during the two year transitional period;
- Prescribe the type of information that must be included in financing statements when registering security interests;
- Prohibition of the registration of security interests in respect of personal property that is subject to certain legislation or court orders; and
- Detail the interaction of the PPS regime and the National Credit Code in respect of the enforcement of security interests.
The Personal Property Securities Register
Following the commencement of the PPSA in October, provided rights are recorded within the appropriate time frames, the PPS regime will give the holders of security interests over personal property the benefit of legislative priority and enforcement.
While the priority rules are complicated and contain exceptions security interests that are “perfected” by registration will generally hold priority over an “unperfected” security interest.
Certain existing registered security interests will be automatically transferred to the PPS Register.
However there will be a transition period allowing parties to register on the PPS register:
- Interests that are currently registered but that won’t be automatically transferred;
- Security interests that previously did not require registration; and
- Security interests that previously could not be registered.
What can you do?
Given the time that haspassed since the PSA was passed, many large financiers are likely to already have sought professional legal advice on the PSA regime and adjusted there business procedures accordingly.
However, there are likely to be many small to medium businesses that are in industries that are traditionally not accustomed to registering an interest over personal property that have yet to prepare for the PSA regime. If your business falls into this category it is advisable that you:
- Seek professional legal advice;
- Ensure that relevant staff are aware of what is required under the PPS regime;
- Amend or establish relevant procedures;
- Identify, review and amend relevant documents (such as retention of title clauses); and
- Ensure any existing rights over personal property that can be recorded on the PPS register are registered during the transitional period.