News

16 September 2016

Personal Property Securities Update

Registering your interests – the importance of correct identifiers

The importance of correctly registering a security interest on the Personal Property Securities Register (“the Register”) cannot be overstated.  Whilst the process for registration is very simple and anyone is able to do it, it is very important to know the rules behind using the Register.

This lesson is highlighted in the recent decision of the NSW Supreme Court In the matter of Accolade Wines Australia Limited and other companies [2016] NSWSC 1023 (“Accolade Wines”).  On a review of the company’s Personal Property Securities Registrations, it was discovered that a number of registrations may be invalid due to incorrect recording of the grantor details.

The Personal Property Securities Act (“the Act”) has specific requirements for what identifiers you may use when registering a security on the Register against different entities:

  • for individuals – the date of birth of the person must be provided;
  • for companies – charges must be registered against the ACN; and
  • for other entities (such as partnerships or trusts) – charges must be registered against an ABN, where one exists.

Failing to register with the correct grantor identifier will invalidate a registration.  In Accolade Wines, the company had registered interests against customers’ ABN’s instead of ACN’s as required.  To rectify the error, they created new registrations and sought orders from the court allowing extra time for registration as this error was inadvertent.  The extension orders were allowed on the basis that there was little or no prejudice to creditors or shareholders by allowing the extension of time.

This decision shows us that whilst it is possible to rectify errors in registrations, it will in most instances create risk and involve costly applications to the courts.

Expiration of Transitional Period

Another important reminder is that the transitional period for charges formerly registered with ASIC prior to the Register will expire on 30 January 2017 (five years from the registration commencement date for the Register).

Section 337 of the Act provides that registrations (with no stated end date) are temporarily unaffected by defects in registration (for example, registrations not citing serial numbers on certain types of collateral or registration against an incorrect grantor identifier).  This was to allow time for defective registrations to be amended to make them compliant with the Act.  Following 30 January 2017, these types of registrations will no longer be protected by this provision as the transitional period will have come to an end.

It is important that if you have not already reviewed transitional charges from previous registers (such as that maintained by ASIC), you should ensure that they are compliant with the Act prior to the end of this transitional period so that your registration does not become invalid.

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