In brief - Act before the end of January 2014 to ensure you maintain your rights to your property
The two year transitional period under the Personal Property Securities Act 2009 (PPSA) expires at midnight at the end of 31 January 2014. You need to register your security interests in the Personal Property Securities Register (PPSR) before then.
Registering security interests necessary to retain priority over other security interests
Transitional rules under the PPSA allowed for security interests created before 30 January 2012 ("transitional security interests") to be temporarily perfected, meaning that a transitional security interest retained the same priority it had at 30 January 2012 against other security interests in the same collateral perfected after that date.
Some transitional security interests ("migrated transitional security interests") were able to be registered prior to 30 January 2012 on the transitional registers - for example, a fixed and floating charge on the old Register of Company Charges maintained by the Australian Securities and Investments Commission.
If those interests were registered before 30 January 2012, they were in nearly all cases automatically migrated to the Personal Property Securities Register (PPSR).
Other transitional security interests which could not be registered on any transitional register before 30 January 2012 ("non-migrated transitional security interests") are temporarily perfected under the PPSA until midnight on 31 January 2014.
What arrangements might create security interests which should be registered?
Examples of commercial arrangements entered into before 30 January 2012 where non-migrated transitional security interests might arise include:
• long term contracts such as property development agreements, licensing agreements, distribution arrangements and joint ventures containing in substance security interests to ensure performance of contractual obligations (such as, for example, step-in rights)
• charges and mortgages over shares, units in a unit trust or other personal property (particularly those given by individuals)
• supply of goods on retention of title terms under long term standing orders (however described)
• long term bailment or warehousing arrangements
• long term leasing or hire arrangements such as in relation to industrial or mining machinery
What happens if you don't register your security interests on the PPSR?
If you have the benefit of a non-migrated transitional security interest, you must make sure that you perfect your transitional security interest (commonly by registration on the PPSR) before midnight on 31 January 2014.
If you do not perfect your transitional security interest by midnight on 31 January 2014, other perfected security interests may take priority over your unperfected transitional security interest to your detriment, even if your security interest arose first.
Furthermore, your transitional security interest may vest in the grantor of that security interest if that grantor is wound up or placed into administration and you will stand in line with all other unsecured creditors.
What should you do to protect your transitional security interests?
• You should ensure that all commercially important transitional security interests are perfected before midnight on 31 January 2014, by registration on the PPSR or in a way otherwise contemplated by the PPSA.
• If you have the benefit of a transitional security interest that was registered on a transitional register, you should search the PPSR to confirm that it has been properly migrated and is properly registered to you.
• A search should also be made of the list of the approximately 6000 charges which were registered at ASIC but not migrated to the PPSR. If you find a charge granted in your favour on that list, you will need to register that security interest on the PPSR before midnight on 31 January 2014.
• You should also consider whether you should make additional registrations in relation to any migrated security interests. For example, if you hold a security interest over certain personal property which must or may be registered with reference to its serial number (such as a valuable patent or trade mark registration or construction vehicle), then an additional registration should be made against that serial number on the PPSR.
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.