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Personal Property Securities Act
Practical Law UK Legal Update 1-501-8546 (Approx. 3 pages)
Personal Property Securities Act
by Nigel Clark and Wayne Fellows, Minter Ellison
| Published on 26 Mar 2010 • Australia |
This article is part of the PLC Global Finance March 2010 e-mail update for Australia.
Speedread
The Personal Property Securities Act 2009 establishes a national law governing security interests in personal property. It represents a monumental shift in Australian law and the way in which security is taken. Among other things, the Act provides for a single register to replace existing ones (including the register of company charges held by ASIC) and a comprehensive national law relating to creation, perfection or registration, priority, extinguishment and enforcement of personal property securities. This article provides an introduction to the Act and some of its key provisions and concepts.
The way in which security is taken in Australia is changing. In a monumental shift of Australian law, the Personal Property Securities Act 2009 (Cth) (Act) will establish a national law governing security interests in personal property.
The Act will establish a register of personal property securities, replacing numerous State registers and the register of company charges maintained by the Australian Securities & Investments Commission.
The Act and the register are expected to commence in May 2011.
Based on personal property security legislation in New Zealand, Canada and the US, the Act will provide a comprehensive national law relating to creation, perfection or registration, priority, extinguishment and enforcement of personal property securities. The Act will apply to financiers, manufacturers, suppliers and lessors of personal property.
Certain interests are excluded from the operation of the Act, such as security interests in land and fixtures, water rights and other types of statutory rights or licences granted by legislation where the legislation declares those licences are not to be governed by the Act (such as mining tenements). Statutory liens and rights to set-off or combine accounts and close-out netting contracts are also excluded.
The Act introduces new key concepts such as:
- Attachment.
- Perfection and temporary perfection.
- Extinguishment.
- Collateral (the property subject to the security interest).
- Personal property.
- Purchase money security interests.
The Act dispenses with artificial distinctions based on the legal form of the security, the legal personality of the grantor (company, individual, other) and the nature and location of the collateral. Rather, it takes a functional approach and applies to transactions which have the effect of securing a payment or other obligation.
The Act extends the concept of security interest to transactions not previously regarded in Australia as security, including:
- A conditional sale agreement (including an ordinary supply agreement subject to a retention of title clause).
- A hire purchase agreement.
- A flawed asset arrangement.
- A lease of motor vehicle or equipment having a serial number, for a term of 90 days or longer.
- A lease or bailment of goods for a term of one year or longer.
The distinction between a fixed and floating charge will no longer apply, with all security interests being fixed. Parties may agree when personal property can be disposed of free from a security interest. In addition, the extinguishment rules in Part 2.5 of the Act describe when personal property may be bought or leased free of a security interest, significantly changing the current law.
The Act allows registration of a security interest for both:
- Offshore grantors if they own or have rights in personal property located in Australia.
- Offshore personal property of Australian grantors.
The Act applies to a security interest if the grantor is an 'Australian entity', such as a company or other body corporate that is incorporated in Australia or an Australian Government entity. A security interest granted by an individual with their principal place of residence in Australia will be governed by the Act.
The Act applies to a security interest if granted by an offshore entity if the interest is over goods or 'financial property' physically situated in Australia, or for uncertificated or e-record based investments if the property is governed by Australian law. The Act also extends to 'investment entitlements' if the intermediary is located in Australia and 'intangible property', such as a debt payable in Australia, Australian bank accounts or if created by Australian law.
In future articles,we will continue our examination of the Act. Preparation for the changes introduced by the Act should start by understanding the types of transactions involving personal property which are now security interests under the Act.