Overview | Glossary of Terms | Why we have the Act
The Personal Property Securities Act 2009 or PPSA came in to effect on 30 January 2012. A two-year transition period was provided by the Australian government to allow businesses to adjust, and the law is now in full force.
Why does this matter? There has been widespread talk about PPSA being described as the most important piece of commercial legislation nobody has ever heard of. This statement could be a little exaggerated but in reality, the overall level of awareness is low.
If you are wondering what the Act is all about and find the whole subject a bit baffling, please read on and we will provide you with a primer about the PPSA. We hope to untangle the knots and straighten some issues as we explain the Act to give you a broad grasp of the legislation and how your business could be affected.
The Act by its very nature is comprehensive and some thought of it as excessively long. There are a lot of new terminology that makes it quite difficult to understand. The numerous exceptions to some very important clauses add up to the difficulty resulting to ambiguity all round.
The PPSA is currently undergoing a Statutory Review process which is sometimes known as the Whittaker review, since the lawyer Bruce Whittaker is the reviewer. The initial submissions show a widespread concern over intricacy, ambiguity and lack of awareness of the Act.
The information you'll find on this website should be treated as a general overview only and please do not try to make it as a reference to any particular situation. Any information provided here cannot be substituted for a legal advice and the reader is not entitled to depend on it for whatever purpose.
The PPSA is a complex knotty subject that leads many businesses to widespread confusion.
GLOSSARY OF TERMS
One of the biggest problems faced by people who are trying to get to grips with the PPSA is its terminology. The Act introduces so much new jargon that it might as well be a foreign language. To make matters worse, certain words or phrases, which at first sight are plain English, are given a new meaning that differs from the common one.
For example, “serial numbered goods” does not mean any item that has a serial number – it refers exclusively to motor vehicles, watercraft and aircraft. And then “motor vehicle” has its own definition, which is far broader than most of us would expect.
The definitions in the PPSA go on for pages. The following table only explains the essential terms that are used in this booklet, to give an overview of the new regime.
||Meaning in the PPSA World
||Meaning in the Real World
||An agreement that creates or provides for a security interest.
||Terms and conditions, loan agreement
and hire agreement would be the most
||Security interest in an asset, taken to secure payment of a debt or to secure performance of an obligation, or
Certain types of transaction such as a PPS Lease.
|Taking security over assets to secure
No equivalent to a PPS Lease.
|Purchased Money Security Interest
|A special type of security interest granted to suppliers of goods or providers of finance that allowed the goods to be acquired.
|Perfected Security Interest
||Normally a security interest that has been registered on the PPSR.
|Unperfected Security Interest
||Normally a security interest that has not been registered on the PPSR.
||A person to whom money or an obligation is owed, where that person has a security interest in personal property.
Owner of equipment subject to a PPS Lease.
|A person to whom money or an obligation is owed, where that person has a security interest in personal property.
||A person who grants the security interest, or
A person who is in possession of property.
|Most often a debtor or commonly referred to previously as the chargor
Hirer or bailee of equipment.
||The personal property in which the secured creditor has a security interest.
||Most commonly stock, motor vehicles or equipment.
|Serial Numbered Good
||Normally a motor vehicle, watercraft or
|Any piece of equipment with a serial
||The electronic document created on the PPSR to record the interest of a secured creditor in specified collateral.
WHY WE HAVE THE ACT
The Personal Property Securities Act 2009, commonly known as PPSA, came into force in 2012. Let's have a look as to why we have this legislation.
Harmonisation and efficiency are only two of the goals of PPSA and at least three other goals are worth mentioning:
We all know that when a business goes into insolvency, unprotected creditors are at the back of the queue, sometimes not getting anything at all. It is not a surprise that creditors take security wherever possible. Most of us know that in business lending, the bank takes security over all the assets of the business and can appoint a receiver if the business defaults.
The hire purchase for motor vehicles is not so different. We understand that the finance company retains ownership of the vehicle until it is paid in full. For many years, this type of lending has been subject to registration regimes. Although these types of transactions were the most common forms of secured lending, with security being registered on ASIC or REVS, there were almost 70 registers in Australia by the time the PPSA was introduced.
On top of this there were transactions that fell outside any registration regime. For over 35 years suppliers of goods have been protecting themselves with retention of title clauses. These now come within the PPSA net since the supplier is effectively taking security over the goods supplied.
The main idea behind the PPSA was to do away with all these registers and replace them with one, while harmonising the law with one piece of legislation. More controversially, the scope of PPSA was extended to include long-term hire and lease
arrangements. This has caused great consternation in the hire industry.
- Improved credit management. The Personal Property Securities Register (PPSR) is a public notice board that records creditors who have taken security over the assets held by an individual or an organisation. For example, if you were considering opening a trade credit account with a new customer, a simple PPSR search would reveal the extent to which the applicant has encumbered its assets.
- Better protection for buyers of assets. Normally when you buy an asset you are taking a commercial risk because an undisclosed third party may have security over that asset – and the security continues after you have bought the asset. A search of the PPSR will normally reveal a creditor with a security in the asset being purchased. The PPSA also introduces protections for buyers against secured creditors that have not registered on the PPSR.
- Improved enforcement regime. The introduction of the PPSA should theoretically make the job of the insolvency practitioner easier. As the business community is still getting to grips with the new law, it is fair to say that this is not entirely true, but give it a few years and we may expect to see some real benefit.