Managing the Transition to the PPSA

7 March 2012

As you are aware, the Personal Property Securities Act (PPSA) came into effect on 30 January 2012. The PPSA establishes a new national PPS Register (‘PPSR’) of security interests in personal property and replaces over 70 registers across all states and territories.

The PPSA includes transitionary provisions which cover the protection of for pre-existing interests for up to 24 months. This allows time for holders of interests that existed prior to 30 January 2012 to take the necessary steps to properly register their existing interests on the PPSR.

Transitional Security Interests

For your pre-existing interests to fall within the transitionary provisions of the PPSA, the following must apply:

the interest must be one applicable to personal property that is subject to the PPSA and it must be an interest that secures the payment of money or the performance of an obligation; and
the interest must be granted prior to 30 January 2012, irrespective of whether it takes effect after 30 January 2012, and it must continue beyond 30 January 2012.

Priority of Transitional Interests

The PPSA provides rules for the priority rights of parties that hold transitional security interests over other transitional security interests affecting the same property and over new security interests (registered after 30 January 2012) affecting the same property.

If your transitional interest has been perfected as provided for by the PPSA, it will have and maintain priority over any unperfected security interests and any security interests granted after 30 January 2012, including those that are perfected.

Remember, the PPSR is a live electronic register. The party who registers their security first in time will prevail over a party who subsequently registers their security interest in respect of the same personal property.

If an issue arises in respect of the priority between two transitional security interests that is not dealt with by the PPSA it will resolved according to the laws that applied immediately prior to 30 January 2012 in this regard.

Migrated Security Interests

If you hold pre-existing security interests that extend beyond the initial transitionary period of 24 months, it will be necessary, in most cases, to properly register those interests on the PPSR to maintain the protection afforded by the PPSA beyond the initial 24 month period.

Lawfully registered and effective security interests that existed prior to 30 January 2012, such as registered company charges, that have been migrated to the PPSR are referred to as migrated security interests. Migrated security interests are a class of transitional security interests which means that the enforcement, priority arrangements and protection afforded to transitional security interests also apply to these security interests.

Check Migrated Interests are Registered Accurately

Although some pre-existing interests will be migrated to the PPSR, it is nevertheless imperative that you search the PPSR to verify the accuracy of migrated interests and that you do not assume that the correct information has been migrated across to the new register. This is important to ensure that the migrated registration in the PPSR is not later deemed to be defective due to any inaccuracies in the details recorded in the PPSR. If errors are detected, these can be rectified, however you must ensure that action is taken in this regard as soon as possible to ensure that your priority is not adversely affected.

The migration of registered charges from the ASIC system to the PPSR has been problematic. Problems encountered to date include:

Multiple Secured Parties: in cases where there are two or more secured parties in respect of the same transaction (for example, multiple chargees in respect of a loan arrangement) often the security interest has only migrated to the PPSR in respect of one of the chargees and not the others. Where this has been detected, we have amended migrated registrations to include the other secured parties in the registration.

ACN or ABN: due to the fact that many registrations from ASIC were migrated using the ABN of the grantor as a reference point, as opposed to the ACN, difficulties have been experienced in searching for migrated ASIC registrations by ACN. As the PPSR has been designed to only store a single organisation number, the PPSR is therefore unable to store both the ACN and ABN for a grantor of a security interest.

This issue will not impact on the effectiveness of migrated ASIC registrations where the grantor is identified by the ABN, as a migrated registration will be effective on the PPSR if one of the name or the identifiers that was used in the ASIC registration is used in the registration on the PPSR to describe the grantor.

The Attorney General’s Department (AGD) is looking into possible solutions to the confusion caused by the manner in which ASIC registrations were migrated to the PPSR. Until the issue is resolved, the AGD has recommended that multiple organisation grantor searches be conducted using the ACN, ABN, and the name of the grantor.

What You Need to Do Now:

If you:

hold a pre-existing security interest that qualifies as a transitional security interest under the PPSA, you need to register that interest on the PPSR by 30 January 2014;

hold a pre-existing security interest that has been migrated to the PPSR, you need to check the PPSR to make certain that your interest is accurately recorded on the PPSR and to ensure that the interest is actually there;

are experiencing difficulties searching for security interests registered against a grantor, you will need to conduct multiple searches in order to be satisfied whether there are any ASIC registrations against a company on the PPSR;

cannot locate your security interest on the PPSR, you need to register your security interest.

We strongly recommend that you access the PPSR to identify and correct any errors in the details of the migrated interest shown on the register. The PPSR has a "find and claim" process whereby properly authorised parties can search and amend transitional registrations on the PPSR.

If you haven't done so already, you should also assess whether your terms and conditions are compliant with the PPSA requirements and ensure your relevant interests in any personal property is secured.

For further information or assistance in relation to any of the above, please contact Fotini Kypraios on 9510 0366 for tailored PPSA advice.