Transitional provisions

Transitional security interests and migrated registrations

From 30 January 2012, the Personal Property Securities Act 2009 (Cth) (PPS Act) established a new system for the creation, priority and enforcement of security interests in personal property.

To support implementation of the new system, the PPS Act contains transitional provisions.  These provisions provide two key dates:

  • 31 January 2014 – transitional security interests

  • 31 January 2017 – effective migrated registration

31 January 2014 – transitional security interests

A transitional security interest (TSI) is an interest in personal property that, in substance, secures payment or performance of an obligation which existed prior to the PPSR commencing in 30 January 2012.

TSIs also include security interests that didn’t exist at 30 January 2012, but were created under a security agreement that existed prior to 30 January 2012 and continued to exist after that time.

An example of this could be goods supplied in 2013 under a retention of title (ROT) agreement that was created in 2011.

TSIs can include ‘PPS leases, which are generally leases for a term of more than a year.

Secured Parties were able to take advantage of ‘temporary perfection’ and preserve the priority status of their TSI by registering the interest on the PPSR before midnight on 31 January 2014.

Although you can still register a TSI, if you register it after 31 January 2014, you no longer gain the benefit of temporary perfection.

What this means is that the ‘perfected’ status of the security interest begins from the time of registration on the PPSR, instead of the earlier date allowable under the transitional provisions if registered before the end of 31 January 2014.

As a result, another person with a security interest in the same collateral with a higher priority ranking (for example, a secured party who registered during the transitional period) will be paid out ahead of you in the event that grantor (the person who hires or buys the goods, or borrows money) defaults.

There is also the risk that if the grantor enters bankruptcy or insolvency, and a security interest was not perfected for a period, the security holder will lose their security interest altogether.

31 January 2017 – effective migrated registrations

Security interests registered on certain Commonwealth, State and Territory registers (including the ASIC Register of Company Charges, the Vehicle Securities Registers and Registers of Encumbered Vehicles) were migrated to the PPSR. A full list of the registers which were migrated to the PPSR can be found here .

Some of the registrations migrated to the PPSR from pre-existing registers may be defective because when they were migrated they did not contain the information required by the PPS Act.

The Personal Property Securities (Migrated Security Interest and Effective Registration) Determination 2011 (Determination) helps migrated registrations to remain effective, despite these defects, but only until the migrated end time of the registration or, if the original registration does not have a migrated end time, until 31 January 2017.  The Determination ensures the effectiveness of migrated registrations, but the absence of the required data may have consequences under other provisions of the PPS Act, for example provisions relating to taking personal property free of the security interests.

The period provided by the determination, which is the maximum period allowed under the Act, is intended to give secured parties ample time to make an effective registration should one still be required after the passage of five years.