November 16, 2023
November 16, 2023

Navigating the Future: Changes to the Personal Property Security Act

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The Personal Property Securities Act 2009 (Cth) (‘PPSA’) is set to undergo a significant transformation.  This blog delves into the PPSA, the proposed changes, and why businesses should pay attention and prepare for the impending changes.

What is the PPSA?

The PPSA is a comprehensive legal framework that governs the registration and management of security interests in personal property. It was introduced to simplify and standardise the process of securing assets, reducing disputes and enhancing transparency in transactions.

What is the PPSR?

The Personal Property Securities Register (‘PPSR’) is the online platform where these security interests are registered and searched. It acts as a centralised database, allowing businesses and individuals to record their security interests and conduct searches to determine if another person or entity has existing security interests registered against it.

Statutory review of the PPSA

On 22 September 2023, the Australian Government invited public consultation on its response to the 2015 statutory review of the PPSA (‘Whittaker Review’).  The Whittaker Review made 394 recommendations to reduce complexity and allow the PPSA to better meet its objectives.  Of the 394 recommendations, the Government has proposed to accept (in whole or in part) 345 recommendations.

What’s changing?

The proposed reforms are designed to assist small business, financiers and consumers by simplifying processes, reducing risks and costs, and increasing usability of the PPSR.  The exposure draft of the amending legislation and regulations, and other consultation materials, are available here.

Some of the proposed changes to the PPSA include:

  • Chattel paper: removing the concept of ‘chattel paper’ from the PPSA.
  • PPS lease: amending the concept of a ‘PPS lease’ to remove all references to ‘bailment’.
  • Negotiable instrument: deleting the definition of ‘negotiable instrument’, allowing the term to have the same meaning as at general law.
  • Motor vehicle: modifying the definition of ‘motor vehicle’ to mean that a vehicle is a motor vehicle if it has a vehicle identification number.  
  • Intermediated securities and investment instruments: amending the definitions of ‘intermediated securities’ and ‘investment instruments’ and the rules relating to how security interests over such personal property can be perfected by control.
  • PSMI: providing that a sale and lease-back can give rise to a PMSI if (and to the extent that) the PMSI secured party paid the purchase price for the collateral directly to the supplier.
  • Chapter 4: replacing the enforcement rules set out in Chapter 4 with a clearer security interest enforcement regime.
  • Accounts financer: allowing an accounts financier to be able to use the process in section 64 of the PPSA to take priority over both a PMSI held by an inventory financier in the proceeds of inventory, and over a non-PMSI security interest held by the same inventory financier in those proceeds.
  • PPS Registrar: expanding the Registrar’s power to conduct investigations to investigations that are conducted for purposes that may include pursuing the enforcement of civil penalties.

Some of the key changes to the PPSR registration process include:

  • Number of collateral classes: simplifying the collateral classes to 6 classes: serial-numbered property (with appropriate sub-classes for the different types of serial-numbered property), other goods, accounts, other intangible property, all present and after-acquired property, and all present and after-acquired property except.
  • Registrations over trust assets: changing the registration of security interests over trust assets so that registration can be made against the relevant details for the trustee, rather than trust ABN or other identifying details for the trust.  
  • Consumer and commercial property: removing the requirement to indicate whether the collateral is consumer property or commercial property.
  • Single registration for multiple collateral classes: allowing a single registration to be made against a number of collateral classes (subject to certain exceptions).
  • PMSI: providing a uniform timeframe of 15 business days for a registration that perfects a PMSI for all types of collateral, including inventory.
  • Registration terms: all registrations against individuals, or against serial-numbered property that may not identify the grantor because the grantor is an individual, will have a maximum term of 7 years.
  • Registrations against individuals: introducing an obligation on secured parties to remove registrations made against individuals within 5 business days after the secured party becomes aware, or should reasonably have become aware, that it no longer has any security interest over any collateral.

What’s next?

The Government is seeking input on the proposed reforms to assess whether they will meet the needs of lenders, consumers and businesses. The submission period opened on 22 September 2023 and is scheduled to close on 17 November 2023.

These suggested reforms might require adjustments to contracts, documents, IT systems, and business practices. Secured parties should carefully evaluate the potential impact on their current registrations, security interests, and overall business operations as they move forward.

Stay tuned for further updates on the PPSA.  Contact the Sierra Legal team today to discuss how the reforms will affect your business.

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