The Personal Property Securities Act 2009 (Cth) (PPSA) has had a marked impact on the law and practice relating to security interests over personal property (other than land, statutory licences/liens and similar transactions). Following practical commencement of the PPSA on 30 January 2012, its effect has been felt across a wide range of services and businesses.
Some key features
Allens was involved in helping to shape the legislation which is over 300 pages long and contains new concepts and rules.
Some of the key features of the PPSA are as follows.
- The PPSA dramatically alters the law of 'security interests' in personal property, and certain critical aspects of commercial law, for example assignability of contracts.
- It uses a 'substance over form' approach to defining a security interest.
- It also applies to some transactions that are not 'in substance' a security interest. (For example, commercial consignments, certain leases and bailments and assignments of some accounts receivable are deemed to be security interests.)
- In many cases, it is irrelevant who has title to an asset. This means that secured parties must ensure that 'risky' businesses have established robust PPSA compliance programs.
- A security interest must be perfected to ensure it has priority over other security interests and is effective in a winding up. Perfection can be via registration (on the national electronic register of security interests), possession, or (in the case of some financial assets) control.
- The expanded concept of a security interest means that registration is required for many types of commercial arrangements that were not previously registrable (eg, PPS leases (leases or bailments (including operating leases) for a term of more than one year or an indefinite term, and commercial consignments).
- The rules regarding priority and when an asset can be transferred free of a security interest, and the effect on proceeds, are complex.
- 'All assets' security interests are still possible (now under documents call 'general security deeds' or 'general security agreements' (or 'GSD' or 'GSA')). However, there are many circumstances in which the secured party can lose priority or security over an asset, even when the party buying or taking security over an asset has knowledge of the earlier security interest. This requires secured parties to take extra steps to protect their position.
- There are specific rules that apply to commingled goods, purchase money security interests (PMSIs), serial numbered goods and collateral subject to 'control' (such as ADI accounts and receivables).
- There are extensive rules for enforcement but (except in the case of consumer property) a number of these rules can be contracted out.
Read about Personal Property Securities reform in Papua New Guinea.