Given the sheer number of new transactions that are regulated as security interests under the PPSA, the first task is to spot them all. There is a list of transactions regulated as security interests in section 12 of the PPSA, and a list of transactions and interests that are excluded in section 8. Some thoughts and commentary on these lists of included and excluded transactions and interests in sections 12 and 8, as well as a number of other transactions not listed in either section 8 or 12, are set out in Tables 6.7.3 to 6.10.1 in Chapter 6 (Security Interests).

Security interests are not limited to those transactions listed in section 12 of the PPSA. Any transaction that provides for an interest in personal property and which in substance secures an obligation is a security interest¹. That is why various other transactions (in addition to those specifically listed in section 12) are listed in Tables 6.7.3 to 6.10.1 in Chapter 6 (Security Interests), with commentary on whether and when they might be considered to be security interests under the PPSA.

The consequences of not spotting transactions that are regulated as security interests before the onset of an enforcement or an insolvency are dire. Security interests which are not spotted and not properly perfected will generally be void upon the bankruptcy, administration or liquidation of the grantor by virtue of vesting in the grantor. There are certain exceptions for “deemed” security interests, turnover trusts and certain other transactions – see paragraph 23.1.2 of Chapter 23 (Vesting (Extinguishment) of Unperfected Security Interests upon Insolvency).

A “scoping exercise” needs to be conducted when doing security reviews, conducting an investigating accountancy role, or otherwise preparing for enforcement, to ensure that all security interests are identified.