- The Personal Property Securities Act 2009 (Cth) (PPSA) refers to ‘security agreements‘ as the instruments by which security interests are created, arise or are provided for.
- A security interest is an interest in personal property that secures payment of a debt. Personal property is all forms of property other than real estate.
- Secured parties such as financiers and lessors are required to register their security interests on the register created under the PPSA (the PPSA Register).
The PPSA, which commenced in 2012, introduced a national regime that replaced many existing schemes.
The PPSA Register is a single national online register that records the registration of all security interests in personal property.
Registrations on the PPSA Register can include data about the personal property which the grantor is providing a security interest over and, where the grantor is an individual, may contain the grantor’s name and date of birth.
Deemed Security Interests
Certain transactions are deemed to be security interests under the Act. These include:
- the interest of a factor in an account
- consignment arrangements, and
- leases of personal property for a term exceeding 12 months (or three months for motor
- vehicles, boats or aircraft).
- All PPSA security interests will need to be perfected by the procedures set out in the PPSA (which include registration, possession or control). In the majority of circumstances, registration will be the appropriate means of perfection.
- A security interest can be identified by a functional test (where transactions function as a security) or a test to determine whether various arrangements that are not typically thought of as security are in fact PPSA security interests.
- If you are searching the PPSA Register using an individual’s name and date of birth, you may only search for an authorised purpose.
Using the PPSA Register
The PPSA Register is used in many situations including:
- finance companies that provide loans on the basis that they receive a security interest in an item of personal property to register their interest in the property on the PPSA Register;
- business operators who sell personal property on credit, consignment, or on a retention of title arrangement to register their interest in the property on the PPSA Register; and
- consumers who are about to purchase personal property, such as valuable second-hand goods (i.e. a used car), to search the register before buying to make sure that the property is free of a security interest.
PPSA Registration Process
A secured party can perfect its security interest by entering required details about that security interest in the PPSA Register. Importantly, a
secured party does not need to wait until the security interest has been
granted before entering it on the register, and can register a security
interest before it has been granted as well.
A secured party can perfect its security interest by taking possession of the collateral.
A secured party can perfect its security interest over some types of personal property, being bank accounts and certain other financial instruments, by taking “control” of the collateral in a manner specified in the Act.
The Act provides for a number of situations in which a security interest will be taken to be temporarily perfected without any act by the secured party – for example, where property that is subject to a security interest is brought into Australia, or collateral that is subject to a perfected security interest is disposed of in circumstances where the security interest is not extinguished by the disposal.
Where collateral under a perfected security interest is disposed of, and the security interest attaches to the proceeds, the Act also deems a security interest to be automatically perfected.
Frequently Asked Questions about Security Agreements
Q: What is the difference between a charge and a fixed charge?
A: Both terms are no longer used; however, a charge is now known as a security interest that is attached to personal property, whilst a fixed charge is a security interest that has attached to personal property that is not a circulating asset.
Q: Can you keep a security agreement confidential?
A: Confidentiality agreements must be entered into with the debtor, either before the security agreement is executed, or as part of the security agreement.
Q: What are examples of a secured party?
A: Secured parties may include a financier, mortgagee, chargee, lender or lessor.
Q: What is perfection in terms of PPSA Register?
A: Perfection is a form of protection for a secured party that is stronger than the mere attachment of their security interest.
Q: What is attachment?
A: Attachment occurs when the dealer has rights or the power to transfer rights in the goods.
How can LegalVision help me?
LegalVision assists businesses and individuals with tailored online legal advice for a fixed-fee, including reviewing documents to determine whether security interests are granted and draft any required amendments to deal with the PPSA. Call LegalVision today on 1300 544 755.