As outlined in Part 1 of our information series, the PPSA will impact many arrangements with respect to personal property and failure to address these changes could result in your interest being inadequately secured. The PPSA affects all established forms of secured finance including fixed and floating charges, chattel mortgages, margin loans, finance leases and debt finance.
An understanding of key terms and concepts is essential, so we have prepared a short glossary:
Attachment is the process by which a security interest fastens on an asset so as to be enforceable such as when the value is for the security interest or the grantor does an act by which the security interest arises.
Collateral means personal property to which a security interest has attached.
Grantor is a person or organisation who owns or has an interest in the personal property (collateral) to which the security interest is attached (whether or not the person owes payment or performance of an obligation secured by the security interest).
Perfection means ensuring that the security interest is attached to the collateral and is enforceable against a third party. A perfected security interest has priority over an unperfected security interest.
Priority rules means determining the ranking of the security interest in relation to rival claims.
Purchase Money Security Interest (PMSI) is created where a secured party provides collateral, a person provides funds to acquire collateral, a lessor or bailor leases or provides goods or goods are consigned under a commercial consignment. It applies only to the extent of the value given to the grantor, including interest and credit charges.
Personal property means any form of property other than land or buildings and includes tangible property such as motor vehicles, art, machinery and crops, as well as intangible property such as intellectual property and contract rights.
Security interest in personal property arises from a transaction that in substance secures the payment of a performance or obligation.
In Part 3 of our series we will look at the importance of priorities and perfecting your security interest.