The Personal Property Securities (Corporations and Other Amendments) Bill 2010 has been introduced into Parliament.
The Bill amends the Corporations Act, as foreshadowed last year (see here) .
The PPS Act is scheduled to commence in May 2011 but if the Minister does not make that determination the amendments will require commencement by 1 February 2012.
Registration of most existing security interests will be migrated to the PPS register 1 month before commencement.
If there is no existing register (for example because the PPS Act creates a new type of security interest), the holders of security interests (eg lenders) will have 24 months from the commencement date to decide whether to register. Failure to register within 24 months may result in a loss of priority to other security interests or on a sale of the collateral or insolvency of the grantor of the security interest over the collateral.
Amendments to PPS Act
Other proposed changes include:
- maintaining the general exclusion of insurance policies from the PPS Act but including insurance payments that are proceeds under the PPS Act. Without this amendment, it would be possible for a secured party’s security interest to become worthless when the collateral is destroyed.
- an amendment to ensure that the Act would not apply to rights held in water that are derived from contract.
- exclusion of certain security interests taken by pawnbrokers from the PPS Act.
- exclusion of members’ interests in superannuation entities from the PPS Act.
- amending the definition of livestock to make it clear that livestock includes the products of livestock.
- The ADI with whom the account is held would be able to perfect a security interest in an ADI account by control, without the need for registration. The ADI would therefore have the highest priority (because perfection by control would also have a higher priority than perfection by registration). This means that the ADI would not be vulnerable to other secured parties claiming the ADI account, so that the ADI account would be available to the ADI for prudential regulation purposes. Allowing the ADI to perfect the security interest by control, and obtain the highest priority would also be consistent with the ADI’s right of set-off and combination of accounts in relation to the ADI account.
- changes to priorities between an inventory financier and an accounts financier.
- clarification that a security interest could be held in crops and livestock as distinct from the land or animal from which these products are derived. Accordingly a financer could take a security interest in the wool without taking a security interest in the livestock from which it is derived.
- changes to the enforcement provisions.
UPDATE 22 March: The Senate Legal and Constitutional Affairs Legislation Committee will conduct an inquiry into the Bill.