When the results of the official Review of the PPSA were released earlier this year, I was tempted to hurriedly put out a number of
posts describing its recommendations.
However, this temptation was tempered somewhat by the realisation that,
not only was it something of a major job trying to sort through 394
recommendations in a 542 page report, it was highly unlikely that any of the report’s
recommendations were likely to be implemented in the very near future.
This was not from of any lack of confidence
in the quality of the recommendations but merely because of the
sheer number of recommendations being made and the fact that it took well over
a year for the last PPSR amendment Bill to be passed addressing only a single
issue (not counting the time taken to decide that a Bill was appropriate in the
first place!).
Now that I’ve stuck my toe in the water of the Report’s
recommendations in my last, catchily titled, post on the Cross-Collateralisationof PMSIs, I thought I’d draw attention to some of the Report’s recommendations
aimed at simplifying the registration experience.
Consumer property or commercial property? - Recommendations 86 and 87 propose doing away with the distinction entirely. No more confusion caused by the uninitiated thinking that ‘commercial property’ means the same thing as commercial premises.
Purchase Money
Security Interest (PMSI) applies? - The PPSR’s ‘PMSI Box’ is widely
misunderstood with many registrations rendered largely ineffective because a
secured party didn’t understand what was meant by a Purchase Money Security Interest.
In both Canada & NZ there is no requirement to ‘flag’ a registration
as a PMSI but, instead, PMSI priority will be determined by the nature of the
security interest itself whenever competing security interests need to be
assessed. Where ROT suppliers are
concerned, recommendation 241 proposing the removal of the PMSI Box is one of
the biggest (if not the biggest)
recommendations contained in the report.
The collateral is inventory?
- Recommendation 88 proposes doing away
with the question, finding that it added little value and merely served to
create confusion and uncertainty – as well as an opportunity for liquidators to
dismiss an otherwise correct registration.
Current assets are subject
to control? – On of the least understood of the questions facing anyone
trying to lodge a registration against inventory, the Report’s recommendation
89 also proposes removing this question, again finding that it added little
value and that it’s absence would be less confusing.
This registration is subordinate
to another? – Again, this is found to be merely confusing and absent of
value, thus recommendation 90 advocates its deletion.
Proceeds to be claimed?
– Recommendation 180 seeks to make it clear that if a security interest over
goods supplied is properly perfected by registration then it should automatically
apply to any proceeds from those goods, thus recommendation 98 proposes the
removal of the proceeds question when lodging a registration.
Giving of Notice
Identifier (GONI) – Recommendation 122 suggests doing away with the
expression “GONI” on the register and replacing it with a term that more
clearly indicates its purpose as the supplier’s internal client reference number. GONI was always a ridiculous and misleading term
for something that was otherwise so straightforward.
In conclusion, should the Report’s recommendations be
adopted, lodging a registration in the future will be simply a matter of
identifying the grantor/buyer, choosing a collateral class, entering a brief
(but suitably vague) description, choosing a registration period and pressing
submit. Too easy!!
But, as I said at the outset, don’t expect much to happen in
the short term.