Migrated Security Interests - back in focus!

When the PPSR first started it was immediately populated by a number of registrations representing security interests that had been migrated across from other registers.  

Initially, we were promised that the PPSR would, effectively, absorb the role of 70 national and state registers although, in the end, substantially fewer registers had data moved across.

Unfortunately, the migration exercise was not entirely successful and statutory provisions had to be introduced in order to confer legitimacy on registrations that, in any other circumstances, would have been deemed ineffective.

With the 5^th anniversary of the PPSR, at the end of January 2017, those statutory provisions are scheduled to lapse. 

This means that any PPSR registrations you have that had originally been lodged on an older register will need to be checked to ensure their continued effectiveness.

So what type of problems might there be?

One relatively well publicised issue, when the PPSR first started, revolved around security interests with multiple secured parties.

While an original lodgement on ASIC’s register of company charges might have shown that ABC P/L, DEF P/L and GHI P/L all shared in the same security interest against a debtor/grantor, when transfer to the PPSR took place, only ABC P/L might have been shown as the secured party.  Apparently, some 27,000 registrations are thought to fall in this category!

Another problem arises from the PPSA’s very strict rules regarding how a debtor/grantor should be identified.  

These rules do not necessarily align very well with those used by the original registers.  For example, most registers would not have deemed a Trust as having sufficient legal capacity to grant a security interest and would thus have required any registration to be lodged against the trustee of that trust as opposed to the trust itself.  However, the PPSA pretty much requires registrations to be lodged against the ABN of the trust rather than its trustee.

Similarly, ABNs will have commonly been used to identify corporate grantors on pre-PPSR registers whereas the PPSA requires such to be identified by their ACN, if they have one, or their full legal name if they do not.

Registrations that don’t identify grantors by their proper, PPSA legislated, identifiers are almost certainly likely to be considered ineffective.

The PPSA also has specific rules for identifying motor vehicles, watercraft, aircraft (including various bits of aircraft) and certain intellectual property rights by serial numbers in order to be fully effective.  There will undoubtedly be a great number of instances where those serial numbers were not migrated across from their originating registers.

If you have any security interests that were ‘automatically’ brought across from another register at the start of the PPSR, you only have a matter of weeks left to make sure they meet the PPSA’s requirements before they lose any ‘artificial’ effectiveness the subsequent statutory provisions may have conferred.