Personal Property Securities (Corporations and Other Amendments) Act 2010 (96 of 2010)

Schedule 1   Corporations Act 2001

Part 9   Special requirements for security interests

183   After Division 2 of Part 5.7B

Insert:

Division 2A - Vesting of PPSA security interests if not continuously perfected

588FK Interpretation and application

(1) A word or expression used in this Division has the same meaning as in the Personal Property Securities Act 2009.

(2) Subsection (1) applies despite any other provision of this Act (subject to subsection (4)).

(3) For the purposes of this Division, whether or not a person has acquired actual or constructive knowledge of a circumstance is to be determined in accordance with sections 297 to 300 of the Personal Property Securities Act 2009.

(4) In this Division:

PPSA security interest has the meaning given by section 51.

Note: As a result of this section, in this Division, company has the same meaning as in the Personal Property Securities Act 2009. At the time this section was enacted, section 10 of that Act provided that company means:

(a) a company registered under Part 2A.2 or Part 5B.1 of the Corporations Act 2001; or

(b) a registrable body that is registered under Division 1 or 2 of Part 5B.2 of that Act.

588FL Vesting of PPSA security interests if collateral not registered within time

Scope

(1) This section applies if:

(a) any of the following events occurs:

(i) an order is made, or a resolution is passed, for the winding up of a company;

(ii) an administrator of a company is appointed under section 436A, 436B or 436C;

(iii) a company executes a deed of company arrangement under Part 5.3A; and

(b) a PPSA security interest granted by the company in collateral is covered by subsection (2) or (3).

Note: A security interest granted by a company in relation to which paragraph (a) applies that is unperfected at the critical time may vest in the company under section 267 or 267A of the Personal Property Securities Act 2009.

Australian law governs security interest

(2) This subsection covers a PPSA security interest if:

(a) at the critical time, or, if the security interest arises after the critical time, when the security interest arises:

(i) the security interest is enforceable against third parties under the law of Australia; and

(ii) the security interest is perfected by registration, and by no other means; and

(b) the registration time for the collateral is after the latest of the following times:

(i) 6 months before the critical time;

(ii) the time that is the end of 20 business days after the security agreement that gave rise to the security interest came into force, or the time that is the critical time, whichever time is earlier;

(iii) if the security agreement giving rise to the security interest came into force under the law of a foreign jurisdiction, but the security interest first became enforceable against third parties under the law of Australia after the time that is 6 months before the critical time - the time that is the end of 56 days after the security interest became so enforceable, or the time that is the critical time, whichever time is earlier;

(iv) a later time ordered by the Court under section 588FM.

Note 1: For the meaning of critical time , see subsection (7).

Note 2: For when a security interest is enforceable against third parties under the law of Australia, see section 20 of the Personal Property Securities Act 2009.

Note 3: A security interest may become perfected at a particular time by a registration that is made earlier than that time, if the security interest attaches to the collateral at the later time (after registration). See section 21 of the Personal Property Securities Act 2009.

Note 4: The Personal Property Securities Act 2009 provides for perfection by registration, possession or control, or by force of that Act (see section 21 of that Act).

Foreign law governs security interest

(3) This subsection covers a PPSA security interest if:

(a) at the critical time, or, if the security interest arises after the critical time, when the security interest arises, the security interest is enforceable against third parties under the law of a foreign jurisdiction (the relevant foreign law ); and

(b) the relevant foreign law provides for the public registration or recording of the security interest, or of a notice relating to the security interest; and

(c) the security interest or notice has not been so registered or recorded, in accordance with the relevant foreign law, before the latest of the following times:

(i) 6 months before the critical time;

(ii) the time that is the end of 20 business days after the security agreement that gave rise to the security interest came into force, or the time that is the critical time, whichever time is earlier;

(iii) if the security agreement giving rise to the security interest came into force under the law of a jurisdiction other than the relevant foreign law, but the security interest first became enforceable against third parties under the relevant foreign law after the time that is 6 months before the critical time - the time that is the end of 56 days after the security interest became so enforceable, or the time that is the critical time, whichever time is earlier;

(iv) a later time ordered by the Court under section 588FM.

Note: For the meaning of critical time , see subsection (7).

Vesting of security interest in company

(4) The PPSA security interest vests in the company at the following time, unless the security interest is unaffected by this section because of section 588FN:

(a) if the security interest first becomes enforceable against third parties at or before the critical time - immediately before the event mentioned in paragraph (1)(a);

(b) if the security interest first becomes enforceable against third parties after the critical time - at the time it first becomes so enforceable.

Note: For the meaning of critical time , see subsection (7).

Property acquired for new value without knowledge

(5) Subsection (4) does not affect the title of a person to personal property if:

(a) the person acquires the personal property for new value from a secured party, from a person on behalf of a secured party, or from a receiver in the exercise of powers:

(i) conferred by the security agreement providing for the security interest; or

(ii) implied by the general law; and

(b) at the time the person acquires the property, the person has no actual or constructive knowledge of the following (as the case requires):

(i) the filing of an application for an order to wind up the company;

(ii) the passing of a resolution to wind up the company;

(iii) the appointment of an administrator of the company under section 436A, 436B or 436C;

(iv) the execution of a deed of company arrangement by the company under Part 5.3A.

Note: For what is actual or constructive knowledge, see sections 297 and 298 of the Personal Property Securities Act 2009.

(6) In a proceeding in Australia under this Act, the onus of proving the fact that a person acquires personal property without actual or constructive knowledge as mentioned in paragraph (5)(b) lies with the person asserting that fact.

(7) In this section:

critical time , in relation to a company, means:

(a) if the company is being wound up - when, on a day, the event occurs by virtue of which the winding up is taken to have begun or commenced on that day under section 513A or 513B; or

(b) in any other case - when, on a day, the event occurs by virtue of which the day is the section 513C day for the company.

588FM Extension of time for registration

(1) A company, or any person interested, may apply to the Court (within the meaning of section 58AA) for an order fixing a later time for the purposes of subparagraph 588FL(2)(b)(iv) or (3)(c)(iv).

Note: Paragraphs 588FL(2)(b) and (3)(c) fix times within which certain events must take place (for example, registration under the Personal Property Securities Act 2009), failing which a PPSA security interest may vest in a company granting the security interest. The paragraphs only apply if an insolvency-related event occurs in relation to the company under subsection 588FL(1).

(2) On an application under this section, the Court may make the order sought if it is satisfied that:

(a) the failure to register the collateral earlier:

(i) was accidental or due to inadvertence or some other sufficient cause; or

(ii) is not of such a nature as to prejudice the position of creditors or shareholders; or

(b) on other grounds, it is just and equitable to grant relief.

(3) The Court may make the order sought on any terms and conditions that seem just and expedient to the Court.

588FN PPSA security interests unaffected by section 588FL

PPSA security interests arising under certain transactions

(1) Subsection 588FL(4) (vesting of security interests in company) does not apply to a PPSA security interest provided for by any of the following transactions, if the interest does not secure the payment or performance of an obligation:

(a) a transfer of an account or chattel paper;

(b) a PPS lease, if paragraph (e) (serial numbered goods) of the definition of PPS lease in subsection 13(1) of the Personal Property Securities Act 2009 applies to the lease, and none of paragraphs (a) to (d) of that definition applies to the lease;

(c) a commercial consignment.

Example: An example of a PPSA security interest mentioned in paragraph (b) is a PPS lease of goods that does not secure the payment or performance of an obligation, if:

(a) the goods leased may or must be described by serial number in accordance with regulations made for the purposes of the Personal Property Securities Act 2009; and

(b) the lease is for a term of between 90 days and 1 year; and

(c) paragraphs (c) and (d) of the definition of PPS lease in subsection 13(1) of the Personal Property Securities Act 2009 do not apply to the lease.

PPSA security interests and subordinated debts

(2) Subsection 588FL(4) (vesting of security interests in company) does not apply to a PPSA security interest in an account if all of the following conditions are satisfied:

(a) a person (the obligor ) owes money to another person (the senior creditor );

(b) the obligor also owes money to a third person (the junior creditor );

(c) an agreement between the senior creditor and the junior creditor provides (in substance):

(i) for the postponement or subordination of the obligor's debt to the junior creditor, to the obligor's debt to the senior creditor; and

(ii) in the event of the obligor's debt to the junior creditor being discharged (whether wholly or partly) by the obligor transferring personal property to the junior creditor - for the junior creditor to transfer the property, or proceeds of the property, to the senior creditor to the value of the amount owed by the obligor to the senior creditor; and

(iii) in the event that the property or proceeds are not transferred - for the junior creditor to hold the property or proceeds on trust for the senior creditor to that value; and

(iv) in the event of such a trust arising - for a security interest to be granted by the junior creditor to the senior creditor over the personal property or proceeds securing payment of the obligor's debt to the senior creditor;

(d) the security interest is a security interest granted under the agreement, in the circumstances described in subparagraph (c)(iv).

Transfer of collateral subject to PPSA security interests

(3) Subsection 588FL(4) (vesting of security interests in company) does not apply to a PPSA security interest covered by subsection 588FL(2) (Australian law governs security interest) if:

(a) before the critical time that applies under section 588FL, the company acquired, by transfer, the collateral in which the PPSA security interest is granted; and

(b) the company did not acquire the collateral free of the security interest; and

(c) the security interest became perfected before the critical time; and

(d) the security interest was continuously perfected by registration during a period covered by subsection (4) that begins before the critical time.

(4) The period covered by this subsection:

(a) begins at whichever of the following times is applicable:

(i) in a case in which the secured party consented to the transfer - the end of 5 business days after the day of the transfer;

(ii) in a case in which the secured party otherwise acquires the actual or constructive knowledge required to perfect the secured party's interest by registration (or to re-perfect the interest by an amendment of a registration) - the end of 5 business days after the day the secured party acquires the knowledge; and

(b) ends no earlier than at the critical time that applies under section 588FL.

Note: For what is actual or constructive knowledge, see sections 297 and 298 of the Personal Property Securities Act 2009.

588FO Certain lessors, bailors and consignors entitled to damages

Scope

(1) This section applies if either of the following PPSA security interests is vested in a company under section 588FL:

(a) a PPSA security interest of a consignor under a commercial consignment;

(b) a PPSA security interest of a lessor or bailor under a PPS lease.

Entitlement to damages and compensation

(2) The consignor, lessor or bailor:

(a) is taken to have suffered damage immediately before the PPSA security interest was vested in the company; and

(b) may recover an amount of compensation from the company equal to the greater of the following amounts:

(i) the amount determined in accordance with the consignment, lease or bailment;

(ii) the sum of the market value of the consigned, leased or bailed property immediately before the critical time that applies under section 588FL, and the amount of any other damage or loss resulting from the termination of the consignment, lease or bailment.

Note: The consignor, lessor or bailor may be able to prove the amount of compensation in proceedings related to the winding up of the company.

Division 2B - Security interests in favour of company officers etc.

588FP Security interests in favour of an officer of a company etc. void

General rule

(1) A security interest, and any powers purporting to be conferred by the instrument under which the security interest is created, are void, and are taken always to have been void, if:

(a) a company grants the security interest; and

(b) a person covered by subsection (2) is a secured party; and

(c) the secured party purports to take a step to enforce the security interest, within 6 months after the time (the relevant time ) the instrument is made, without the leave of the Court under subsection (4).

(2) This subsection covers the following persons:

(a) a person who is an officer (including a local agent of a foreign company) of the company at the relevant time;

(b) a person who has been such an officer of the company at any time within the period of 6 months ending at the relevant time;

(c) a person associated, in relation to the creation of the security interest, with a person of a kind mentioned in paragraph (a) or (b).

(3) Without limiting paragraph (1)(c), a secured party takes a step to enforce a security interest if:

(a) the secured party appoints a receiver, or a receiver and manager, under powers conferred by an instrument creating or evidencing the security interest; or

(b) whether directly or by an agent, the secured party enters into possession or assumes control of property of a company for the purposes of enforcing the security interest; or

(c) the secured party seizes the property under section 123 of the Personal Property Securities Act 2009 for the purposes of enforcing the security interest.

Extension of time on application to the Court

(4) On application by a secured party, the Court may give leave for a security interest granted by a company to be enforced by the secured party within 6 months after the relevant time, if it is satisfied that:

(a) the company was solvent immediately before the relevant time; and

(b) in all the circumstances of the case, it is just and equitable for the Court to do so.

Exception for security interests in PPSA retention of title property

(5) This section does not apply in relation to a PPSA security interest in PPSA retention of title property.

Effect on debts, liabilities, obligations and title

(6) A debt, liability or obligation is not affected by the fact that the security interest securing the debt, liability or obligation is void under subsection (1).

(7) Subsection (1) does not affect the title of a person to property if:

(a) the person acquires the property for new value (within the meaning of the Personal Property Securities Act 2009) from any of the following persons (the seller ):

(i) a person covered by subsection (2);

(ii) another person on behalf of a person covered by subsection (2);

(iii) a receiver, or receiver and manager, appointed under powers conferred by an instrument creating or evidencing the security interest; and

(b) at the time the person acquires the property, the person has no actual or constructive knowledge that the seller is a secured party or acting on behalf of a secured party.

(8) Sections 297 to 300 of the Personal Property Securities Act 2009 apply in relation to the determination of whether or not a person has actual or constructive knowledge as mentioned in paragraph (7)(b) of this section.

Onus of proof

(9) In a proceeding in Australia under this Act, the onus of proving the fact that a person acquires property without actual or constructive knowledge as mentioned in paragraph (7)(b) lies with the person asserting that fact.


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