A SHIFT IN REGIME. IS YOUR BUSINESS PREPARED?
AN UPDATE ON PROPERTY SECURITIES LAW
The Commonwealth Personal Property Securities Act 2009 (the “Act”) has fundamentally changed the way ‘security interests’ over personal property (excluding land) are taken in Australia. It has also fundamentally changed what a ‘security interest’ is.
The Act has effectively replaced over 70 pieces of Commonwealth, State and Territory laws.
At first glance, the Act might sound like a great topic for lawyers to talk about but the reality is that this Act is actually having a dramatic impact on how most (if not all) businesses take security in Australia. It is a very good idea to get a handle on the key concepts sooner rather than later.
It isn’t possible to explain the entire operation of the Act in this update. Instead, we’ve focused on explaining some of the key concepts/changes with a particular focus on how the changes may impact small to medium businesses.
1. WHAT HAS CHANGED?
Most would know that if ever you wanted to take security over a company’s property, the security would be registered with ASIC. Registration on ASIC register was done to ensure priority against all subsequent security interests in the secured property. The ASIC register was a publicly available register that third parties could search to see whether a company had granted a security interest over its property.
Unless there were specific laws requiring a security interest over other personal property to be registered, most other security interests over personal property were unregistered and there was consequently no publicly available register to search in order to record a security interest or to check to see whether one had already been taken.
Examples of voluntary registration included registration of a ‘security interest’ under the NSW Security Interest in Goods Act. Other than the registration of security interests over cars and boats, the registration of security interests over other personal property was voluntary.
1.1 WHAT ‘PERSONAL PROPERTY’ IS COVERED BY THE NEW ACT?
Practically speaking, the Act defines personal property to mean all property (including licenses) but excluding land. It is a reasonably safe bet that most personal property will fall within this definition.
1.2 WHAT IS A ‘SECURITY INTEREST’ UNDER THE NEW ACT?
The new Act provides a rather wide definition of what a ‘security interest’ in personal property is. That definition is much wider than under the previous system.
For example, if you are in the businesses of hiring or leasing goods or equipment to customers, then you need to be aware that many of these hire/lease arrangements will now need to be registered on the PPS Register in order to protect your interests in the property being leased/hired. This is because the Act deems many of these transactions to be ‘security interests’ in personal property.