Personal Property Security

Personal Property Security

The Commonwealth Personal Property Security Register is a web-based noticeboard of all “interests” over all non real estate assets in Australia. At last count there were more than 10 million, many of which were defunct and many others defectively registered.

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What “interests” can be registered?

Any tangible or intangible asset over which a chattel mortgage or charge could be granted can be the subject of a PPS incapable of registration on the Register.

Most commonly such securities are granted to secure an interest in:-

  • Goods: plant and equipment, vehicles
  • Goodwill of a business;
  • Intellectual property eg, trade marks;
  • Receivables , ie debts;
  • Proceeds, ie value of business received upon liquidation;
  • Inventory;
  • Shares;
  • Livestock and their progeny;
  • Crops

What does registration achieve?

Provided the security is validly registered, registration accords to the security holder, priority over other creditors in respect of the secured asset.

The interest will survive a transfer of ownership of the collateral to a third party unless it was in validly or defectively registered in which case the interest is extinguished.

How to register the interest

The creation of the security interest requires an agreement between the mortgagor and the security holder. the agreement should specify precisely what the obligations of the mortgagor are, ie to re-pay a loan; the extent of the security interest and under what terms the loan and the security interest may be discharged. It should also specify that the security holder is entitled to register the interest on the Personal Property Security Register and the “class” or “classes”  under which such registration may be effected.

The security holder may then complete an online declaration and pay a fee whereupon the registrar is bound to accept and record the registration.

The selection of collateral “class” is important. The security may be registered in respect of several different classes e.g. Purchase Money and Book Debts. Vehicle finance securities concerning companies are commonly registered in respect of the vehicle itself as well as “Proceeds” (of the company).

Some errors discovered in a registration statement can be corrected without having to discharge the registration and start over, which would thereby lose priority. These include the description of the collateral and the description of the proceeds but not the collateral class or serial number of serial numbers of collateral goods.

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