One of the best ways of understanding the GST when it was introduced (and probably the proposed new carbon price) was to track its effect through the supply chain.

If you are having trouble communicating the impact of Personal Property Securities reform in your organisation then regardless of whether you sell products or services, do a supply chain impact study (click on the above image to get an idea of a supply chain).

As a lawyer I can tell you that PPS is a once in a generation change to business law starting with terms of trade and flowing all the way through to enforcement of securities regardless whether your customer is a company or an individual.

Regardless of whether you are a manufacturer, wholesaler, retailer or consumer or a financier to anyone of those, your failure to understand the change to your rights in the supply chain and what you need to do to protect them will expose you to the risk that you will be an unsecured creditor if your customer becomes insolvent.

The Personal Property Securities (Corporations and Other Amendments) Bill 2011 has been introduced into Parliament.

It contains the final set of amendments to the Personal Property Securities Act 2009 and consequential amendments to the Corporations Act prior to the Personal Property Securities Register commencing in October 2011.

The amendments to the PPS Act will:
• provide exemptions to the rules on taking personal property free of security interests for temporarily perfected transitional security interests and transitional
security interests which were not previously registered by serial number
• ensure that the definition of security interest is consistent with the New Zealand legislation and remove any potential for confusion
• clarify that CHESS securities are intermediated securities and the means by which CHESS securities can be subject to control
• ensure access to third party data through the Register (such as that provided by the National Exchange of Vehicle and Driver Information System (NEVDIS)
• impose conditions on accessing and using data on the Register to ensure that parties cannot sell this data
• enable the Registrar to investigate breaches of the rules authorising searches of the Register and registration of security interests on the Register
• clarify the provisions on security interests in authorised deposit-taking institutions and the provisions on control of inventory and accounts.

The amendments to the Corporations Act will confirm that:
• the 2010 PPS Act will not affect a secured party’s capacity to appoint or veto the appointment of a company administrator under a transitional security agreement
• the liability of receivers and the ability of administrators to avoid liability for transactions entered into by the company before their appointment will be retained
• the existing ability of the holder of a pledge or lien to enforce is subject to the pledge or lien not being subordinate to another security interest.

Langes is current conducting in-house seminars and advising on PPS preparation and implementation. Please call your local partner if you would like to discuss how we can help you.

UPDATE 12 May 2011: The Bill has been passed by both Houses

At its meeting on 13 February 2011 the Council of Australian Governments agreed to defer the commencement date for PPS reform to October 2011. The Attorney General’s Department revised implementation schedule provides for the reforms to commence on 10 October 2011.

In the meantime the following steps are scheduled:

• additional Commonwealth legislative amendments to be passed by May 2011
• Commonwealth: Register Application to be developed by June 2011
• Commonwealth: Personal Property Securities Register user acceptance testing commences by June 2011
• All jurisdictions: complete migration of data from State and Territory registers and all related transitional arrangements by October 2011.

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The Attorney General’s Department have advised that “The Business Regulation and Competition Working Group of COAG met on 15 December 2010 and agreed to recommend to COAG that the commencement date for PPS reform be deferred to October 2011. COAG is expected to endorse this decision when it meets in February 2011. On this basis, an indicative program schedule will be released in January 2011.”

The Personal Property Securities Regulations 2010 have been registered.

Amongst other things the Regulations:

• clarify the rights of an execution creditor;
• contain a new definition of “motor vehicle”: the regulations have the effect that a motor vehicle that satisfies the definition of “motor vehicle”will be taken free of a security interest in circumstances if a search of the register using the serial number does not disclose a registration on the register (section 45 of the Act);
• clarify the relationship between the enforcement provisions of the PPS Act and consumer credit legislation;
• clarify the operation of the Register;
• prescribe details to be included in a financing statement;
• set out transitional arrangements for “watercraft”.

The commencement date for the new scheme has not been proclaimed yet.

Whether the PPS Act applies to your security interest is not straightforward.

We have prepared a security interest analysis which identifies the relevant issues.

If you are not sure whether your product will be affected speak to your Langes contact.