Personal Property Securities (PPS) reform will dramatically change the current law and practice relating to security interests over assets other than land and similar transactions. It will affect a wide range of services and businesses, not just those in the finance sector.
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The Personal Property Securities Act 2009 (Cth) is on track for commencement before February 2012. That may seem a long way off, but the New Zealand experience indicates that the time will barely be adequate for businesses to make the changes necessary to comply with the Act and you should start preparing now.
Some key features
Allens has been involved in helping to shape the legislation. Watch Partner Diccon Loxton give an overview of what PPS reform is and how it will work. Watch Partner Steve Pemberton talk about what PPS means for businesses and various industries.
PPS reform is contained in more than 300 pages of legislation and contains radically new concepts and rules.
Some of the key features of the PPS reform are as follows.
- The Act fundamentally alters the law of 'security interests' in personal property, and some aspects of commercial law, for example assignability of contracts and negotiability.
- It uses a 'substance over form' approach to defining a security interest. It also deems commercial consignments, certain leases and bailments and assignments of some accounts receivable to be security interests even where they do not secure money.
- In some cases it will be irrelevant who has title to an asset.
- There will be a national electronic register, which should be easy to use.
- Perfection is necessary to ensure a security interest has priority over other security interests and is effective in a winding up. Perfection can be via registration, possession, or (in the case of some financial assets) control.
- The rules regarding priority and when an asset can be transferred free of a security interest are complex.
- 'All assets' charges will continue to be possible. However, there will be a much longer list of circumstances in which the secured party can lose priority or security over the asset, even when the party buying or taking security over the asset has knowledge of the earlier security interest. This is a weakening from the current position and will require secured parties to take extra steps to protect their position.
- There are some proscriptive rules for enforcement but, except in the case of consumer property, these rules can generally be contracted out.
