Practical Guide for Accountants Amy Sheggerud-Woods Partner - - PowerPoint PPT Presentation

The Personal Property Securities Act 2009 – A Practical Guide for Accountants

Amy Sheggerud-Woods Partner Accredited Commercial Litigation Specialist Marsh & Maher Richmond Bennison Lawyers

Personal Property Securities Act 2009 (Cth)

• Commenced on 30 January 2012
• Contains default rules for the creation, priority

and enforcement of security interests in personal property

• Created the Personal Property Securities

Register (“PPSR”), a national public register of security interests in personal property

• PPSR subsumed and replaced multiple state and

national registers, including ASIC Register of Company Charges, state and territory registers

• f encumbered vehicles, and state and territory

bills of sale, stock, wool and crop registers

New terminology in PPSA

https://www.ppsr.gov.au/ppsr-overview

Security interest (PPSA s12)

An interest in personal property provided for by a transaction that, in substance, secures payment or performance of an obligation, such as:

• charges (fixed or floating)
• chattel mortgage
• conditional sale agreement (i.e. retention of

title clause)

• hire purchase agreement
• consignment
• lease of goods

Personal property (PPSA s8 & s10)

Broad definition, including tangible and intangible property:

• not land
• not fixtures
• not liens, charges or security interests

provided for under statute or general law

• other specific exclusions under PPSA

Purchase money security interest (“PMSI”) (PPSA s14)

The security interest of a Secured Party in collateral for:

• the purchase price of the personal property
• the value given to enable a Grantor to acquire

rights personal property

• a commercial consignment
• a PPS lease

PMSI: Retention of title clause

• “Title to the goods shall remain vested in the

seller and shall not pass to the buyer until the purchase price for the goods has been paid in full and received by the seller.”

• Seller has a registrable security interest on the

PPSR as a PMSI

• Terms and conditions of sale should be updated

to refer to PPSA for the avoidance of doubt

• Central Cleaning Supplies (Aust) Pty Ltd v

Elkerton [2015] VSCA 92

PMSI: PPS Lease (PPSA s13)

• A lease or bailment of goods:
• for more than 2 years;
• for up to 2 years if automatically renewable;
• for an indefinite period once the possession by

the lessee exceeds 2 years by a lessor that is regularly engaged in the business of leasing goods

• Lessor has a registrable security interest on the

PPSR as a PMSI

• Maiden Civil v QES [2013] NSWSC 852
• Power Rental Op Co Australia, LLC v Forge

Group Power Pty Ltd (in liq) (receivers and managers appointed) [2017] NSWCA 8

PMSI Super-priority (PPSA s62)

• Registration of the PMSI on the PPSR gives the

Secured Party priority over other Secured Parties in the same collateral

• Example:
• A seller of goods pursuant to a retention of

title clause; or

• A lessor of equipment;

would have priority over a bank with a general security interest

• However, PMSI does not have priority over

security interests in crops or livestock for the value given to develop them

Agricultural security interests (PPSA s85 & 86)

• Secured party who has given value to a Grantor

to enable:

• crops to be produced; or
• livestock to be fed or developed;

has priority over any other security interests in the crops, livestock (including fish) or proceeds if:

• the crops are growing at the time of the

making of the security agreement, or grown within 6 months thereafter

• the livestock are held at the time of the

making of the security agreement, or acquired within 6 months thereafter

Fixed and floating charges (PPSA s339)

• Since commencement of PPSA, fixed and

floating charges have been replaced in practice by General Security Agreement (“GSA”)

• PPSA does not provide for fixed and floating

charges other than:

• Fixed charge is taken to be a security interest
• ver personal property that is not a

circulating asset

• Floating charge is taken to be security

interest over personal property that is a circulating security asset

Circulating asset (PPSA s340)

• Personal property for which the Secured Party

has given the Grantor authority to deal with and sell in the ordinary course of the business free

• f the security interest
• Usually inventory and accounts in the ordinary

course of business

• Langdon, in the matter of Forge Group Ltd

(Receivers and Managers Appointed) (In Liquidation) [2017] FCA 170

ALLPAAP (PPS Regs, s1.6)

• “All present and after-acquired property”
• Personal property over which the Grantor has

an interest at the time of registration on the PPSR and personal property acquired after the registration

• GSA of Banks will often provide for creation of a

security interest over ALLPAAP of the Grantor

Perfection by registration

• n PPSR

(PPSA s21)

• Most effective way for Secured Party to protect

security interest

• Online registration with a “financing statement”

(PPSA, s153 & PPS Regulations Schedule 1)

• A “verification statement” is produced and

emailed to the Secured Party once the registration is made (PPSA, s155 & s 156)

• Secured Party must provide a copy of the

verification statement to the Grantor (PPSA, s157)

Defective registration– general rule (PPSA s165)

• Seriously misleading defect in registration if

requirements of PPS Regulations are not met with the consequence that the registration is ineffective

• Extension of time for registration of security

interests (PPSA, s293; Corporations Act 2001, s588FM)

• Accolade Wines Australia Ltd [2016] NSWSC 1023
• In the matter of OneSteel Manufacturing Pty Limited

(administrators appointed) [2017] NSWSC 21

• Re Appleyard Capital Pty Ltd [2014] NSWSC 782
• Kaizen Global Investments Limited, [2017] FCA 431
• Ineffectiveness of a registration does not affect the

validity of the underlying security agreement, but may result in a loss of priority (PPSA Explanatory Memorandum, 5.80)

Registration items that cannot be amended

• Grantor Identifier
• Grantor DOB
• Grantor Name
• Any serial number in a serial

number field

• PMSI
• Inventory
• Assets subject to control
• Collateral Type
• Collateral Class
• Kind (of registration) (i.e.

security interest, court order, hoon lien, other prescribed property or proceeds of crime)

• Transitional Indicator
• Migrated Indicator
• Manufacturer Name‘s for

aircraft, helicopter, or aircraft engine

• Manufacturer‘s generic model

description for aircraft, helicopter, or aircraft engine

• Secured Party Group (this is

achieved by the Transfer a Registration transaction)

• Attachment file name
• Attachment free text
• description. It can only be

added and removed with the associated attachment

• Registration Number
• Change Number
• Start Date/Time
• Earlier registration number

Consequences

• f unperfected

registrations

• Insolvency – loss of unregistered security

interest by vesting in Grantor (PPSA s267, s267A ; Corporations Act 2001 s588FL)

• Maiden Civil v QES [2013] NSWSC 852
• Re Carpenter International Pty Ltd

(administrators appointed)[2016] VSC 118

• Power Rental v Forge Group [2017] NSWCA 8

Unfair preferences and security interests

• Transaction resulting in a creditor receiving

more in respect of an unsecured debt than would be received if the proving for the debt in liquidation of the company (Corporations Act 2001 s588FA)

• Transaction giving creditor a preference, priority
• r advantage over other creditors

(Bankruptcy Act 1966, s122)

• Hussain v CSR Building Products Ltd [2016] FCA

392

PPSR Search- usual information required

• Grantor / Secured party:
• Full name
• Date of birth (for individuals, partners and

trustees)

• ACN (for companies)
• ABN (for partnerships and trusts)
• ARBN (for foreign companies/registrable

Australian bodies)

• ARSN (for managed investment schemes)
• Serial number of goods
• PPSR registration number

Search the PPSR

Before: ASIC register of charges

After: Migrated registration to PPSR

Discharge registrations

• n the PPSR
• Secured Party has the group number, access

code and token number required to discharge registered security interest on PPSR

• Deed of release gives Grantor evidence of

full or partial release of security interest

• Grantor may seek discharge or amendment
• f PPSR registration via Amendment

Demand process if Secured Party fails to discharge

Enforcement: general rule (PPSA s123)

• The Secured Party may seize collateral by any

method permitted by law if the debtor is in default under the security agreement

• Security agreement may provide for

enforcement

• Knauf Plasterboard Pty Ltd v Plasterboard West

Pty Ltd (In Liquidation) (Receivers and Manager Appointed) [2017] FCA 866;

• Court orders for possession
• BOQ Credit Pty Ltd v Chatah [2017] NSWSC

1444

Enforcement: crops and livestock (PPSA s138B & 138C

• Secured party may take possession of crops,

harvest, and/or sell

• Secured party may take possession of livestock

(including fish), slaughter, extract products, and/or sell

. https:/www.ppsr.gov.au/business-resources

Questions?