Level 11, 65 York Street, Tel: 02 9188 9631 Sydney NSW 2000 Fax: 02 - PowerPoint PPT Presentation

Level 11, 65 York Street, Tel: 02 9188 9631 Sydney NSW 2000 Fax: 02 8215 1600 www.srmlawyers.com.au Personal Property Securities Act 2009 (Cth) A PRACTICAL GUIDE MICHAEL STEVENS 18 MARCH 2014

Level 11, 65 York Street, Tel: 02 9188 9631 Sydney NSW 2000 Fax: 02 8215 1600 www.srmlawyers.com.au WHAT DOES IT APPLY TO? • Definition of personal property under the Act • Examples of personal property • Questions to consider

Level 11, 65 York Street, Tel: 02 9188 9631 Sydney NSW 2000 Fax: 02 8215 1600 www.srmlawyers.com.au PERSONAL PROPERTY • One person must be able to transfer the ownership of the property to another person • Section 10 of the PPS Act sets out the legal definition of this term • Certain property is excluded under the definition

Level 11, 65 York Street, Tel: 02 9188 9631 Sydney NSW 2000 Fax: 02 8215 1600 www.srmlawyers.com.au SECURITY INTEREST • What is a personal property security interest? • The 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

Level 11, 65 York Street, Tel: 02 9188 9631 Sydney NSW 2000 Fax: 02 8215 1600 www.srmlawyers.com.au HOW DO YOU REGISTER A SECURITY INTEREST? • Secured party registers a Financing Statement online relating to their Security Interest • A Financing Statement is a notice of the Security Interest - no requirement to lodge a copy of the actual security interest agreement at the Registry • See website - http://www.ppsr.gov.au/Pages/ppsr.aspx

Level 11, 65 York Street, Tel: 02 9188 9631 Sydney NSW 2000 Fax: 02 8215 1600 www.srmlawyers.com.au WHAT INFORMATION DO YOU NEED? • Log in as a registered user and have the following details: • identity of the secured party and the person granting the secured party the security interest (the grantor) • description of the collateral/ proceeds secured • the end date of the registered interest • subordination • description of the security interest (eg 'security interest over circulating assets', 'purchase money security interest' etc)

Level 11, 65 York Street, Tel: 02 9188 9631 Sydney NSW 2000 Fax: 02 8215 1600 www.srmlawyers.com.au WHAT DO THE NEW WORDS ACTUALLY MEAN? • Secured Party – the party who takes the security interest • Personal Property – any form of property other than land or buildings and fixtures which form part of that land (not land) • Security Interest - interest in personal property that secures payment or performance of an obligation

Level 11, 65 York Street, Tel: 02 9188 9631 Sydney NSW 2000 Fax: 02 8215 1600 www.srmlawyers.com.au • Perfection – priority obtained through Perfection • Unperfected Security Interest – lose interest on liquidation/ bankruptcy, lose priority to perfected security interest, lose title to most purchasers

Level 11, 65 York Street, Tel: 02 9188 9631 Sydney NSW 2000 Fax: 02 8215 1600 www.srmlawyers.com.au • Grantor – the party who gives or grants the security interest over their property • Non Circulating and Circulating Assets – fixed and floating Charges • Security agreement – Financing agreement, mortgage, charge etc

Level 11, 65 York Street, Tel: 02 9188 9631 Sydney NSW 2000 Fax: 02 8215 1600 www.srmlawyers.com.au WHAT IS COLLATERAL? • Personal property that is the subject of a security interest • Certain classes of collateral prescribed in the PPS Regulations • Each registration must only relate to a single collateral class

Level 11, 65 York Street, Tel: 02 9188 9631 Sydney NSW 2000 Fax: 02 8215 1600 www.srmlawyers.com.au WHAT IS A PMSI? • Purchase money security interest (PMSI) = security interest in collateral created by a seller who secures the obligation to pay the purchase price or by a person who finances or provides the value to purchase the collateral • PMSI must be registered within the required time to ensure “super - priority” status

Level 11, 65 York Street, Tel: 02 9188 9631 Sydney NSW 2000 Fax: 02 8215 1600 www.srmlawyers.com.au BUSINESSES ARE AFFECTED IF THEY: • Sell stock on credit • Have asset protection arrangements involving one entity leasing assets from another related entity • lease plant, equipment, motor vehicles and other assets • have stock or other assets on consignment with third parties • have partnership agreements, such as those with 'pre-emptive rights' for one partner to buy out the other at the time of death • Franchise Agreements

Level 11, 65 York Street, Tel: 02 9188 9631 Sydney NSW 2000 Fax: 02 8215 1600 www.srmlawyers.com.au TITLE v REGISTRATION • Title itself does not equate to rights over property • Failure to register an interest may result in your business having no claim to the asset, should an insolvency scenario arise

Level 11, 65 York Street, Tel: 02 9188 9631 Sydney NSW 2000 Fax: 02 8215 1600 www.srmlawyers.com.au HOW TO REMOVE / DISCHARGE A REGISTERED SECURITY INTEREST • Website link - https://transact.ppsr.gov.au/ppsr/DischargeCollateralRegistration • To discharge a registration, need registration number , token or Secured Party Group number and Access Code • No fee payable for discharge of registration • Section 271 PPSA allows recovery of damages from wrongly registered Security Interest.

Level 11, 65 York Street, Tel: 02 9188 9631 Sydney NSW 2000 Fax: 02 8215 1600 www.srmlawyers.com.au PRE AND POST 30 JANUARY 2014 • 30 January 2012 to 30 January 2014 - transitional ‘grace’ period • If prior Security Interests were not actually registered after 30 January 2014, those interests would lose priority from any subsequent created registered Security Interest • Registration is King • If Security Interest not registered and Grantor enters into administration, liquidation or a deed of company arrangement, security interest will vest in administrator or liquidator

Level 11, 65 York Street, Tel: 02 9188 9631 Sydney NSW 2000 Fax: 02 8215 1600 www.srmlawyers.com.au FREQUENTLY ASKED QUESTIONS How do I get a copy of the agreement in support of the security interest? • You have to obtain same from the Secured Party. The Security Interest Agreements are not retained by the Registry. Does a new registration need to be lodged for each retention of title invoice? • No – you can have an all monies clause registration, however the PMSI status must be set out in the initial Credit Account Application and / or each invoice i.e. that retention of title remains until payment for all goods supplied. See Swan Services Pty Ltd (In Liq) v Central Cleaning Supplies (Aust) Pty Ltd [2014] VSC 61.

Level 11, 65 York Street, Tel: 02 9188 9631 Sydney NSW 2000 Fax: 02 8215 1600 www.srmlawyers.com.au LEASES AND THE PPSA • PPS Lease includes lease or bailment of personal property for term of more than a year, or which may or actually does run for term of more than one year (for consumer goods and things with serial numbers it is 90 days) • Interest of lessor or bailor in personal property deemed to be security interest for purposes of PPSA • A landlord incentive may be used to pay for tenant’s fitout and lease may include clause that landlord retains ownership of fitout until end of lease. This arrangement gives rise to a security interest capable of registration of the security interest by the landlord.

Level 11, 65 York Street, Tel: 02 9188 9631 Sydney NSW 2000 Fax: 02 8215 1600 www.srmlawyers.com.au LEASES AND THE PPSA • If landlord does not register security interest, because tenant has possession of fitout, tenant may grant security interest over fitout to third party, which may defeat landlord’s interest • For goods leased to tenant, security deposit and any lease incentive, prudent for landlord to register security interest when lease is entered into • Registration should be considered where lease allows landlord to sell any property left behind by tenant at end of lease and use proceeds to either reduce tenant’s debt or use proceeds in satisfaction of obligation created by security interest