What is the PPSR?
The Australian Personal Property Securities Register (PPSR) commenced in 2012, with a transitional period until 2014. The Australian PPSR is modelled off similar regimes that exist in other countries, including New Zealand and Canada.
The PPSR operates under the Personal Property Securities Act 2009 (Cth) and is administered by the Australian Financial Services Authority (AFSA).
The PPSR contains an online register of security interests and can be used to determine the enforcement and priority of those security interests. When it commenced, the PPSR replaced several other state and territory registers, such as REVS and the ASIC Register of Company Charges. It also replaces common law “retention of title” clauses.
Purchasers of goods can check the register to ensure the goods they are buying are not subject to a registered security interest (also known as an “encumbrance”), and lenders or suppliers can register security interests to protect the goods they supply.
What is a Security Interest?
A security interest is a legal interest that one party holds over another party’s property. Usually the interest must be created by a contract (known as a Security Agreement), and a security interest often includes the right to take possession of (seize) the property if the person defaults or breaches the contract.
The property subject to a security interest is known as Collateral. The person who holds the security interest is called a Secured Party and the person who grants the security interest is called a Grantor.
A common example of a security interest is the rights of a supplier or lender over property that is purchased on credit (eg extended payment terms), but it can also include interests over goods that are leased, hired, rented or consigned.
For a security interest to be legally effective, several requirements must be met:
- the interest must be legally enforceable (ie the underlying contract must be legally valid)
- the security interest must attach to particular collateral
- the security interest must be perfected, by registration of the security interest on the PPSR when required by law.
If a security interest is required to be registered, but is not correctly registered, it is unperfected. This may mean that the security interest cannot be enforced and the creditor (eg supplier or lender) may be unable to recover the collateral, or its value, if the debtor (eg borrower or purchaser) breaches their contract, or goes into liquidation.
Why engage a professional?
The PPSR has cheap, do-it-yourself options. However, despite being inexpensive, the legislation has strict requirements, including:
- correct identification of both the secured party and the grantor
- correct identification of the goods (collateral) being secured
- ensuring the underlying security agreement is legally effective
- time limits for effective registration
Mistakes, incorrect documentation, incorrect registrations and out-of-time registrations can lead to the security interest being ineffective and unenforceable.
Mirai Legal provides advice and assistance for protection of security interests on the PPSR.
If you are a supplier or lender, we can assist with preparation of the necessary contracts and lodging effective registrations on the PPSR.
If you are a purchaser or borrower, we can assist with reviewing agreements and advice on the proposed transactions.
We can assist with:
- PPSR Searches
- PPSR Registration
- security interest portfolio management
- contract preparation & negotiation
- related advice on asset protection
Contact us today for further information.
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