A security interest can be perfected if:
If a security interest is not perfected by one of the above means, it is said to be unperfected and another security interest may take priority or another person may acquire an interest in the property free of the security interest.
If a secured party has a perfected interest it will:
If an interest is perfected by possession or control it may be perfected without registration on the PPS Register. These forms of perfection take priority over prior registered interests. It follows that the Register may not be a complete record of all security interests over personal property.
Any property other than land and fixtures, including:
It does not include:
See Trace Proceeds.
PMSIs are a special type of security interest taken in collateral to the extent that it secures all or part of the purchase price.
Examples of PMSIs:
A PMSI is said to enjoy a super priority over other security interests in the same collateral and even though they may be second in time, they are first in line, i.e. they have a priority over another security interest that is not a PMSI (e.g. a registered General Security Agreement (GSA) over all present and after acquired property even if the GSA may be registered before it).
A PMSI takes priority over any other perfected security interest in goods provided it is perfected (usually by registration) within time.
To obtain its super priority a PMSI relating to collateral other than inventory must be registered within 15 business days of it being attached to the collateral usually when the grantor obtains possession of the goods.
However, if the PMSI relates to inventory it must be registered before attachment usually before possession is taken of the goods.
A lease or bailment of goods (including dealer floor plan arrangements):
The lessor or bailor must be engaged in the business of regularly leasing or bailing goods.
For bailments, the bailee must provide value. Accordingly, a purely gratuitous loan of goods will not be covered.
An arrangement whereby goods are supplied to a customer and the seller retains title to the goods until the customer pays for them.
Is the person (usually the financier or the supplier of the goods) who takes or holds the security interest from the grantor.
The agreement creating or evidencing a security interest between a grantor and a secured party. The agreement must:
An interest in property ‘provided for by a transaction that, in substance, secures payment or performance of an obligation (without regard to the form of the transaction or the identity of the person who has title to the property).’ (S.12 (1) PPS Act)
Refers to motor vehicles, watercraft, aircraft and certain IP rights (including designs, patents, plant breeder’s rights, and trademarks).
It does not include other personal property that carry serial numbers such as TVs, whitegoods and power tools.
See Purchase Money Security Interest.
The right a secured party has in relation to their security interest to trace the proceeds of sale of the collateral. E.g. if a supplier sells goods on an ROT basis, and the customer on sells those goods, the original supplier will have a security interest in the customer’s book debts in relation to that on-sale or the proceeds of sale.
Special rules for existing security interests that will continue after the Commencement Date (scheduled to be a date before 1 February 2012).
These interests will be temporarily perfected during a 2 year transitional period. The existing rights of the secured party will be preserved in the event of the grantor’s insolvency. They must, however, be perfected before the end of the 2 year period.
For transitional security interests that are not migrated from another register to the PPS Register, failure to register a financing statement in the 2 year period may result in loss of priority to other security interests, or loss of the security interest on the sale of the collateral or the insolvency of the grantor. Accordingly, the owners of ROT and bailed or leased goods who wish to protect their interests should register them during the 2 year transitional period.
Refers to a security agreement that was in force before the Commencement Date.
These are treated as security interests given by the transferor in favour of the transferee. The collateral is the right to receive payment from the account debtor. Such interests are created, for example, where debts are factored to another party.
Where goods are installed in or affixed to other goods.
A security interest can only be enforceable against a grantor (the customer/lessee/bailee/debtor) or a third party if it is attached to the collateral (the goods) that is provided by the grantor.
Attachment refers to the time at which the collateral becomes the subject of the security interest. For the sale of goods on Retention of Title (ROT) and for a PPS lease, attachment will occur when the grantor acquires rights in the collateral – usually when the grantor obtains possession of the goods.
For attachment to occur there must be:
Is an asset that would have been the subject of a floating charge under the laws before the PPS Act. Rights in such an asset may be postponed to other creditors such as employees or the liquidator’s costs on the insolvency of the grantor.
The personal property (i.e. the secured property), over which the security interest is taken. In a sale of goods on ROT terms, it is the goods which become the collateral.
It is either commercial or consumer property.
It is classified into classes including: agriculture, all present and after acquired property, financial property, intangible property, motor vehicles, other goods, watercraft and aircraft.
Involve arrangements where:
Any personal property that is not consumer property.
Any property held by an individual that is not used in carrying on a business to which an ABN has been allocated.
The person who owes the payment or performance of the obligation. In most cases the grantor and the debtor are the same person. In a sale of goods on ROT terms, the customer is the debtor.
Transactions that are deemed to be security interests whether or not the transaction creating them secures payment or performance of an obligation. Examples include:
Deals with circumstances in which a person who purchases or leases collateral can take free of a security interest. For example, extinguishment can occur:
In some cases, extinguishment requires the absence of knowledge that the dealing is a breach of a security agreement.
The notice that is registered on the PPS Register to enable a security interest to be perfected. The information on the financing statement is fairly limited. It contains, among other things, the following information:
It is not necessary for the secured party to register the actual document or agreement that gives rise to the security interest.
The notice that is registered when amendments to the financing statement need to be made.
Current equivalent of this is a fixed and floating charge or a mortgage debenture. A GSA is granted over ‘all the company’s present and after-acquired personal property’.
The person (whether an individual, company or other entity) with an interest in personal property who grants a security interest over it to another party. In a sale of goods on ROT terms, the customer is the grantor.
Is defined in different ways in different parts of the PPS Act but generally means raw materials, goods to be used for work in progress, goods that are stock and other things created by or held by a person to be used up, leased or sold in the ordinary course of their business or used to earn income.
The transference of existing registers of security interests (e.g. the ASIC register and the vehicle securities registers) to the PPS Register.