On 30 January 2012, the Personal Property Securities Act 2009 (Cth) (PPSA) came into effect at midnight. It was one of the most significant commercial law reforms in recent times. But why was it so significant? This article looks at the five key features of the PPSA.
The PPSA completely changed the concept of a security interest under Australian law. Before the PPSA, the term ‘security interest’ was limited to your traditional securities such as mortgages, charges, pledges and assignments. Also, you had to own the property in order to grant a security interest in it.
The PPSA broadened the concept considerably to include non-traditional interests in personal property such as retention of title arrangements, conditional sale agreements, flawed asset arrangements, certain leases, hire purchase agreements and consignment agreements. This meant that many arrangements that were not previously considered security interests suddenly were. In addition, you no longer had to own an asset in order to be able to grant a security interest in respect of it; you could, for example, grant a security interest over property that you were leasing or in the process of acquiring title to (under a retention of title arrangement).
Personal Property in the Personal Property Securities Act
The PPSA affects all security interest in personal property. Personal property covers almost all tangible and intangible property. The key exception is real property. Accordingly, if you are granting a mortgage over your real property, the PPSA will not apply. If personal property is the subject of a security interest, it is called ‘collateral’.
Before the PPSA, there were various asset registers (e.g. aircraft register and ship register). If you were granted a fixed and floating charge over all of someone’s assets (which included an aircraft and a ship), you would have to register the charge on both the aircraft and ship registers as well as with ASIC. Now, you just need to complete the relevant registrations on the Personal Property Securities Register.
Terminology and Concepts
The PPSA introduced a lot of new terminology. We now have ‘security interests’ instead of mortgages, charges, pledges, assignments etc. We also now have ‘General Security Agreements’ instead of fixed and floating charges and ‘Specific Security Agreements’ instead of, for example, share charges.
The PPSA also included a lot of new concepts. We now have the concepts of collateral, attachment, possession, control, perfection, PPS leases, purchase money security interests and serial numbered goods, to name but a few. We look at these concepts in more detail in other articles.
The PPSA was a very significant piece of legislation. The concept of a security interest is a lot broader than it used to be. You must, therefore, ensure that you understand when a security interest has been created and, if necessary, how you can protect your security interests. You should also be aware of the implications of not protecting your security interests. If you are unsure or require advice in relation to this, please do not hesitate to contact LegalVision. One of our PPSA solicitors would be delighted to assist you.
Questions? Call us on 1300 544 755.