Publications / Nonprofit
By Barbara Bogiatzis (Special Counsel)
The Personal Property Securities Act 2009 (Cth) (PPSA) is the new national personal property securities regime which came into effect on 30 January 2012. It represents a significant overhaul of the laws governing the taking of security over personal property within Australia.
The PPSA applies to all tangible and intangible personal property owned by any legal entity. The PPSA has implications for any person or organisation who deals in personal property as part of their day to day business. The PPSA is relevant to, and will have particular implications, for Not-for-profits. A wide variety of projects and contractual arrangements to which Not-for-profit organisations may be a party may now be affected by the PPSA, including:
- equipment hire agreements or supply contracts that have retention of title clauses
- share farm or agistment arrangements
- secured loans and transactions involving deferred purchase price payments
- joint ventures, and
- contracts where rights to obtain property arise on default (for example, step-in rights or dilution on default).
What is the Personal Property Securities Register?
The PPSA aims to consolidate and simplify over 70 Commonwealth, State and Territory Acts regulating security in personal property by creating an online Personal Property Securities Register (PPS Register) on which security against personal property may be recorded.
If a party grants a security interest over personal property (Grantor), for example equipment, in favour of another party (Secured Party), the security interest over the equipment may be recorded by the Secured Party against the Grantor by registration on the PPS Register.
How is a security interest created?
The PPSA relies on the concepts of ‘attachment’ and ‘perfection’ to determine if a security interest has been created over personal property.
Broadly, a security interest will be created where:
- the security interest ‘attaches’ to the item of personal property. A security interest attaches to personal property when the Grantor has rights in the personal property, (or the power to transfer rights in the personal property) the Secured Party gives value and the Grantor agrees to enter into a security agreement under the PPSA, and
- a ‘perfection’ step takes place. A security interest may be perfected by registration on the PPS Register, or for certain classes of personal property, the Secured Party may perfect its security interest by possession or control.
Will the PPSA apply even if I am the owner or have legal title?
Even if you are the owner of personal property, in some circumstances under the new regime if you do not have physical possession your ownership or title to the property may be defeated by others, for example, third party creditors. In some circumstances an informal ‘loan’ of valuable equipment may require registration to ensure an owner’s interest is protected.
Ultimately it is vital that you familiarise yourself with the PPSA to ensure compliance (where necessary) and to obtain the best possible protection for your organisation’s rights as is available under the PPSA. You should consider any transactional arrangements entered into by your organisation and identify if any of these arrangements will be affected by, or need to be reviewed, in light of the new regime.
Focus covers legal and technical issues in a general way. It is not designed to express opinions on specific cases. Focus is intended for information purposes only and should not be regarded as legal advice. Further advice should be obtained before taking action on any issue dealt with in this publication.