The launch of the Personal Property Securities (PPS) Register has not gone without a hitch.
Since its launch on 30 January, a number of problems with the PPS Register have been identified, resulting in the need for lenders, security holders and practitioners to be on high alert and extra diligent when performing searches for existing charges and in protecting existing security interests over personal property.
As outlined in our February eBulletin Parties with security interests beware, company charges registered with ASIC prior to 30 January 2012 were to be migrated to the PPS Register. This process was part of a national commercial law reform which aimed to bring the different federal, state and territory laws and registers for security interests in personal property under one national system.
On 30 January 2012, many security registers, including the ASIC Register of Company Charges, were closed and existing registrations were migrated to the PPS Register. However, following this, it was discovered that a problem had been encountered during the migration process of existing company charges on the ASIC Register.
Some charges did not successfully migrate
It is now known that of the 1.5 million charges intended for migration from the ASIC Register, approximately 6,000 charges did not successfully migrate to the PPS Register. ASIC has now released a list of those charges which did not migrate and the details of those charges.
As a result, the PPS Register does not contain a complete register of charges. We strongly recommend that existing lenders and security holders and practitioners perform a search, not only on the PPS Register but also on the ASIC Register, to check that their charges have been successfully migrated. All historical information will remain on the ASIC Register and will be available to be searched for seven years.
ASIC has contacted approximately 4,000 lenders and security holders whose charges were not migrated and is currently in the process of notifying the remaining affected parties.
ASIC cannot now migrate the charges which did not come across, which means that affected secured parties must now register the charges themselves as security interests on the PPS Register.
If you are one of the parties affected by the migration issue, you should register the existing charge on the PPS Register as a security interest. Provided that registration on the PPS Register by the lender or security holder of the existing ASIC charge occurs prior to 1 February 2014, there will be no cost to do so and the priority of the security interest or charge will not be affected.
Searching for company charges
A separate issue in terms of searching for company charges has arisen out of the migration process. Rather than migrating company charges using ACNs as expected, most company charges were migrated to the PPS Register using ABNs. This has resulted in inaccurate search results when searching the PPS Register using ACNs.
The Commonwealth Attorney General's Department has indicated that a proposal to change the grantor details in each registration migrated from ASIC with an ABN, to an ACN, should be completed by the end of March 2012.
Until that solution is complete, it is strongly recommended that multiple searches be conducted in order to be satisfied whether there are any ASIC charge registrations against a company on the PPS Register. When searching the PPS Register by a grantor company, practitioners should conduct three separate searches, using the ABN, ACN and the company name.
To assist in this process, the Insolvency and Trustee Service Australia has now published a list of all migrated ABNs and their corresponding ACNs which should be referred to in situations where only ACN details are available.
The PPS Register government website has provided the following instructions on how such searches should be effected using the current web interface:
1. Searching by ABN
In order to search by ABN, answer 'No' to each of the questions until entity type can be selected. Then select one of 'Partnership', 'Body Politic', or 'Trust' to be able to enter ABN.
2. Searching by company name
In order to search by company name, answer 'No' to each of the questions until entity type can be selected. Then select 'Other', which allows the company name to be entered.
Irrespective of these migration issues, it should be remembered that:
- ASIC current company charges (that is, charges lodged with ASIC before 30 January 2012 which have not been satisfied or released) should be searched for using the PPS Register, not the closed ASIC Register.
- All new security interests (including charges) should now be registered on the PPS Register.
- Registration of discharges of company charges or security interests must now be done online; the ASIC form 312 is no longer relevant. Generally the release of an existing security will be achieved by the outgoing secured party providing you with a 'Release and Undertaking to Amend Registration' document. By this document, the outgoing secured party undertakes to register a financing change statement online on the PPS Register within 10 days (or such other time agreed in the document).
Craig Higginbotham | Partner, Commercial Disputes
All information on this site is of a general nature only and is not intended to be relied upon as, nor to be a substitute for, specific legal professional advice. No responsibility for the loss occasioned to any person acting on or refraining from action as a result of any material published can be accepted.