Proposed law reforms
The Federal Government is pursuing a significant reform of the personal property securities law. The Government plans to establish and operate a single online national system governing the registration and regulation of securities held against personal property. The Australian reforms, initiated under the previous Federal Government, follow similar reforms in the United States, Canada and New Zealand. In October 2008 the Federal Government and each State Government signed an intergovernmental agreement to formalise their commitment to the reform.
The new system is expected to commence in May 2010.
New online securities register — for company charges, crops, leases and more
Under the reforms the Federal Government will create an online Personal Property Securities Register, which will replace around 40 existing, mostly paper based, securities registers operated by the various Australian Governments.
Included in the registers to be replaced are:
- the register of company charges operated by the Australian Securities and Investments Commission in which security holders register fixed and fixed and floating charges granted by companies; and
- security interests such as those over crops and leases operating for more than one year and many more.
The full list of registers being replaced has not yet been provided. From the information published to date, many of the registers are not widely used because they are not widely known. The new system will change all of this.
Priority goes to registered interests
Under the new system, a security interest that has been registered on the new online register will have priority over security interests that are not registered. A key exception applies if the holder of an unregistered security actually has the asset in their possession or under their control. This is called "perfected by control". Generally, a security interest perfected by control will take priority over a registered interest. This is called "perfected by registration".
- the priority of many security interests is not affected by whether or not they are registered, and
- many security interests cannot be registered at all.
Learning new habits
In the future, anyone taking security interests will need to make sure they register their interest on the new online — and their advisers will need to be alert to the need to register.
Any security interest holders who fail to register their interest — perhaps, because they have never needed to before — are likely to find themselves without the protection they thought they had.
When the new system is close to launch, ClearLaw will provide readers with further details about the system, how to register security interests, and the security interests which need to be registered to be protected.
Status of the draft legislation
Consultation drafts of the legislation to implement the reforms, the Personal Property Securities Bill 2008 and the Personal Property Securities (Transitional Provisions and Consequential Amendments) Bill 2008, were released in May 2008.
On 17 November the Federal Government announced that it had referred revised legislation to the Senate Standing Committee on Legal and Constitutional Affairs. Written submissions may be made to the Committee by 10 December 2008. The Committee is due to report in February 2009.
If you have any questions about this article, please contact Maddocks on (03) 9288 0555 and ask for the Cleardocs Help Desk: they will put you through to the relevant member of our Commercial Team.