- 22.1 Registration
- 22.2 20 business day registration window – Corporations Act 2001 (Cth) section 588FL
- 22.3 Financing statements
- 22.4 The PPS Register is a “red flag” only – there is no “title by registration”
- 22.5 Requesting copies of security agreements
- 22.6 Financing change statements
- 22.7 Removal of pre-registrations where no security interest was ultimately taken
- 22.8 Registration by class of collateral
- 22.9 Registration against proceeds
- 22.10 Periods of registration – seven (7) years, 25 years or an indefinite period
- 22.11 Registration is only effective from the time the register shows the interest – so “search, register, search”
- 22.12 Verification statements
- 22.13 Search results - establishes registration time and priority time
- 22.14 Registration of PMSIs
- 22.15 Pre-registration before security interests attach
- 22.16 Inventory PMSIs must be pre-registered
- 22.17 "Silent equipment PMSI" risk
- 22.18 Amendment demands and amendment notices – cleaning up a cluttered register
- 22.19 Defective registrations
- 22.20 Other defects in registrations – PMSIs and “seriously misleading” registrations
- 22.21 Consequences of defective registrations
- 22.22 Registration, searches and privacy
- 22.23 Prescribed information, and prohibited registrations – impounded motor vehicles, proceeds of crime, freezing orders
- 22.24 Registration details for trusts
- 22.25 Applications for extension of time
A registration on the PPS Register is effected by completing a form called a financing statement1. Financing statements can be lodged online, or in paper-form through the Register Contact Centre.
A financing statement is a short-form registration which discloses key, but limited, information about a security interest.
A financing statement, and thus any search of the PPS Register, only records/reveals certain details about a security interest, being:
(a) the grantor;
(b) the secured party;
(c) a generic description of the collateral, although the parties may list specific items of collateral if they wish; and
(d) the type of security interest granted.
Security agreements are not recorded on the PPS Register.
In more detail, a financing statement must include, and the PPS Register will disclose, the following information about security interests:
(a) grantor: the grantor’s details, being the grantor’s Australian company number (ACN) where the grantor is a company, and name and date of birth where the grantor is an individual2.
The grantor’s details are absolutely fundamental because all searches of the PPS Register are made against the grantor, except for serial numbered property that must be (not may be) registered by serial number (which is all consumer serial numbered property, and commercial aircraft). If a grantor’s details are incorrect, the registration is defective. A defective registration is invalid. There are only certain limited "grace" provisions to save a defective registration from being invalid in section 1663.
Where a grantor is a company, the only option will be to search the PPS Register against the grantor’s Australian company number.
An individual grantor’s address is never recorded for privacy reasons.
For security interests granted over serial numbered property by individual consumers (consumer aircraft, watercraft and motor vehicles), no grantor’s details can be recorded at all. The registration is against the serial number only, again for privacy reasons4.
For all other security interests granted by individuals only the grantor’s name and date of birth are recorded on the PPS Register5;
(b) secured party: the secured party’s details, being name, and an address (including email address or fax number) for giving notices to the secured party about the registration.
The registration practice seems likely to require that all corporate secured parties register as a “secured party group”, which permits the allocation of unique identifiers to certain internal sections or divisions to which a registration may relate. This is so the correct personnel receive notices and communications relevant to a registration;
(c) collateral: the following details about the collateral covered by the security interest:
(i) consumer or commercial property: the registration must nominate the collateral as either consumer or commercial property.
This is relevant, for example, to the level of detail for the grantor which can be included in a financing statement (see paragraph (a) above);
(ii) one single class of collateral: one registration must be against one single, generic class of collateral from the nine classes of original collateral listed below at paragraph 22.026. In addition, the parties are free to list specific items of collateral if they wish.
Secured parties must chose one class of collateral only for each registration. There are wide and narrow classes of collateral to make this system work. If a secured party wishes to register a security interest against multiple classes of collateral (where the widest class “all present and after- acquired property” is inappropriate) then another registration is required for the additional class of collateral. The additional registration can be effected through a single application.
The golden rule is that one class of collateral must be selected for each registration. This will incentivise secured parties to register wide, either by selecting wide classes of collateral such as “all present and after-acquired property”, or by conducting several registrations to select multiple classes of collateral;
(iii) serial number: for serial numbered property which must be described by serial number.
There are two types of serial numbered property – that which must be registered by serial number, and that which may be registered by serial number.
Consumer motor vehicles, aircraft, watercraft and intellectual property (patents, trade marks, designs and plant breeder’s rights)6, and commercial aircraft7, must be registered by serial number.
All commercial serial numbered property (except commercial aircraft) may be registered by serial number, which means that recording the serial number on the PPS Register is optional.
It is always advisable to register against serial numbers of all serial numbered property to prevent extinguishment of security interests upon transfers of collateral – see paragraphs 21.058 to 21.079 of Chapter 21 (The Extinguishment Rules) for discussion of sections 44 and 45, which set out the extinguishment rules for serial numbered property; and
(iv) proceeds: if the initial registration against original collateral is wide enough to cover the class of property into which proceeds fall, that will be sufficient to perfect against proceeds. Alternatively, secured parties may register specifically against proceeds, either by registering against all present and after-acquired property that is proceeds of original collateral, or by nominating particular items or classes of proceeds. See paragraph 22.028 and below for discussion on how to register against proceeds;
(d) type of security interest: information about the type of security interest, being whether8:
(i) PMSIs: the security interest is a PMSI. However, the registration practice may not apply this to security interests over “all present and after-acquired property”9.
There will be no unintentional PMSIs. A PMSI must be set up and registered as a PMSI from the outset;
(ii) subordination: the security interest is subordinated to other security interests.
It seems unlikely that the parties would bother nominating that a security interest is subordinated. Little seems to turn on this;
(iii) inventory: the collateral is inventory in the hands of the grantor.
This is important because, for example, PMSIs are of two types, inventory PMSIs and equipment PMSIs. Inventory PMSIs must be perfected very early, before either supply (goods) or before attachment of the security interest (all other inventory) – see paragraph 22.046 and below of this chapter for discussion on how to register PMSIs.
This encourages both the grantor and the secured party to think about and register whether collateral will be inventory, and whether security interests over inventory will be PMSIs;
(iv) circulating assets: a registration may nominate that the grantor has control over collateral that would otherwise be circulating assets10.
This will be important because circulating security interests (the PPSA equivalent to floating charges) over personal property are subordinated in a similar fashion to floating charges, namely, to employee entitlements and administrators’ liens11.
Circulating assets are any form of collateral that the grantor is permitted by the secured party to dispose in the ordinary course of business12. The PPSA deems the following six (6) classes of collateral to be circulating assets unless the secured party has taken control over the assets13:
(A) many accounts that arise in the ordinary course of business, except that where security interests take the form of (outright) transfers of accounts the accounts will not be circulating assets14;
(B) inventory;
(C) accounts that are the proceeds of dealings with inventory;
(D) current (at-call) ADI accounts, but not where the secured party is a bank (ADI) holding a registered security interest over an ADI account held with it that nominates control over the account15;
(E) currency; and
(F) negotiable instruments;
(v) transitional security interests: a registration must nominate whether the security interest is a transitional security interest16.
Secured parties under transitional security interests who conduct preparatory registrations, or who register during the two year transition period ending in 2014 while their security interests are temporarily perfected, must nominate that their security interests are transitional; and
(vi) migrated security interests: where transitional security interests are migrated to the PPS Register, the registration will nominate the transitional register (for example, the ASIC company charges register) on which the security interest was previously registered and the date it was registered17.
This will enable the historical registration to be traced back if required to establish due registration, in case this information is needed to resolve priority contests. Priority contests between two transitional security interests are resolved by the general law that applied to them before the commencement of the PPSA – see paragraphs 18.19.1 to 18.19.11 of Chapter 18 (Priority) for discussion of the priority of transitional security interests.
The security agreement is not registered or available from the PPS Register, which is a key change from the pre- PPSA ASIC company charges register.
Notes:
1 PPSA section 150(1). (link)
2 PPSA section 153, Item 2 (The grantor) in the table, and PPS Regulations, paragraph 1.2(4) in Part 1 of Schedule 1.
3 PPSA sections 165(b), read with 166(2)(c).
4 PPSA section 153, Item 2 (The grantor) in the table, and PPS Regulations, paragraph 2.2(1)(a) in Part 2 of Schedule 1.
5 PPSA section 153, Item 2 (The grantor) in the table, and PPS Regulations, paragraph 1.2(4) of Part 1 of Schedule 1.
6 PPSA section 153, Item 4 (The collateral and proceeds) in the table, and PPS Regulations, paragraph 2.2(1)(a) of Part 2 of Schedule 1.
7 PPSA section 153, Item 4 (The collateral and proceeds) in the table, and PPS Regulations, paragraph 2.2(1)(b) in Part 2 of Schedule 1.
8 PPS Regulations, paragraph 4.1 generally in Part 4 of Schedule 1.
9 But see PPS Regulations, para 3.1 of Part 3 of Schedule 1.
10 PPSA section 153 and PPS Regulation 5.5.
11 Corporations Act 2001(Cth), sections 433 (receivership), 443E (administration) and 561 (liquidation).
12 PPSA section 340(1) (b). (link)
13 PPSA section 340(1) (a), read with section 340(5). (link)
14 PPSA section 340(4A). (link)
15 PPSA section 341A. (link)
16 PPS Regulations, paragraph 4.1 of Part 4 of Schedule 1, item 3 in the table.
17 PPS Regulations, paragraph 4.1 in Part 4 of Schedule 1, item 4 in the table.
