Originally authored by Mark Gordon, Partner, Piper Alderman
Updated by the LexisNexis team
The Personal Property Securities Act 2009 (Cth) (PPSA) commenced operation on 30 January 2012.
The PPSA, the regulations and the register established under them (PPSR) replace, with a single national Act, countless and conflicting Commonwealth, state and territory laws and registers for company charges, bills of sale, ship mortgages, motor vehicle securities, crop liens, stock mortgages and most other securities affecting tangible and intangible personal property rights. The PPSR is integral to the nationalisation of personal property securities law.
In addition to the above, the PPSA also introduced major substantive changes to the law in force prior to 30 January 2012 which are particularly important for creditors, equipment lessors, consignors, retention of title suppliers, bailors, purchasers of accounts receivable and insolvency practitioners. These changes to the law have had a significant effect on documentation, business processes and risk management.
The PPSA allows for the registration of securities that could not be registered previously. These include securities by individuals over intangible property such as goodwill.
The PPSA also applies to charges that apply to security interests granted by both companies and individuals over personal property. One of the major changes to the previous law concerning securities affected by the PPSA, is that interests that were not regarded as securities, eg retention of title clauses and leases of goods, are now regarded as security interests.
Important terminology
The PPSA introduces new terminology and concepts into the laws relating to personal property securities. The PPSA also redefines some terminology and concepts which were used in pre-PPSA laws.
See Important terminology.
Security interests
The PPSA defines security interests as any interest or right in relation to personal property provided for by a transaction that, in substance, secures payment or performance of an obligation: s 12(1). In addition to traditional forms of security such as chattel mortgages, fixed charges, floating charges and pledges, the PPSA deems certain rights in personal property to be security interests such as:
There is also a subcategory of security interests which are deemed by the PPSA to be security interests regardless of whether they secure payment or performance of an obligation: s 12(3). These deemed security interests include:
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the interest of a transferee under a transfer of accounts receivable or chattel paper;
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the interest of a consignor who delivers goods to a consignee under a commercial consignment; and
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the interest of a lessor or bailor of goods under a PPS lease.
See Security interests.
Attachment and perfection of security interests
The PPSA sets out the rules relating to when a security interest will attach to personal property and how a secured party can perfect that interest. A security interest is only effective if it has attached to personal property. A security interest can be perfected by:
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registration;
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possession; and
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control.
Only certain types of property can be perfected by control.
See Attachment and perfection of security interests.
Priority and extinguishment rules
The PPSA outlines general priority rules and specific rules regarding priority of interests arising outside of the PPSA as well as the rules for enforcement. There are also rules applying to non-PPS property. Extinguishment rules apply where collateral is purchase or leased. The extinguishment rules under the PPSA deal with situations when a third party transferee can take free of security interest.
See Priority and extinguishment rules.
Personal property securities register
The PPSA and the register established under it — the Personal property securities register (PPSR) replace the numerous existing Commonwealth, state and territory laws and registers for company charges, bills of sale, ship mortgages, motor vehicle securities, crop liens, stock mortgages and most other securities affecting tangible and intangible personal property rights.
The PPSR is administered by the Australian Financial Security Authority.
See Personal property securities register.
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.