The Personal Property Securities Act 2009 (PPSA) is expected to commence operation from 30 January 2012. The commencement of the PPSA will see the introduction of new processes which will govern how individuals can register security interests in personal property. 

The PPSA will change how businesses and people deal with personal property and security interests over personal property.  Personal property is all forms of property other than real estate.  A security interest is an interest in personal property that in substance secures payment of a debt or other obligation regardless of the form of the transaction.

The PPSA will affect a wide range of businesses not just those in the banking and finance sector. Don’t get caught out - all businesses need to be aware of the PPSA and its impact. It is not a matter of will the PPSA impact your business but how will it impact your business.

The commencement of the PPSA will introduce a single national law and a single national register of security interests in personal property, replacing  a number of existing Commonwealth and State registers including the ASIC charges register, REVS and Bills of Sale registers.  The PPSA will also cover transactions not currently considered registrable securities such as retention of title clauses, financing leases and leases of personal property for a term exceeding 12 months (or three months for motor vehicles, boats or aircraft).

Under the PPSA, the classes or types of assets that can be considered ‘personal property’ against which a security interest can be registered will be expanded.  For example; machinery and equipment, book debts, inventory of a company, motor vehicles, company shares, receivables, farm crops, trade marks and other forms of intellectual property will be personal property against which a security interest can be registered. 

Once the PPSA commences, if you do not register your existing or future security interests in personal property you risk ‘losing’ your security interest.  The effect of ‘losing’ your security may mean that the security interest holder may lose:

• priority over secured property to another creditor; or
• title to your personal property if it is left in the possession of someone else (eg. if they sell it or if they go into liquidation, voluntary administration or bankruptcy).

Set out below are examples of the types of business activities which may be impacted by the commencement of the PPSA.  If these are matters that are relevant to your business, we suggest that you contact Hemming+Hart Lawyers to discuss how the PPSA may affect you:

• Do you own personal property that could be in someone else’s possession for longer than 90 days?
• Do you consign goods to other people to sell?
• Do you manufacture and sell goods?
• Do your conditions of sale state that you retain ownership until you are paid (i.e. retention of title or Romalpa clause)?
• Do you lease goods or chattels, whether on their own or as part of a lease of land?
• Do you have security over a motor vehicle, boat or aircraft?
• Do you have security over property which has serial number identification?
• Are you involved in transactions under which debts are assigned to you?
• Are your security agreements in writing?
• Are your security agreements registered on existing registers?
• Do you lend money or extend credit for the purchase of inventory or particular items of personal property?
• Do you take security over intellectual property e.g. design, patent, plant breeder’s right or  trademark?
• Have you granted “fixed and floating” charges or have they been granted to you?
• Do you deal in livestock, crops or equipment that is not in your possession?
• Do you buy or sell personal property either with real estate or on its own?
• Do you provide hire-purchase finance?
• Do you include charging clauses in your standard documents to give you security for an obligation?
• Do you take control of your customer’s bank accounts to secure obligations owed to you?
• Does any existing agreement, to which you are a party, include provisions which create security over property to secure the obligations of a party under the agreement (i.e. joint venture agreements, shareholder’s or unit holder’s agreements, licensing agreements, franchise agreements etc)?

This list is not exhaustive and if your business deals with personal property you should seek specialist advice regarding how your business will need to adjust its activities so that it can obtain the maximum protection for its security interests.

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In most cases, security interests regulated under the PPSA will need to be registered on the new national securities register, the Personal Property Securities Register (PPSR).  There is every indication is that the PPSR will ‘go live’ to the public from 30 January 2012.

Existing public registers such as the ASIC charges register, REVS and Bills of Sale registers will effectively be transferred onto a single register – the PPSR, once the PPSA has commenced.  Currently, the security interests recorded on these public registers are in the process of being migrated to the PPSR.  From the commencement of the PPSA companies and individuals will need to register these types of security interests on the PPSR.

The PPSA provides for certain ‘transition’ arrangements for security interests that are not currently registrable (these include arrangements such as retention of title, chattel leases, commercial consignments, bailments and vendor finance arrangements).  These pre-existing security interests will have a degree of protection for a period of two years after commencement of the PPSA.  We suggest that businesses and individuals register these security interests on the PPSR within that two year period.  In particular registration is strongly advised where it is expected that a security interest in personal property is to last longer than two years.  Depending on the nature of the security interest held, there are additional steps that a secured party should take during this transitional period in order to ensure that its security interests are not affected. 

In most instances it will be essential to register your security interests on the PPSR.  Registration of a security interest on the PPSR will be the most certain process available to give the security holder priority against other persons who may wish to claim that personal property.  Any delays in registering your security interest or inaccuracy in registration details could have significant consequences for your business.  Businesses will need to be aware of the time limits which may apply to the registration of certain security interests.

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Businesses should now, in the period prior to the expected commencement of the PPSA review how they engage with customers, from the opening of an account, to the enforcement of a security interest under a security agreement. 

Now is the time for businesses to seek advice regarding the changes required to standard documentation in order to ensure that the documentation and agreements used by a business and the business processes in place are aligned with PPSA regime.  Any business impacted by the PPSA should consider updating its documentation (e.g. credit applications, leases etc) and business procedures (for example what part of the business will be responsible for the registration of security interests of the business) in order to maximise the benefits which the commencement of the PPSA offers.

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