In 2009, the Personal Property Securities Act (Cth) (“PPS Act”) was established and became an important reform introducing a national regime for secured finance using personal property. The PPS Act replaced a complex legal system, creating one method in respect of registration, priority and enforcement of security interests in personal property to which it applies.
The PPS Act was intended to reduce the costs of borrowing and increase the range of property available to secure finance, especially for small businesses. The objectives of the Act were to:
1. Increase the consistency and certainty of secured finance in Australia;
2. Reduce the complexity and cost of secured finance in Australia; and
3. Enhance the ability of businesses and consumers to use their assets as security, and improve their ability to access cost-effective finance in Australia.
The introduction of the PPS Act has been particularly relevant in assisting Lawyers to easily identify security interests given or received by their clients. Following the introduction of the PPS Act, Lawyers have been able to:
• Ensure that the terms of contracts or security agreements adequately protect clients’ positions and do not obstruct business in the ordinary course;
• Protect security interests of their clients by constantly reviewing the register and ensuring that registration is at a minimum and control is held where relevant;
• Register security interests of their clients within 20 business days of the interests arising;
• Recommend (for larger businesses) that a PPS officer be appointed, who is responsible for managing PPS issues arising in daily operations of the business;
• Consider whether enforcement action can be taken against defaulting parties; and
• Where it appears that a security interest is about to be enforced against a client, consider whether the right to enforce has actually arisen, and if not, whether urgent action should be taken, such as an injunction to restrain enforcement.
On 4 April 2014, the Attorney-General announced a review of the PPS Act. After more than two years of operation, the review of the PPS Act provides an opportunity to consider, based on practical experience, whether the PPS Act has achieved the core objectives, as outlined above. The review will particularly focus on the experiences of small businesses.
An interim report on issues raised by business will be prepared by 31 July 2014 based on submissions put forward by businesses around Australia. A final report on the review will then be prepared by 30 January 2015.
If you are a business and interested in the review of the PPS Act, watch this space, as we will provide a further update as more information becomes available.