Thursday, 19 December 2013

When does the PPSA transitional period end?

As noted on the Personal Properties Securities Register web site, From 30 January 2012, the Personal Properties Securities Act 2009 (Cth) (PPSA) established a new system for the creation, priority and enforcement of security interests in personal property, which is generally all property other than land, fixtures and certain statutory interests.

A transitional security interest (TSI) is an interest in personal property that, in substance, secures payment or performance of an obligation which existed prior to 30 January 2012.

TSI's also include security interests that didn’t exist at 30 January 2012, but were created under a security agreement that existed prior to 30 January 2012 and continued to exist after that time.

An example of this could be goods supplied in 2013 under a retention of title (ROT) agreement that was created in 2011.

If you are a secured party with respect to a TSI that is not yet registered on the Personal Property Securities Register (PPSR), you need to register it on the PPSR before midnight on 31 January 2014 (Canberra time) to take advantage of “temporary perfection” and preserve the priority status of your TSI.

If you don’t do this, temporary perfection for the TSI will not apply from 1 February 2014. Registration of a TSI is free.

Although there will still be the facility to register a TSI on the PPSR after 31 January 2014, choosing to hold off registering until after that date will result in you losing the benefit of the transitional provisions.

What this means is that the ‘perfected’ status of the security interest will only begin from the time of registration on the PPSR, instead of the earlier date allowable under the transitional provisions if you register before the end of 31 January 2014.

If a security interest loses its ‘perfected’ status its priority ranking will not be preserved. This means that another person with a security interest in the same collateral with a higher priority ranking (for example, a secured party who registered during the transitional period) will be paid out ahead of you in the event that grantor (the person who hires or buys the goods, or borrows money) defaults.
There is also the risk that if the grantor enters bankruptcy or insolvency and a security interest has not been perfected at relevant times, the security holder will lose their security interest altogether.

Now is effectively the last opportunity to secure any interest in personal property that was created before 30 January 2012.

W G Stark 
Hayden Starke Chambers

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