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Contract Law News August 2011

Are you ready for the new PPSA regime? Be aware of the “transition” provisions

In the past, we have provided articles on the new Personal Property Securities Act 2009 [“the PPSA”] that is now due to come into force in late October 2011. We now provide you with a further update and summary regarding the provisions.

As we have said before, the PPSA will replace over 70 pieces of legislation throughout Australia when it comes into force in October and will change concepts of ownership and priorities. The legislation will apply to goods including financial instruments,  intellectual property, company charges, motor vehicles, and goods supplied under retention of title arrangements. 

Transitional Security Agreements

A security agreement will be a “transitional security agreement” if it exists before the commencement of the Act in October 2011. If such an Agreement allows for future security interests to be granted, then supplies of goods made under this Agreement, will be referred to as a “transitional security interest”.  The “transitional security interests” will still need to be registered on the PPS “Transitional” Register.

Security interests [supplies of goods] that are not the subject of a an Agreement in force before the commencement date of the new Act, will need to be registered on the PPS Register in a separate registration. These interests will have to be the subject of a separate “Security Agreement”

Transitional Security Agreements can form either Migrated or Non-migrated Security Interests. 

Migrated Interests are the Interests which are registered on the Transitional PPSA Registers and will be pulled across to the ordinary PPS Register. These Interests will be deemed to be registered from immediately  before the date for commencement of the PPSA  until the time the security interest no longer exists in the property. The registration of the migrated security interest before the commencement of registration will give these interests priority over new security interests registered at or after the registration time commences.

Non-migrated Security Interests refer to Interests that are not automatically migrated onto the PPS Register. These will be temporarily perfected under the Act until the Security Interest no longer exists or after a period of 24 months after the PPSA commencement time [whichever is the earlier] This will give the  holder of the Non-Migrated Security Interest the opportunity to perfect their interest  and give them priority over other people claiming a security interest in property within the first 2 years of operation of the Act.

Exclusion from Temporary Perfection

Be aware, that Security Interests that have been registered incorrectly, will not be migrated to the PPS Register. So, even though these are Non-Migrated Security Interests they will not get the Temporary allowed for Non-Migrated Security Interests. 

Therefore, it is essential that any Security Interest you hold is reviewed and registered correctly at the time of commencement of the Act in October 2011 for you to receive priority over other registered interests.

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