The new Personal Property Securities (PPS) regime took effect on 30 January 2012. The project encountered its share of hiccups and false starts but the PPS Register is now up and running.
What does this mean in practice in the short term?
Firstly, existing 'security interests' which were previously registered on certain existing registers - such as the ASIC Register of Company Charges, the NSW Register of Encumbered Vehicles etc - were 'migrated' to the PPS Register from 30 January. Migration refers to the transfer of data relating to the security interest from the existing register to the PPS Register. Clearly, with the volume of transactions involved in the data transfer process, there is potential for the data transferred to be inaccurate or incomplete in some cases.
The onus is on the security holder to ensure that an existing security interest has been accurately migrated to the PPS Register. Incorrect registration of an existing security interest, which is not rectified within the two-year grace period for registration, may result in the loss of priority for that security interest.
Secondly, as most readers are probably aware, there are certain types of commercial arrangements which were previously not required to be registered but are now considered 'security interests' under the PPS regime. These arrangements include certain leases, hire purchase agreements and retention of title arrangements. Suppliers, manufacturers and other security holders need to ensure that any of these new security interests created after 30 January, comply with the PPS legislation and are immediately registered on the PPS Register.
This new type of security interest may also qualify as a 'purchase money security interest' (PMSI) and achieve a 'super priority' - akin to the priority that a pre-PPS retention of title arrangement may have enjoyed. But failure to 'perfect' these new types of security interests by registration on the PPS Register could result in the loss of protection and priority in an insolvency situation.
The good news is that the PPS registration process itself is designed to be simple. For example, a single 'financing statement' can be registered at the start of a trading relationship which covers all supplies made to a customer under a retention of title arrangement. (Note however, that the financing statement will need to describe the collateral in terms which are broad enough to cover all types of goods supplied). The financing statement is lodged online and registration takes only a matter of minutes.
There's also some statutory 'breathing space' under the PPS legislation for suppliers where retention of title arrangements are already in place and further supplies are made under these existing arrangements after 30 January. The PPS legislation contains detailed transitional provisions which in effect give pre-existing retention of title arrangements, and other 'transitional security interests', protection for up to 24 months. This allows sufficient time for steps to be taken to arrange registration on the PPS Register of these pre-existing arrangements, if appropriate.
In summary, although the new PPS regime provides transitional provisions to protect some existing security interests, it is advisable in the short term to:
- check that any 'migrated' data from other registers to the PPS Register is accurate and complete
- ensure any new security interests (including retention of title arrangements) created after 30 January comply with the requirements of the PPS legislation and are registered on the PPS Register
- take steps to ensure that pre-existing security interests, (which are protected as 'transitional security interests' under the PPS legislation), are properly registered on the PPS Register before the 24 month temporary protection period expires.
Lawler Partners can provide assistance in ensuring documentation and processes comply with the PPS legislation and security interests continue to be 'perfected' - thus protecting the security and maintaining priority under the new PPS regime.
For specialist advice on all insolvency matters contact Partners Chad Rapsey and Mitch Griffiths in Newcastle on (02) 4962 2688 or John Vouris and Brad Tonks in Sydney on (02) 8346 6000:
