PPSA – Banks gearing up for commencement date
Continuing our series about preparing for the new Personal Property Securities Act 2009 (PPSA), this week MST consider how the banks and financiers are gearing up for the introduction of the PPSA in October 2011.
Increasing numbers of clients are contacting us for advice in relation to new loan and security documentation being issued by banks and financiers. The amended documentation includes PPSA content for the first time.
It now seems clear that borrowers will be asked to agree to loans, to give securities with broad and open-ended obligations, to sign further documents and accept onerous obligations to reorganise their business practices to accommodate new demands.
Every business that borrows money from a bank or financier needs to be very careful about new loan and security documents they are asked to sign. Our advice to all borrowers is that care should be taken in relation to automatically agreeing to sign amended documents without fully appreciating the consequences and obligations under the new PPSA regime.
The demise of the ASIC Charge Register
Many businesses have traditionally given fixed and floating debenture charges (FFCs) to secure their borrowings. Under the PPSA, FFCs will no longer exist.
FFCs will be migrated from the ASIC Register to the PPS Register immediately before the introduction of the PPSA. After the launch of the PPSA, the ASIC Register will cease to exist for the registration of company securities. In addition, there are some interesting timing questions about registrations of FFCs on the ASIC Register close to the start date of PPSA launch.
It is also important to note that if there are any errors on current ASIC registered FFCs, the migrated security interest may be defective.
Preparing for the PPSA
Irrespective of whether you are a bank, financier or a borrower, you should be taking steps to prepare for the PPSA, as soon as possible. The new system is transformational. It requires all businesses to consider their existing financing arrangements and their commercial transactions and how they should be structured from October 2011.
MST is a member of the Attorney General’s PPSA Legal Special Interest Group.
For further assistance please contact David Boyall or Susan Reece Jones in our Corporate Advisory team.
