The PPSA recognises the above difficulty in floating charge law, and washes the issue away. The PPSA provides upfront that all security interests, including circulating security interests, attach to after-acquired collateral without appropriation¹. Circulating assets are always turning over, and accordingly comprise (for the most part) after-acquired property.

Circulating security interests under the PPSA can attain the same priority time in respect of circulating assets as they can for non-circulating (fixed) assets. There is no delay in a security interest arising (attaching) or a priority time being allocated simply because the security interest relates to circulating assets, as there is for floating charges.

Circulating assets can still be disposed of by a grantor free of a circulating security interest, provided that the disposal is within the scope of the ordinary course of business, which is the scope of the consent from the secured party to release assets from the security interest.

The default scope of the trading power under a circulating security interest is the ordinary course of business of the grantor². It is unclear whether the grantor and the secured party could contract for a wider trading power than this by the secured party authorising wider disposals of collateral.

The key change to floating charge law under the PPSA is that circulating security interests attach to circulating assets immediately. This is likely to be significant particularly where there are unauthorised disposals by the grantor of circulating assets, outside the scope of the trading power (ordinary course of business). In these cases a secured party will have an immediately attached security interest in collateral disposed with which to compete against other claimants in the collateral (for example, a buyer).

The existence of a trading power for circulating security interests, which is the key element of a floating charge, means (for the author) that floating charges continue (in essence) under the PPSA. The floating charge concept is renamed “circulating security interests”, and amended such that circulating security interests attach immediately to circulating assets without appropriation.