New national laws introduced by Personal Property Securities Act 2009 will govern personal property security interests. These new laws change the way any person or company either gives or obtains security for any credit transaction.
These new laws will control strictly the credit arrangement, registration, and ability to enforce the security for the debt.
It is imperative to prepare immediately for the introduction of these new laws. The consequence for not implementing the new requirements is that, for example, suppliers may not be able to recover goods sold on credit (previously held under retention of title clauses) and lose priority rights over other creditors. These consequences also apply to liquidators or other insolvency arrangements.
APPLICATION OF PERSONAL PROPERTY SECURITIES ACT
Govern the creation, perfection or registration, priority, extinguishment and enforcement of personal property securities;
Apply to transactions that secure a payment or other obligation, such as retention of title clauses in credit sales;
Establish a single register of personal property securities, replacing State registers and the ASIC register of company charges;
Apply to financiers, manufacturers, suppliers, and lessors of personal property;
Introduce new security concepts not previously applied in Australia and change the underlying principles of security, for example, they remove the distinction between a fixed and floating charge with all security interests being fixed. Parties can agree when personal property can be disposed of free from a security interest;
Apply to a security interest if the grantor is an 'Australian entity', such as a company or other body corporate incorporated in Australia or an Australian Government entity;
Apply to a security interest granted by an individual with their principal place of residence in Australia;
Apply 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, and
Extend 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
The new laws will not apply to:
Security interests in land and fixtures, water rights, and statutory rights or licences granted by legislation where the legislation declares those licences are not governed by these new laws (such as mining tenements), and
Statutory liens and rights to set-off or combine accounts and closeout netting contracts
The legislation introduces new concepts that include:
Perfection and temporary perfection;
Collateral (the property subject to the security interest);
Personal property, and
Purchase money security interests.
The concept of security interest will extend to transactions that include:
Conditional sale agreements (including an ordinary supply agreement subject to retention of title clause);
Hire purchase agreements;
Flawed asset arrangements;
Leases of motor vehicle or equipment having a serial number, for a term of 90 days or longer;
Lease or bailment of goods for a term of one year or longer
Registration and accurate identification of the security in the register is critical to the supplier’s security being enforceable-“...its all in the timing...”
By not registering within the prescribed time and not accurately identifying the goods or property that are being secured will result in loss of security
The new laws also allow registration of a security interest for both offshore:
Grantors if they own or have rights in personal property located in Australia
Personal property of Australian grantors
Although, this brief outline only highlights some pertinent issues, which may or may not yet affect you; we suggest that you call 9646 0344 to make an appointment and meet with us to focus on your specific circumstances and evaluate how the new laws affect your business. This will allow you to prepare and implement the necessary changes on time.
NEED MORE INFORMATION
Behan Legal assists and advises on these important issues. For an appointment, call 03 9646 0344