Legal
Issue No. 52 - April/May 2010
Securities reform has sweeping impact
by Tony Hurren
Australia is entering a brave new world for credit markets, one which will impact on the way most businesses obtain and provide finance.
The changes under the Personal Property Securities Act 2009 (PPS) should make it easier for many SME businesses to raise funds.
PPS is a fundamental overhaul of the way in which security is given and taken over ‘Personal Property’ and will consolidate a myriad of complex rules and regulations.
There are 70 pieces of legislation in Australia governing security over personal property with about 200 pieces of legislation in total Australia-wide which touch upon what will be covered by PPS.
Businesses need to consider what steps to take now to ensure they are ready for the changes coming into force next year.
What are Personal Property Securities?
‘Personal Property’ under PPS is any type of asset other than land, subject to a few exceptions. Personal Property covers both tangible property (such as motor vehicles, crops, stock, office equipment and machinery) and intangible property (such as shares, intellectual property, bank accounts and accounts receivable).
A Personal Property Security is an interest which someone takes over Personal Property to secure repayment of a loan or performance of some other obligation. PPS will apply to all lending and borrowing where the lender wants security over Personal Property.
It will, for example, apply to:
• company debenture charges
• hire-purchase arrangements and leasing arrangements
• margin loans
It will even apply to some situations, such as retention of title arrangements, which are not normally regarded as involving a loan.
Why change?
A significant amount of wealth in Australia is held in Personal Property and an increasing proportion of it is held in intangible assets, such as IP rights.
How security is taken over Personal Property currently varies according to severa...
