Overall practical results and consequences of the PPSA

The PPSA does away with many of the old problems identified with the patchwork quilt of pre-PPSA laws. The PPSA introduces uniform rules dealing with the attachment, perfection, enforceability and priority of security interests.

A single national register, the Personal Property Securities Register (PPSR), has been established for the registration of security interests and is administered by the Australian Financial Security Authority.

The PPSR is the national online database of security interests in personal property in Australia. The PPSR is the centrepiece of the Personal Property Securities Act 2009 (Cth) (PPSA). Among other things, it allows registration of security interests (the most common method of perfection) and it allows users to search for registered security interests in personal property.

A secured party can register a notice called a "financing statement" on the PPSR, in respect of:

• • a security interest; or
• • certain personal property, including impounded motor vehicles, property confiscated under proceeds of crime laws, and property subject to a court or tribunal order restricting dealings with the property or ordering sale of the property: ss 148(c) and 150(1), PPSA and reg 5.3, Personal Property Securities Regulations 2010 (Cth).

Registration occurs on the PPS Register website.

A registration is effective from the time that it becomes available for searching in the PPSR in respect of the secured party (registration time).

Practice Tip: The PPSR is a risk management tool to protect businesses and individuals from acquiring personal property that may contain an existing security interest in that property. If a business acquires second hand goods or sells on terms, such as retention of title or consignment, or hiring, renting or leasing out valuable goods, machinery, vehicles and equipment, it is advised that the business should search the register for any existing security interests in the property.

See Overall practical results and consequences of the PPSA.

Security agreements under the new system

An agreement which evidences the granting of a security interest in personal property to secure the payment or performance of an obligation is a security agreement for the purposes of the PPSA. A security agreement will be effected according to its terms. New security agreements will need to create a security interest which attaches to identifiable property and avoids some of the pit falls associated with using pre-PPSA concepts in the PPSA environment. The flexibility of the PPSA allows parties who are drafting security agreements to use the provisions of the PPSA.

See Security agreements under the new system.

Changes to and relationship with other legislation

Many of the pre-PPSA laws (or parts of them) that deal with personal property securities have been repealed and replaced by the PPSA. New provisions have been introduced to the Corporations Act 2001 (Cth) to align it with the PPSA. The PPSA also contains provisions dealing with situations where a security interest is governed by both the PPSA and the National Consumer Credit Code.

See Changes to and relationship with other legislation.

Who can search the PPSR?

Any individual who wishes to know about security interests in personal property can search the PPSR. One common reason for searching the PPSR is when a buyer wishes to make sure that the goods that they are looking to purchase do not have finance owning against them. Another common reason for searching the PPSR is to search for existing security interests on personal property, which may affect creditors in liquidation or bankruptcy.

Registration of interest in company collateral

The registration for PPSA security interests granted by a company in collateral should be registered by the latest of the following times:

• • six months before the critical time (such as when the winding up or administration of the company begun);
• • twenty business days after the security agreement that gave rise to the security interest came into force, or the critical time, whichever time is earlier (s 588FL); and
• • a later time ordered by the court under s 588FM.

If the secured party registers the interest after the relevant time period and an insolvency-related event occurs (winding up, appointment of an administrator or execution of a deed of company arrangement) the security interest will vest in the company which granted the security interest.

For example — Company A grants Company B a security interest in all its present property. Company B registers the interest 25 days after the security interest was created. Company A (the grantor) becomes insolvent 30 days after the security interest is granted. The security interest would vest in the grantor because it was not registered within the required 20-day period or within the 6-month period prior to the “critical time”.

Application by courts

In the decisions of Apex Gold Pty Ltd and Cardinia Nominees Pty Ltd [2013] NSWSC 881, the New South Wales Supreme Court extended the time for registration of security interests where they had not been registered within the 20-business day period. It was found in both cases that the delays were the result of a mistake or misunderstanding by their legal advisors.

The significance of timely registration of security interests was considered in Relux Commercial Pty Ltd (in liq) v Doka Formwork Pty Ltd (2014) 104 ACSR 163 and Amerind Pty Ltd (recs and mgrs apptd) (in liq) [2017] VSC 127. These cases indicate that secured parties should ensure security interests are registered within 20 days of creation.

Other dealings on the PPSR

Once a registration has been made, users can amend details (including grantors, description of collateral, end time), discharge or renew the registration, reissue the verification statement, transfer a registration to a different secured party group or ask for a new token (which is used to authorise a user to amend or discharge a registration). Some of these actions may require payment of a fee.

Costs

The PPSR operates on a cost recovery basis. Fees are subject to change periodically. For verification of costs of operating the PPSR, please see the Fees section of the PPSR website.