The implementation of the new Personal Property Securities Register (PPSR) will affect most Business across Australia. Business owners and individuals who take security interests over personal property will need to understand the new system and how it differs from the existing registries. We will run through the some of the terminology and benefits of the new Register as well as provide some helpful information about ensuring your security interests are protected.
In the same way that you can lose your interest in a house if you do not register that interest on the title. You can also lose your interest in any personal property in which you have taken an interest if it is not registered. If you operate a business where you retain title to goods until you receive payment then these changes have a particular impact on you.
What is a personal property security?
1.1 A personal property security interest arises when an individual or corporate entity takes an interest in property, other than land, as security for the performance of some obligation such as repayments under a loan agreement.
1.2 The granting of security interests is a way in which Businesses can raise capital. It provides lenders and financiers with greater security when lending money to a Business by giving them access to and possession of the secured property in the event that the Borrower defaults.
What is the Personal Property Securities Register?
2.1 The PPSR will take most the existing national, state and territory registers currently being maintained and roll them all into a unified, national register of personal property security interests.
Benefits of the new system
3.1 The PPSR will make it easier to register your security interest in personal property.
3.2 The PPSR will allow interested parties to more efficiently investigate whether certain personal property is subject to any security interests. For example, if an item such as a car has gone through a number of different owners in different states and all the owners have obtained finance to purchase the car, you will no longer need to search each state’s registries to determine what encumbrances there are over the car. As a purchaser of the car or a financier, the only security interests affecting the car as far as you are concerned are those listed on the PPSR.
3.3 Furthermore, given how much easier it will be for financiers and lenders to verify whether your property is encumbered, it will be easier to use personal property in raising capital for yourself or your business.
When does it take over from the existing system?
4.1 The new PPSR is scheduled to start in October 2011.
Why do I need to register my security interests?
5.1 Failure to register a personal property security may have significant consequences. For instance, your interest would be defeated by a registered security holder even if that security holder obtained their interest in the property at a later date than you. In addition, you would not be able to enforce your interest in the event that the grantor of the security goes into liquidation, administration or is declared bankrupt. This may cause you significant financial loss.
What do I need to do about my existing security interests?
6.1 Many of the security interests currently on existing registers will be automatically migrated to the PPSR. These include:
6.1.1 Company charges currently listed on the ASIC register;
6.1.2 Motor vehicle securities listed on the respective states’ Register of Encumbered Vehicles; and
6.1.3 Bills of Sale Registers.
You should check the migrated data when the register goes live and ensure that any existing interests you have on these registers are correct.
Please note that for security interests over motor vehicles, boats or aircraft, you will need to ensure that the Vehicle Identification Number (VIN) of the vehicle is noted on the register. This is an essential identifier of this type of property on the register. If it is not noted, persons searching the register may be regarded as bona fide third parties without notice of your registered interest. This would result in their later registered interest in the property being given priority over your earlier one.
6.2 There are some registries which will not be automatically migrated. These include the IP Australia registries of patents and trademarks. There is a 2 year transitional registration period in respect of these security interests. During this two year transitional period, your security interests over intellectual property currently recorded in the registers of Patents, Designs or Trademarks will continue to be effective even without registration on the PPSR. However, after that 2 year period, you must have registered these interests on the PPSR or risk having your interest postponed by later security interests in the same property which are registered on the PPSR.
6.3 Some security interests which are not traditionally regarded as security interests including retention of title clauses, hire-purchase agreements and leases of goods should be registered on the PPSR. These interests are also regarded as transitional personal property security interests and will continue to be effective, without registration, for two years after the commencement of the PPSR. After that time you need to ensure that any security interests of this kind that you have are registered.
When do I need to register my security interests?
7.1 For transitional personal property securities, you have two years to register the interest on the PPSR. Upon registration, your security interest will be given the same priority it would have received if it were registered immediately upon creation.
7.2 Any new security interests granted by companies must be registered on the PPSR within 20 business days following their creation. Should you fail to register the interest within this time period, the interest will be postponed to the interests of a registered holder of a later security (provided that they acted in good faith without prior notice of your unregistered security). It will also be invalid against any liquidator or trustee in bankruptcy appointed within 6 months of the date of creation of the security interest.
How much does it cost to register a security interest or search the register?
8.1 Although the costs of registration are not yet confirmed, the Registry estimates that the cost of registering an interest on the PPSR will be between $5 and $10.
8.2 The cost of searching the Register is expected to be less than $5 per search.
How do I find out more?
9.1 If you deal a lot in personal property securities you should consult your legal and financial advisers in order to ensure that your interests are properly protected under the new scheme. You can also visit the PPSR website which contains further information about transitional arrangements and FAQs.