In brief - Federal government formally announces commencement of PPS
The Federal government has formally announced that the new Personal Property Securities regime will commence on Wednesday 1 February 2012.
Existing rules about property ownership are completely changing
The changes under the new system will affect everyone.
Think of the structure of the motor vehicle REVs system, but expanded dramatically to apply to all types of personal property both tangible and intangible, eg goods, crops, currency, intellectual property, debts and rights under contracts.
Plus think of a complete change in the existing legal rules about personal property ownership.
Preparing for the PPS - a few tips
Ownership of personal property
If you sell anything on credit or if anything you own is lent out or left with someone else and if you want to ensure your ownership is not lost, DO get a proper security agreement and register it under the new system. Examples: equipment left or lent out on work sites; retention of title for goods sold on credit.
Indirect rights under contracts
If you enter into any deal where you want or need to be able to grab personal property or contract rights from someone else, especially if something goes wrong, DO get a proper security interest and register it under the new system. Example: rights to step in and finish a contract where there is default by another party.
Ask others to avoid minor PPS registrations
DO get contractual promises from people you deal with that they won't clog up your new public security interest record with minor registrations. Example: someone sells you a small item of computer equipment on credit and registers a security interest but forgets to remove the registration when paid - the registration will probably not specify particular equipment and is likely to cause concerns for other people who deal with you until it is removed.
Make sure you get reasonable carve outs
DON'T sign any contract that has the "usual" type of clause that says you won't create security interests, without getting reasonable carve outs. Otherwise, you will almost certainly find yourself in breach.
You are likely to find that you are subject to lots of "security interests" as the new system develops. Examples of things you need to carve out: any "standard" security to a bank; any situation where you purchase on credit with ownership not passing to you until payment; and wherever you have equipment under lease / rental / HP.
Check before buying or leasing
DO carry out complete security interest searches under the new system before buying or leasing any personal property in any transaction outside the ordinary course of the supplier's business of selling or leasing that type of property OR in any major transaction, where you don't want to take the risk of someone else having a better claim. Example: buying or leasing anything that is not the usual type of trading stock in which the supplier usually deals.
Please note that this is not a complete statement of the rules about how to acquire property free of security interests. Also, note in particular that special rules apply for things like motor vehicles, where security interests are going to be registered by "serial number".
Make others register their security interests
If someone has assets in which you have a commercial interest, DO consider making it a condition of your contract that they also protect themselves (and thus you) by getting and registering appropriate security interests. Check to make sure they do so.
Use a separate security agreement
In larger deals, to protect confidentiality and make proof easier, DO consider getting a separate security agreement document to create security interests, rather than relying on wording in the main contract. Otherwise you may be forced to produce your main contract for inspection, despite it being confidential.
DO include confidentiality agreements in any document that creates a security interest (even though those agreements will only be partially protective).
These are just broad commercial tips. 343 sections of the new legislation and lengthy regulations cannot be summarised accurately or comprehensively in a few words.
This article has been published by Colin Biggers & Paisley for information and education purposes only and is a general summary of the topic(s) presented. This article is not specific legal or financial advice. Please seek your own legal or financial advice for any questions you may have. All information contained in this article is subject to change. Colin Biggers & Paisley cannot be held responsible for any liability whatsoever, or for any loss howsoever arising from any reliance upon the contents of this article.