- 24.1 Five (5) key issues when enforcing security interests
- 24.2 Spot all security interests
- 24.3 Perfect all security interests
- 24.4 Maximise priority by seizing opportunities
- 24.5 Ascertain priorities
- 24.6 Appointing receivers “over the top” of administrators
- 24.7 Receivers can sell leased, consigned or retention of title collateral
- 24.8 Chapter 4 - Enforcement of security interests granted by individuals, and certain (non- receiver) controllerships of companies
- 24.9 PPSA Retention of Title Property
- 24.10 Enforcement regulation by class of security interest – PPSA Chapter 4 and the Corporations Act 2001 (Cth)
Great care is required about what system of regulation applies to the enforcement of security interests. Does Chapter 4 of the PPSA apply? Does Part 5.2 (receivers and controllers) of the Corporations Act 2001 (Cth) apply? Do none of them apply, in which case an enforcement would be primarily governed by the contractual provisions in the security agreement and any applicable general law.
Is the transaction a security interest such that repayment of the secured obligations cannot be avoided as a preference under section 588FA of the Corporations Act 2001 (Cth) upon liquidation? Is the transaction a security interest for the purposes of standing outside a deed of company arrangement proposed in an administration of the grantor? There are many other issues of a similar nature.
Some of the above questions are briefly addressed in the tables below to give a flavour for how the PPSA and the Corporations Act 2001 (Cth) apply (or do not apply) upon the enforcement of security interests.
Table 9 below deals with PPSA security interests (that arise under security agreements entered into after commencement of the PPSA) only.
Table 8. Transitional security interests (granted by companies)
| Security interest | PPSA Chapter 4 apply? |
Corporations Act Part 5.2 (receivers, controllers) apply to transaction as security interest over property of company? |
Corporations Act Part 5.3A (administration) apply to transaction as security interest over property of company? |
Can secured obligations be compromised by a deed of company arrangement under section 444D? |
Security for purposes of Part 5.7B (voidable transactions)? |
| Fixed and floating charge | No - transitional security interest | Yes | Yes |
No – not unless secured party votes for the DOCA or court so orders - section 444D(2). |
Yes – “security interest” definition in section 51A includes a charge. |
| Mortgage | No - transitional security interest | Yes | Yes |
No – not unless secured party votes for the DOCA or court so orders - section 444D(2). |
Yes – “security interest” definition in section 51A includes a charge (which includes a mortgage). |
| Lease | No - transitional security interest | No - leased property is not property of the company under Part 5.2 | No - not a security interest under Corporations Act section 51A. Part 5.3A may apply to transaction as “owner” or “lessor”. |
Unclear – rent arguably could be compromised by a DOCA pre-PPSA. |
No – “PPSA security interest” for Part 5.7B purposes excludes transitional security interests. |
| Commercial consignment | No - transitional security interest | No - consigned property is not property of the company under Part 5.2 |
No – not a security interest under Corporations Act section 51A. Part 5.3A may apply to transaction as “owner” or “lessor”. |
Unclear |
No – “PPSA security interest” for Part 5.7B purposes excludes transitional security interests. |
| Transfer of accounts | No - transitional security interest | No - assigned accounts are not property of the company under Part 5.2 |
No – not a security interest under Corporations Act section 51A. |
Unclear |
No – “PPSA security interest” for Part 5.7B purposes excludes transitional security interests. |
| Conditional sale (retention of title) | No - transitional security interest | No - retention of title property is not property of the company under Part 5.2 |
No – not a security interest under Corporations Act section 51A. Part 5.3A may apply to transaction as “owner” or “lessor”. |
Unclear |
No – “PPSA security interest” for Part 5.7B purposes excludes transitional security interests. |
| Trust that secures obligations | No - transitional security interest | No - Part 5.2 only applies to transitional security interests that are charges (includes mortgages), liens or pledges |
No - not a security interest under Corporations Act section 51A. |
No – trusts not generally considered "security" pre-PPSA, so even section 444D not apply? |
No – “PPSA security interest” for Part 5.7B purposes excludes transitional security interests. |
Table 9. PPSA security interests (granted by companies)
| Security interest | PPSA Chapter 4 apply1? |
Corporations Act Part 5.2 (receivers, controllers) apply to transaction as security interest over property of company? |
Corporations Act Part 5.3A (administration) apply to transaction as security interest over property of company? |
Can secured obligations be compromised by a deed of company arrangement under section 444D? |
Security for purposes of Part 5.7B (voidable transactions)? |
| General security interest | No - assuming receiver appointed to enforce | Yes |
Yes – “security interest” in Part 5.3A includes PPSA security interests. |
No – not unless secured party votes for the DOCA or court so orders - section 444D(2). |
Yes |
| Specific security interest | No - transitional security interest | Yes |
Yes – “security interest” in Part 5.3A includes PPSA security interests. |
No – not unless secured party votes for the DOCA or court so orders - section 444D(2). |
Yes |
| PPS Lease |
Yes – if secures obligations, but not if receiver appointed to enforce, and not section 131. |
No - leased property is generally not property of the company under Part 5.2 |
Yes – “security interest” in Part 5.3A includes PPSA security interests, and property of the company includes PPSA retention of title property. |
Unclear. Arguably |
Unclear. “Security interest” (section 51A), but not property of company unless the security interest vests in the grantor – CA section 588C |
| Commercial consignment |
Yes – if secures obligations, but not if receiver appointed to enforce, and not section 131. |
No - consigned property is generally not property of the company under Part 5.2 |
Yes – “security interest” in Part 5.3A includes PPSA security interests, and property of the company includes PPSA retention of title property. |
Unclear. Arguably |
Unclear. “Security interest” (section 51A), but not property of company unless the security interest vests in the grantor – CA section 588C |
| Transfer of accounts |
Yes – if secures obligations, but not if receiver appointed to enforce, and not section 131. |
No - assigned accounts are generally not property of the company under Part 5.2 |
Argubly no – sold accounts are probably not PPSA retention of title property - not property used by or in the possession of the company |
Unclear. Arguably |
Unclear. “Security interest” (section 51A), but not property of company unless the security interest vests in the grantor – CA section 588C |
| Conditional sale (retention of title) |
Yes, but not if receiver appointed to enforce, and not section 131. |
No - retention of title property is not property of the company under Part 5.2 |
Yes – “security interest” in Part 5.3A includes PPSA security interests, and property of the company includes PPSA retention of title property. |
Unclear. Arguably |
Unclear. “Security interest” (section 51A), but not property of company unless the security interest vests in the grantor – CA section 588C
|
| Trust that secures obligations |
Yes, but not if receiver appointed to enforce, and not section 131. |
Yes – “security interest” in Part 5.2 includes PPSA security interests over property of the company. |
Yes |
No – not unless secured party votes for the DOCA, or court so orders – s444D(2). |
Yes - "security interest" includes PPSA security interests – see section 51A. |
