Three months have passed since the registration commencement time of the Personal Properties Securities Act 2009 (Cth) (PPSA). Most issues with migration have been identified, but secured parties must be aware that the solutions to these issues will take time. This article is an update on the progress made by the Registrar of Personal Property Securities (Registrar) in resolving the issues, as well as a reminder of certain things secured parties should be aware of as they adjust to this new process of registering securities and the PPSA.
As easy as ABC... or is it?
The Registrar is in the process of switching the 900,000 ASIC registrations migrated according to the grantor's ABN over to the grantor's ACN. A schedule has been released setting the date of completion at 11 May 2012. The 16 April 2012 update by the the Registrar suggests that verification statements will be generated for each registration changed. The Registrar proposes that a publication in accordance with s158 will be made to preclude the individual verification statement notification requirement.
When two become one
The Registrar has announced that the fix for the 27,000 registrations that migrated over to one SPG when more than one SPG has a registered interest in it, will be dealt with after the ACN/ABN issue has been resolved. In the meantime, secured parties are urged to go onto the Govdex website www.govdex.gov.au and find and claim these registrations themselves.
Several possible solutions have been proposed by the Registrar, with a recommendation that the best short-term solution would be to insert text into the Giving of Notice Identifier (GoNI) notifying those who search the registration that multiple secured parties may exist and to check the attachment for details. This will not issue a verification statement for unclaimed registrations and ASIC advises that the vast majority of these registrations remain unclaimed. Longer term solutions might generate verification statements. There is no indication as to which of the various options for a long term solution will be implemented.
The ones that got away
The 6,084 charges that had failed to reach the PPS Register remain listed on the Excel spreadsheet available on the ASIC website. ASIC has sent out a letter notifying secured parties that the PPSA does not allow ASIC to migrate the charges. Therefore, it is up to the secured parties to go through the list and identify any charges that may have been left behind and register them. If done before 14 January 2014, there is no cost for the registration and priority will not be affected. When undertaking PPSR searches, all parties must continue to ensure, , that they also check this spreadsheet. ASIC continues to roll out notifications to affected secured parties.
Back from the dead
The 38,000 discharged ASIC charges that migrated as current security interests on the PPSR, will not be fixed by the Registrar until after the ACN/ABN fix is complete. The PPSR website provides a list of these charges according to ASIC charge number, grantor ACN and PPSR registration number. Secured parties can discharge these themselves at no fee if they wish. The Registrar proposes to publish the resulting verification statements on the website to avoid the s157 notice requirement.
I think I am seeing double
The Registrar has released a draft version of the Personal Property Securities (Approved Form) Amendment Instrument 2012(No 4). This amendment applies to migrated registrations that registered twice. For example, a secured party who registered against a motor vehicle pre-RCT may have registered with both ASIC as a company charge and with the State register for motor vehicles. This would have migrated as two registrations. Another example is where secured parties had pre-loaded existing registrations pre-RCT, giving rise to two registrations on the PPSR.
To encourage secured parties to discharge the duplicates, this amendment provides an approved form through which secured parties can list the discharges on their company websites instead of sending out notices of verification statements to individual grantors. This option is available only to secured parties with 100 or more discharges to make as a result of the above reasons.
GoNI – please identify yourself
If any secured parties are having trouble aligning their old ASIC charges with their now migrated PPSR registrations, they should keep in mind that the old ASIC charge numbers exist under the heading of 'Giving of Notice Identifier' (GoNI). When reviewing searches, the migrated ASIC charge number will appear under the GoNI.
For new registrations, the GoNI will be a unique identifier that secured parties should use for their own reference and for client reference. The GoNIs entered should be structured and concise to provide an easy search system when more registrations begin to roll in.
What's mine is yours...insolvency of the grantor
Before commencement of the PPSA, a supplier who had the benefit of retention of title arrangement was able to retain ownership of goods if the buyer became insolvent or bankrupt. This is no longer the case. As a result of the introduction of the PPSA, retention of title arrangements give rise to security interests. Therefore, the party supplying the goods under retention of title arrangement is now just another secured party of the buyer.
Since the PPSA provides that possession of goods on its own will be sufficient for a grantor to grant a security interest in goods, if the supplier does not register its security interest it will be at risk of ranking behind secured parties of the buyer in respect of those goods on the insolvency of the buyer. This is because s267 of the PPSA vests unperfected security interests in a grantor in the event of insolvency or bankruptcy.
A recent example of this danger to secured parties is the collapse of WOW Sight & Sound in Queensland that occurred in early March. The receivers had chosen not to honour the retention of title agreements with suppliers on the basis that these security interests were not registered on the PPSR. Therefore, the receivers have opted to sell off the stock at a discount and pay off the secured (and registered) bank loans of the buyer first, potentially leaving the suppliers with nothing.
Therefore, suppliers of goods and inventory must be wary of the changes brought in by the PPSA and must register their security interests where commercially appropriate. Perfection of security interests that arise from retention of title arrangements is the only way to ensure priority on insolvency. Suppliers are also encouraged to register these security interests as purchase money security interests (PMSIs) and may want to consider obtaining additional security from the grantor, such as bank guarantees or cash collateral.
Do you need help with the PPSA or PPSR? Gadens can provide the solutions now.
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This report does not comprise legal advice and neither Gadens Lawyers nor the authors accept any responsibility for it.
Specific Questions relating to this article should be addressed directly to the author.