A QUEENSLAND commercial litigation specialist today warned small to medium enterprises (SME) are most likely to lose control of personal property if another party registers it first under the Federal Government’s new personal property securities regime.
The Personal Property Securities Register (PPSR) replaces the former Australian Securities and Investments Commission’s Register of Charges and more than 70 Acts with one national law and online register.
TressCox Lawyers partner Alex Moriarty (pictured) says businesses will have to modify their trading terms and registers to accommodate for the expanded definition of personal property securities.
“PPSR requires registration of any security interest in personal and intellectual property, motor vehicles, plants, machinery, inventory, leases, hire purchase arrangements and financial instruments such as debentures, shares and units in managed investment schemes,” he says.
“The only exceptions are mortgages over land, fixtures and certain statutory licenses. Businesses most at risks are SMEs that may be unaware of the register.”
Under the new regime, suppliers, manufacturers, lenders, creditors and lessors must ensure that new security interests in personal property are registered as soon as they are created.
Businesses and individuals holding security interests prior to January 30, 2012 will have a two-year grace period. However, interests may be lost if businesses fail to migrate their existing registrable security interests to the PPSR after the two-year period has ended.
Although the new regime adds to what Moriarty describes as an ‘already crowded business landscape’, the PPSR will simplify the registration process in the long-run.
“Businesses will be able to log on and register their securities online. It will certainly be a positive in the medium- to long-term,” says Moriarty.
“There has been such a register operating in New Zealand since 2002. They say it is effective and efficient, but some basic knowledge of the PPSR is essential for doing business.”
Lawyers can expect a significant uptick in work throughout the next two years.
“I expect the PPSR will provide a gradual tide of new work. There may be legal disputes over how security interests affect insolvencies, while transactional lawyers may find a lot of advisory work for lenders and borrowers,” says Moriarty.
“However, most of the work has already been done for big lenders, because they knew about it since legislation was passed in 2009 and have already had three years to prepare.”
The PPSR was initially expected to take effect in late 2010 but delayed partly due to the complexities of moving millions of security interests between old and new registers.