Recently there have been some significant changes to the world we live in. Australia has been losing in the cricket, Collingwood has been winning football finals and NSW is no longer run by a Labour Government. It seems, to quote the Greek philosopher Heraclitus, that the only constant is change.
Heraclitus’ musings extend to the law where some big changes are taking place. One of the most relevant for the operators of businesses is the Personal Properties Security Act 2009 (Cth) (the “Act”). The Act was passed by the Federal Government in December 2009 and is due to come into operation in October 2011 although the commencement date could be delayed until February 2012.
The Government has stated that the Act will rationalise the more than 70 different Commonwealth, State and Territory Acts and security registers that regulate personal property securities, and will consolidate them all into one regime. A single national register, the Personal Property Security Register, will be created by the Act which will be administered by the Federal Government agency, the Insolvency Trustee Service of Australia. The Act will also radically alter the notions of legal title over personal property.
The Act will introduce rules that, amongst other things:
Govern how security interests are created and enforced;
Determine priority between competing security interests;
Sets out rules for enforcing security interests on insolvency.
The Act will relate to personal property which is generally all property, both tangible (like plant and equipment and trading stock) and intangible (like a registered trade mark) but not land or interests in land (such as a premises lease).
On very general terms, the Act provides that a person who obtains a security interest (“Secured Party”) in relation to personal property must register that interest on the Personal Property Security Register in order to be able to enforce their security interest against third parties.
By way of example, if a wholesaler (being the Secured Party) sold trading stock to a pharmacist on terms that included retention of title arrangements, the wholesaler would need to register its interest (being the security interest) in the trading stock (being the personal property) on the Personal Property Security Register in order to enforce its interest against third parties (such as the pharmacist’s trustee in bankruptcy).
It is proposed that the Personal Property Security Register will be a web-based register which is updated and accessible in real time, 24 hours a day seven days a week.
Now before you decide that business life is all too hard and you may as well sell up and buy a kombi, don’t worry. The Act provides for transition arrangements during the period immediately after its commencement date. Generally, an existing security interest that was created prior to the commencement of the Act and which previously did not require registration will be effective for 24 months from 1 February 2012 (referred to in the Act as the Commencement Time).
So if your business is involved in transactions related to personal property that may involve security interests such as: buying or selling trading stock on terms that include retention of title arrangements, borrowing or lending money secured by a chattel mortgage, mortgage of book debts or a mortgage of business or entering into hire-purchase arrangements you should, in conjunction with your legal advisor, as a minimum:
Review your trading activities to determine whether or not you will need to register a security interest over any personal property;
Review any existing asset protection measures to determine if registration of a security interest will be necessary during the transition phase of the Act;
Review your internal procedures to ensure that, where necessary, registration of security interests will take place in the future; and
Conduct staff training in relation to the Act and what it means for your business;
The new regime set out in the Act will be with us longer than platform shoes, compact discs and Hula hoops so a clear understanding of your new legal rights and obligations is very important for every business owner.
Prepared by
Anthony Cannizzo, Partner and Josh Allan, Lawyer
Robert James Lawyers
Level 10, 200 Queen Street
Melbourne 3000
Tel (03) 8628 2000
Fax (03) 8628 2050
Email: anthony@robertjames.com.au; josh.allan@robertjames.com.au
Website: www.robertjames.com.au