At the same time as history was in the making at the epic
Australian Open final last night, the Personal Property Securities Act came
into force, and the PPS Register ‘went live’. See www.ppsr.gov.au

This too, is history
in the making, not only in Australia, where it is undoubtedly the most major
development in commercial and finance law for decades, but also
internationally, in that the achievement of a national legislation and
register, on a 24/7 online basis, for personal property security, is something
that has so far eluded the other Federal jurisdictions where this system
originated.

Bold statements to the effect that the Act will ‘change the
way we do business’ are not wildly inaccurate, at least insofar as confined to
the concepts and mechanisms for taking and protecting security interests in
personal property. The objective of the Act is to facilitate credit
transactions, and to render more predictable and certain the rules and the
transparency around the taking of security, in particular by casting a wide net
as to what counts as ‘security, so that familiar title-based claims such as
retention of title, long leases and transfers of accounts, are all brought
within the system, and providing clear rules for priorities between secured
parties and the effect on third parties such as purchasers.

At this stage, on Day One, we need only mark the achievement
of the Government, and although it has had a long gestation period since the
initial seeds of discussion and persuasion were planted, the last few years
have seen an enormous effort to finetune the legislation and in particular, to
implement the mechanisms to administer the system and the register. At this
point, there are already millions of registrations on the register, due to the
huge number of entries on ‘migrated’ registers, such as the ASIC Company
Charges Register, and State-based REV or Vehicles Registers. In addition, some  1.4 million ‘pre-loaded’ registrations by
large commercial users.

Over the coming months and years, we will have occasion in this Insolvency Blog to deal with many issues arising out of the PPSA, not least of which arise from the ambitious attempt to amend Part 5 Corporations Act (External Administration) which has arguably muddied the waters in comparison with the other choices for dealing with this interface with the PPSA. The PPSA will impact on all insolvency procedures in Part 5, and on retention of title and chattel leasing arrangements, as well as a myriad of other issues. Whilst there is Canadian and NZ case law to draw upon, Australia has not resisted the temptation to reinvent the wheel and attempt to improve upon the solutions in these jurisdictions. In some respects this has taken the most up to date jurisprudence from those countries, in other respects, it has adapted rather than adopted them, and this will have some unintended consequences which will unravel over the next few years. The Act comes up for review in three years, and there have been a number of (not necessarily major) areas which commentators have already earmarked for amendment. In addition, there are those things which were compromised with the States, such as licences, in order to broker a national system.

The PPSA will impact on insolvency, since after all, that is the main rationale for protection sought through security interests. For now we welcome this important reform, and are sure that its long-term benefits will vastly outweigh any short-term adjustment to the new dispensation.This is true for insolvency practitioners as well as for secured creditors. In terms of reaching the small businesses who might not be aware of the new requirements in order to protect themselves, information and awareness are the key to success in the roll-out over the 24 month transition period, though the migration of  existing registers and transitional perfection provisions give rise to some issues too.

Congratulations to the late Professor David Allan of Bond University, Phillip Ruddock and Robert McLelland, and a number of key government and ITSA officials, and practitioners who have supported and contributed to the development,  and shaped the development of the legislation and the Registry.