On 22 September 2023, the Australian Government released its response to the 2015 statutory review of the Personal Property Securities Act 2009 (Cth)(“PPS Act”) and regulations (“PPS Regulations”), known as the “Whittaker Review.” In essence, the Government proposes to accept (wholly or in part) 345 of the 394 recommendations set out in the Whittaker Review.
The proposed reform package is set out in an exposure draft of the Personal Property Securities Amendment (Framework Reform) Bill 2023 and proposed new PPS Regulations. Public consultation regarding the exposure draft bill and regulations closed on 17 November 2023. The Attorney General’s Department and AFSA will now consult with state and territory governments on the proposed final draft legislation before introduction into Parliament. We understand it is currently anticipated that there will be a 2 year transition period from the date of commencement of the amending legislation.
The proposed reforms are substantial and are aimed at achieving a clearer, more accessible and less complex framework for the granting, registration and enforcement of security interests in personal property. A significant focus of the proposed reforms is to reduce the complexity of the PPS Register.
Some of the proposed reforms that are likely to be of interest to an insolvency practitioner’s day to day practice include:
- Removing the requirement for a secured party to tick the “PMSI checkbox” when registering a PMSI – which often leads to registrations being inadvertently rendered ineffective.
- Amending the definition of a PMSI so a secured party does not need to demonstrate which individual items of inventory remain unpaid (ie, a secured party is able to claim PMSI status over all the goods supplied that are still held by the buyer).
- Extending the registration time for PMSI’s in inventory to 15 days after taking possession, to align it with non-inventory;
- Exempting a PPS Lease from the vesting provisions in ss.267 and 267A, unless it is “in substance” a security interest.
- Removing the requirement that a registration over trust assets held by a corporate trustee be made against the trust’s ABN.
- Clarifying the time when priority between security interests in the same collateral should be determined, namely at each time that proceeds become available for distribution.
Significantly, the Government did not accept the Whittaker Review’s recommendation to repeal ss. 588FL and 588FM of the Corporations Act 2001 (Cth). As practitioners will be aware, under s.588FL security interests granted by a company must be perfected within 20 business days of coming into force. If not, and the company enters into external administration within six months, the security interest vests in the grantor.
The Government has not finalised its position in relation to 16 recommendations and is seeking further input in that regard. One of those recommendations was that the arm of Government responsible for insolvency law reform consider whether the law should be amended to clarify whether an administrator’s equitable lien should rank ahead of security interests. We understand that the Attorney General’s office is seeking stakeholder input in that regard. A further recommendation that remains under consideration is whether company receiverships should remain outside the operation of Chapter 4 of the PPS Act.
Hunt & Hunt Lawyers will continue to monitor developments and provide further updates as they arise.
