It is important that all business owners are aware of the reforms to the personal property securities laws that are expected to be introduced late this year or early 2012. These reforms will impact on the majority of Australia businesses so it is important that you understand the reforms which aim to create a national set of laws for the identification, protection and enforcement of security interests in personal property.
What are personal property securities?
Personal property is any form of property other than land, buildings or fixtures which form a part of that land. It can include tangibles such as cars, art, machinery and crops; as well as intangibles such as intellectual property and contract rights. A personal property security is when a secured party takes an interest in personal property as security for a loan or other obligation, or enters into a transaction that involves the supply of secured finance. An example is when a person borrows money from a bank and offers it as collateral or security for the loan. The bank’s interest over the collateral is a personal property security.
Who is a secured party?
A secured party is a company, individual or other entity that has a security interest in a grantor’s collateral. This can include individuals or companies who are involved in:
• taking fixed and floating charges
• long term and finance leases
• chattel mortgages
• retention of title arrangements
• commercial consignments, and
Personal property securities (PPS) reform
The personal property security (PPS) reform brings the different Commonwealth, state and territory laws and registers regarding security interests in personal property under one national system. PPS reform introduces the Personal Property Securities Act 2009 (Cth) and a single national online PPS Register. The aim of the PPS reform is to improve the ability of individuals and businesses, particularly small-to-medium size businesses, to use all their property in raising capital.
In Australia there are significant limitations on the use of personal property as security due to difficulties and gaps in registering security interests. The rules for registering are different for Commonwealth, each state and territory because they each have their own personal property schemes with separate registers and laws.
Using the current system to register a security interest in personal property can be costly depending on the type of personal property. There is overlap between existing registration laws. Whether a personal property security can; or needs to be; or may be registered, depends on the jurisdiction; the type of interest; the class of debtor; the type of property; the location of the property; and the kind of transaction. Some personal property security transactions have more than one registration requirement in the same jurisdiction, or need to be registered in more than one jurisdiction.
The new PPS Register will allow lenders and businesses to register their security interests. Secured parties, buyers and other interested parties can search the PPS Register to find out if a security interest is registered over the personal property. As a consequence of the reforms, a number of existing Commonwealth, state and territory personal property security registers will close. Security interests which are currently registered on those registers will generally be migrated to the national PPS Register.
Here at The Quinn Group our experienced team of lawyers and accountants can assist your business to prepare and understand the forthcoming reforms to personal property securities laws. For more information on PPS, or for any other business accounting advice submit an online enquiry or call us on 1300 QUINNS (784 667) or on +61 2 9223 9166 to book an appointment.