Newsletter

June 2000 March 2000 September 1999

 
PERSONAL PROPERTIES SECURITIES ACT 1999

Introduction the law relating to the lending of money, the supply of goods and the granting of credit has been completely changed with the passing of the Personal Properties Securities Act 1999 (the PPSA). The PPSA is totally new law and is intended to simplify the existing law relating to the security of personal property. It is estimated that the PPSA will come into effect in the first quarter of 2001 and at that time the existing Company (Registration of Charges) Act 1993, Chattels Transfer Act 1924 and Motor Vehicle Securities Act 1989 will all disappear.

The PPSA will significantly affect:

• Banks and financiers;
• Anyone who provides credit;
• Anyone acquiring personal property;
• Any supplier relying on Romalpa (retention of title) clauses;
• Insolvency practitioners;
• Lessors of personal property.

The New System

The new system will be very different from that currently operating through the Companies Office and the Chattels Registry of the High Court. The PPSA requires that there be an electronic register and that it be operated at all times. There will be one national register rather than a number of Companies Office and High Court district registries as currently exist. Unlike the existing Companies Office and High Court registers, which each have a physical register containing documents that can be inspected, the PPSA register will be totally paperless and will only be able to be accessed through the internet. Registration of security interests will also need to be made "on-line" and will be effective almost immediately, unlike the delay involved in paper based registries. Registration of security interests will last for five years or for any shorter period selected. The new system will automatically remind secured parties when registration is about to expire. You will be able to obtain searches of the PPSA register provided your reasons for searching the register fall within permitted categories.

Key Features

Other features of the PPSA include:

• If a transaction relating to personal property in substance secures payment or the performance of an obligation (a "security interest") it will be covered by the PPSA, irrespective of the form of the transaction;
• Some transactions not usually thought of as creating a security interest will be covered; o It will apply equally to individuals and to companies and will apply to security over almost all property, with the main exceptions being land and ships;
• Hire purchase agreements will be required to be registered under the PPSA;
• In some circumstances a buyer or lessee purchasing or leasing goods will take the goods free of any security interests in those goods;
• Unregistered security interests will not be void, but priority against competing security interests may be lost. The rules for determining priority of competing security interests in personal property are set out in the PPSA;
• It provides a uniform set of rights and remedies for enforcing security interests in the event of default.

Transitional Period

It is important to know that there is a six month transitional period from the date that the PPSA comes into force. During the transitional period searches of the registers created under prior registration law will need to be made and creditors must re-register their security interests under the PPSA to maintain ongoing priority against other security interests. There will still be a risk that security interests created during the transitional period will lose priority to prior security interests which are not registered under current law if the prior security interests are perfected at some time during the transitional period. During the six month transitional period all security interests, which were not previously registrable under existing law, will need to be registered.

If the PPSA affects you or your business I strongly recommend that you contact me to discuss the new law.