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Secure your interest now! How will the Personal Property Securities Act 2009 affect you?

Personal Property as security for credit is an essential part of Australia’s economy. The law underpinning this is undergoing a major overhaul.

The Personal Property Securities Act 2009 (PPSA) is scheduled to commence in October 2011 and will have a significant impact on the core business operations of many industries.

The aim of the legislation is to bring an end to the inconsistent and duplicate laws and registers which presently govern personal securities law in the various Australian Jurisdictions. It will replace 70 Commonwealth and State Acts.

The PPSA’s objective is to :

  • Increase Certainty for holders of competing securities interests;
  • Increase Consistency with consistent and comprehensive legislation;
  • Reduce complexity with simpler registration procedures;
  • Reduce Costs.

Over 40 existing security registers will be migrated to the PPs Register including:

  • ASIC Register of Company Charges;
  • Co-operatives register of charges;
  • Bills of sale;
  • Motor vehicle securities;
  • Ship mortgages;
  • Crop liens;
  • Stock liens;
  • Register of trademarks.

What the PPS Register will Look like

The PPS Register will be wholly electronic and, contrary to current processes, will operate on the basis of notice rather than document registration. Notice can be registered before any secured transaction takes place. One registration can cover multiple security interests.

Under the PPSA it is not mandatory to register your security interests, and there is no time limit for registering. However, failure to register/perfect your interest will have consequences for enforcement and priority. A security interest may be void on the insolvency of the debtor and the security party may lose priority to other perfected security interests as a result of the delay.

What the Register will Cover

The PPSA applies to personal property only, including the following:

  • Charges
  • Mortgages (excluding mortgages over land or water rights)
  • Retention of title arrangements
  • Hire purchase agreements
  • Pledges
  • Trust receipts
  • Leases of goods
  • Consignments
  • Assignments
  • Transfers of title

The PPSA specifically excludes:

  • Land,
  • Fixtures,
  • Water rights,
  • A right, entitlement or authority (including access easements) that is granted by or under the law of the commonwealth, state or territory and declared by that law not to be personal property for the purposes of the act.

The PPSA Register will allow parties to register their interest that comply with the following three elements:

  • An interest in relation to personal property;
  • Provided for by a transaction;
  • That, in substance, secures payment or performance of an obligation.

How will the PPSA’s affect particular forms of Securities

Fixed and Floating Charges

Copies of the security documents will not be included in the PPSA register. Subject to satisfying the basic requirements of the act, the parties are generally free to negotiate the terms, and form, of the security agreement. Information in the register is included by the ‘financing statement’.

The PPSA does not distinguish between “Fixed” and “floating” security interests. There is no ongoing relevance for the concept of ‘crystallisation’ in relation to floating charges and it is open to the parties to agree to circumstances in which the security can be exercised. All securities are effectively “fixed”.

Retention of Title Arrangements

A retention of title (“RoT”) clause is often used by suppliers to retain ownership of or title to goods until the buyer makes full payment.

The PPSA will recharacterise a sale on RoT terms as a “security interests”. This means that the PPSA will treat the purchaser as if it already owned the goods despite the RoT clause, and the seller as only having security over the goods for the amount owed.

After the introduction of the PPSA, sellers who rely on with RoT clauses will have to ensure their security interest is registered and perfected under the PPSA process, otherwise the RoT clause and the security interest it thereby creates may not be recognised.

Review your contracts and Security interests NOW !

Many participating registers will be transferred over to the PPS Register and you do not need to do anything about these. However, there are still many registers that will not be included.

The PPSA allows for the pre loading of financing statements for transitional security interests in the lead up to the PPS register commencing operation. Your current security interests, and contracts creating security interests, need to be reviewed and transferred into the PPSR so that your secured interests, including RoT clauses which were previously unregistrable, are recorded and in the one place. The timing of the registration of your security could have important ramifications for your securities priority.


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Charles Lethbridge

Charles Lethbridge

  • Senior Associate
  • Commercial Litigation
  • Direct line: 07 5506 8240
  • Mobile: 0421 885 195