The Personal Property Securities Act 2009 (Cth) ("PPSA") will have a significant impact on the taking, registration and enforcement of security over almost all kinds of property, except land. The PPSA overturns fundamental property law concepts including the long held concept of legal title. A complex set of rules will now govern the enforceability of security interests. The commencement date for the PPSA is 30 January 2012. This guide briefly explains how the PPSA may affect your business ("you", "your") and what you need to be doing now, with our assistance, in order to protect its assets.

How the PPSA may affect you

  • Fixed and floating charges – your existing charges (both as chargee and chargor) registered with ASIC will be "migrated" to the PPSA Register ("PPSR") – a single national internet-based register available 24/7. The concept of fixed and floating charges will be replaced under the PPSA by "security interests over non-circulating assets" and "security interests over circulating assets" respectively.
  • Retention of title ("ROT") – any supply of goods by you under a contract/purchase order that contains a ROT clause will need to be reviewed and may require registration as a purchase money security interest ("PMSI"). Currently, a supplier of goods under ROT may retrieve its goods on the insolvency of the counterparty. Following the PPSA commencement date, unless the ROT supplier registers a PMSI as a security interest on the PPSR, the goods under ROT may become the property of the company in liquidation and amount to a windfall to its creditors.
  • Equipment hire – any equipment lease of more than 12 months may require registration in order to protect the interest which you have in the equipment.
  • Serial numbered goods – any lease of serial numbered goods (eg dump trucks and other motorised mining equipment with a speed of more than 10kph) of more than 90 days may require registration in order to protect the interest which you have in the goods.
  • Inventory and temporary works – currently, as in ROT above, a contractor's title to inventory and temporary works is assumed and is not under threat. Under the PPSA, your title in any inventory and temporary works located on a principal's land/property may be at risk of being defeated by creditor's claims unless registered on the PPSR.
  • Joint venture agreements – interests arising under cross charges and some default clauses in joint venture agreements will fall within the PPSA regime and will need to be reviewed. In particular, new cross charges will require specific drafting changes to deal with the changes introduced by the PPSA.
  • Other considerations – hire purchase agreements, conditional sale agreements, transfers of accounts receivables, confidentiality obligations (amongst others) will also be affected.

How can we assist?

The ILH PPSA team can assist you by:

  • identifying existing security interests and whether these will be the subject of automatic migration or whether new registrations should be made;
  • reviewing the terms and conditions of your contracts including standard terms of trade particularly given that ROT interests, whilst currently not registrable, should soon be registered;
  • amending your standard contracts to be PPSA compliant by taking into account the new terminology and rules relating to attachment, perfection and priority of security interests as well as the PPSA rules affecting issues such as confidentiality, assignment and negative pledges;
  • advising on PPSA and other matters with regard to all new contracts/tenders;
  • assisting with the registration of security interests on, and searches of, the PPSR; and
  • consulting with you as to the risk of not registering a security interest on the PPSR (this is dependent on the credit worthiness of your customers/suppliers and on the cost/benefit of registration).

Winners of the 2010 Lawyers Weekly e.law Asia Pacific Box Breaker of the Year Award and the 2009 NSW Exporter of the Year Award

The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.