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Contract Law News December 2011
Personal Property Securities Act: changes to affect retention of title, off-site storage and security over assets
Do you sell goods on terms that include a Retention of Title clause? Do you store goods off site? Do you wait for payment of goods sold to your clients until an event occurs? Do you take security over other parties’ assets for debts owed to you? These are just some of the circumstances that will be fundamentally affected by the Personal Property Securities Act (PPSA).
The new PPSA is due to come into force (as far as we can estimate) on 30 January 2012. We have discussed this new regime in many of our previous issues and we now provide you with a summary of the new provisions. The PPSA will replace over 70 pieces of legislation throughout Australia when it comes into force 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 defined as a “transitional security agreement” if it exists before the commencement of the Act. 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 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.
In short, if you have security interests in goods you want to protect then:
- It is essential that any Security Interest you hold is reviewed and qualifies as a property Security Interest under the new PPSA. The agreement or document that is the source of your interest in Goods belonging to other people will need to be reviewed to ensure it is properly classified as a “security interest” and “Collateral”
- You will need to register your interest in your Goods, or the Goods belonging to others (e.g. in a company charge arrangement) on the Personal Properties Security Register at ITSA (the Insolvency Trustee Service of Australia). The Register is operated online. You can create an online account either before 16 December 2011 or once the PPSA comes into force on 30 January 2012 registered correctly at the time of commencement of the Act for you to receive priority over other registered interests.
Contact us if you require a review of your consignment, hire/purchase or supply agreements and/ or your charges over companies and their assets and we can advise you on what you need to do to secure your interests.
