Personal Property Securities (PPS) law reform - the start of a new chapter in taking security.
After one of the longest gestation periods for any proposed law reform, Australia is now substantially down the track towards having a completely new system of creation, documentation, registration and enforcement of securities over assets (other than real estate) of both companies and natural persons.
On 16 May 2008, the Federal Attorney-General's Office released the consultation draft of the proposed Personal Property Securities Bill 2008 (Bill). Once passed into law, the proposed legislation will change the way in which all businesses take security over assets. There is a three month period for consultation on the draft Bill. The current timetable has the final Bill passing through the Commonwealth Parliament in 2009 with the new law commencing in May 2010. Due to Australia's federal system, complementary State legislation is also required. The tender for development of the electronic register is scheduled for September this year.
The Bill contains 274 sections and comprises 238 pages. A 141 page commentary on the draft Bill has also been released.
While PPS reform is new to Australia, there have been major PPS reforms across the Tasman in New Zealand, as well as in a number of Canadian provinces and the United States.
New Zealand revised its PPS laws and established an integrated PPS online register in 2002. DLA Phillips Fox in New Zealand actively assisted a range of clients with these reforms through Board and senior executive briefings, training materials, redrafting of security documentation and legal advice on a myriad of transitional and implementation issues arising from the 2002 New Zealand PPS reform. As a result, DLA Phillips Fox in Australia is well placed to assist clients in Australia with navigating their way through the new regime.
The reform will revolutionise the current complex system under which credit providers and suppliers protect their security interest in property other than land and create a single online register. Currently over 70 separate laws, administered by over 30 agencies, regulate these security interests.
A failure to understand and stay on top of the new system will leave many businesses with a red face when they find that what they thought was a secured debt or charge over goods they have supplied to a customer has lost its priority to a competitor business or to the customer's bank following the customer becoming insolvent.
Both private and public health services, other businesses and suppliers in the health sector need to have PPS reform on their radar to protect their cashflows and position as secured creditors when their customers or suppliers fail.
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