Some charges not migrated to the PPSR
The Personal Property Securities Act 2009 (Cth) (PPSA) came into full operation on 30 January 2012 with the commencement of the Personal Property Securities Register (PPSR).
The PPSR is supposed to be the single source of registered security interests in relation to personal property (section 8 of the PPSA lists the interests to which the PPSA does not apply) however the migration of data from various State, Territory and Commonwealth agencies to the PPSR has not gone as smoothly as planned. ASIC recently reported on its website that the migration of the Australian Register of Company Charges to the PPSR occurred on 28 and 29 January 2012. This involved the transfer of over 1.5 million current registered charges, “but technical issues arising in the migration meant that approximately 6000 charges were not migrated to the PPSR.” Details of charges not migrated can be found on a spreadsheet available on ASIC’s website.
ASIC have said that they cannot now migrate the affected charges and that they must be registered on the PPSR by or on behalf of each secured party. The registration can be done at no cost up to and including 31 January 2014.
The prudent thing for anyone dealing with a security interest which they believe has been migrated to the PPSR (whether it is a company charge formerly registered on the Australian Register of Company Charges, or any other type of security interest previously recorded on one of the myriad State, Commonwealth or Territory registers) is to search both the old register as well as the PPSR.
Service entities and PPS leases
For anyone who operates within a group of entities, whether they be a group of companies, trusts, or partnerships (or a combination of one or more such structures) they need to have regard to whether or not they have a security interest which is capable of being registered on the PPSR.
One instance where a security interest may arise is in the dealings between a service entity and a trading entity. A service entity is often a company or a trust which provide premises, staff, intellectual property and plant and equipment to an associated trading entity. One of the main reasons why service entities exist is to ensure that such assets are not owned by the trading entity, they are merely used by it, and this means that those assets are protected against claims by the trading entity’s creditors. For example, a judgment creditor who has successfully sued the trading entity in an action for negligence cannot seize and sell such assets because they are owned by the service entity and not the trading entity against which they have a judgment.
In our experience service agreements typically provide for the licensing of, amongst other things, plant and equipment, which is owned by the service entity, to an associated trading entity for potentially lengthy periods of time. It is often unclear from the terms of these documents whether they create a bailment. In circumstances where they do, the arrangements which these agreements evidence will most likely require registration on the PPSR because they will be deemed to be “PPS leases”.
Failure to register in such circumstances may result in the service entity losing its rights over the plant and equipment if the trading entity goes into receivership or liquidation.