Hints for using the PPSR

The Personal Property Securities Act (PPSA) and Personal Property Securities Register (PPSR) took effect on 30 January 2012. The PPSA and PPSR have replaced a large number of Commonwealth, State and Territory laws and registers for company charges, bills of sale, ship mortgages, crop and stock securities, motor vehicle securities and most other securities affecting tangible and intangible personal property.

Using the correct identification criteria specified in the PPS regulations (e.g. ACN, ABN, ARSN etc) to describe the grantor (i.e. mortgagor, chargor, lessee, bailee, consignee etc) when registering or searching on the PPSR is critical to achieving reliable results.

Equally important is the correct categorisation of the collateral (i.e. the property subject to the security interest) and, where applicable, use of the correct serial number for serial numbered property. The PPSR has no tolerance for mistakes. Minor mistakes can make a registration defective or search unreliable.

Not surprisingly, a number of issues have emerged as potential traps for those unfamiliar with how the PPSR operates.

• Because of the way in which charges previously registered with ASIC have been migrated to the PPSR, it is necessary to search the PPSR using a company's ACN, it's ABN and also the company name to ensure that all security interests previously registered elsewhere are being identified. This is not how the PPSR was intended to be searched but it will be a practical necessity for the time being.
• If you are taking a security interest from a person who is a trustee you should generally register by describing the grantor as the trust (which will usually require registration against the trust's ABN) and also the trustee (which will usually require registration against the trustee's ACN if it is a company).
• The PPSR allows registration against partnerships. This will normally involve registering against the partnership ABN. In order to rank ahead of a partnership's creditors it is necessary for the security interest to be granted by the partnership and not by the individual partners.
• Inappropriate use of 'free text' to supplement a collateral description can cause problems for a secured party such as the registration being 'seriously misleading' and therefore defective or the registration being unduly narrow.
• When purchasing personal property, a release should still be obtained from any secured party holding a security interest covering that property, unless it is being sold in the ordinary course of business of the seller or the property is serial numbered property and no search of the serial number discloses any registered interests on the PPSR.
• It will not be necessary to register any release document on the PPSR and the PPSA does not prescribe a particular release form. However, depending on the nature of the registration and the interest being released, it may be necessary for a financing change statement to be made on the PPSR once the release has happened. Where this is required, the release should include the secured party's undertaking to promptly attend to this.