If you borrow money to purchase personal property, such as a car, or if you lend money to someone using personal property as security, you'll be affected by changes to the laws covering such transactions.
The new Personal Property Securities Act 1999 (the "PPSA") will come into force on 1 May 2002. As the changes in the law relating to securities over personal property are significant, even radical, you'll need to start preparing for them now.
The Effects
The scope of the PPSA is far reaching, hence its significance. It will affect any person or entity that lends money against the security of personal property. Personal property is essentially any property other than land, such as motor vehicles, livestock, goods, shares, etc.
The PPSA will apply to all transactions that are "security interests". A security interest is an interest in personal property that secures payment or the performance of an obligation, therefore it will include chattel mortgages, fixed charges, floating charges, etc.
As well, the new PPSA will involve arrangements that traditionally would not have been thought of as security interests. For example, it will apply to leases to sell for more than one year and agreements to sell subject to retention of title (sometimes called romalpa clauses).
Who Will Be Affected?
Those affected will include:
banks, financiers, and any person or entity, who lends money against the security of personal property;
suppliers who give credit when selling personal property;
lessors and lessees of personal property (when the term of the lease is more than one year);
receivers, liquidators and official assignees;
any person who borrows money or has been given credit when purchasing personal property.
When the Act comes into force it will replace:
the Chattels Transfer Act 1924;
the Companies (Registration of Charges Act) 1993;
the Motor Vehicle Securities Act 1989;
the Registration of Charges provisions in the Industrial and Provident Societies Amendment Act 1952.
Existing Security Agreements
If you have granted or received security under the above acts you will need to "re-register" your security interests. There will be a six-month transitional period commencing on 1 May 2002.
If you are affected, it's important to start thinking now about the consequences for you of the PPSA. If you fail to re-register as a creditor you may lose priority to subsequent creditors who comply with the PPSA. You may need to obtain more information, change your documentation and procedures in order to comply with the PPSA. You need to start planning now so that you are ready for 1 May 2002.
Future Security Agreements
Under the new system there will be one central electronic register for all security interests - a type of electronic notice board. The register won't need a copy of the agreement that creates the security. Instead a "financial statement" will provide brief details of the relevant security agreement and will be filed electronically. It's a bit like the register of Motor Vehicle Securities that operates now.
Because the register is electronic, registrations will be effective almost immediately, so there will be little risk of searches failing to disclose pending registrations. In fact, it will be possible to obtain a "real time" search with updated information at any time.
It will also be possible for lenders to register a financing statement before any funds are advanced. That way, creditors can ensure they have priority over the personal property before they release any funds.
Summary
The PPSA significantly changes the laws relating to securities over personal property. It will affect many businesses and it is important that you take action now so that you are ready for the commencement date of 1 May 2002. If you think you may be affected by the PPSA the time to act is now and there is no room for complacency.
Copyright The Lawlink Group Ltd 2001
Every effort has been made to ensure that this information is accurate. However, it is general introductory information only. It does not constitute legal advice and should not be relied on as such. Specialist legal advice should be sought in particular matters. Any reference to law and legislation is to New Zealand law and legislation.
Annabel Sheppard is an associate with the Christchurch Lawlink firm of Wynn Williams & Co. She has expertise in banking, finance, and commercial law.
Email annabel.sheppard@wynnwilliams.co.nz
Web site: Wynn Williams
March 2002
"http://www.wynnwilliams.co.nz/" target= "_new"> Wynn Williams
The new Personal Property Securities Act 1999 (the "PPSA") will come into force on 1 May 2002. As the changes in the law relating to securities over personal property are significant, even radical, you'll need to start preparing for them now.
The Effects
The scope of the PPSA is far reaching, hence its significance. It will affect any person or entity that lends money against the security of personal property. Personal property is essentially any property other than land, such as motor vehicles, livestock, goods, shares, etc.
The PPSA will apply to all transactions that are "security interests". A security interest is an interest in personal property that secures payment or the performance of an obligation, therefore it will include chattel mortgages, fixed charges, floating charges, etc.
As well, the new PPSA will involve arrangements that traditionally would not have been thought of as security interests. For example, it will apply to leases to sell for more than one year and agreements to sell subject to retention of title (sometimes called romalpa clauses).
Who Will Be Affected?
Those affected will include:
When the Act comes into force it will replace:
Existing Security Agreements
If you have granted or received security under the above acts you will need to "re-register" your security interests. There will be a six-month transitional period commencing on 1 May 2002.
If you are affected, it's important to start thinking now about the consequences for you of the PPSA. If you fail to re-register as a creditor you may lose priority to subsequent creditors who comply with the PPSA. You may need to obtain more information, change your documentation and procedures in order to comply with the PPSA. You need to start planning now so that you are ready for 1 May 2002.
Future Security Agreements
Under the new system there will be one central electronic register for all security interests - a type of electronic notice board. The register won't need a copy of the agreement that creates the security. Instead a "financial statement" will provide brief details of the relevant security agreement and will be filed electronically. It's a bit like the register of Motor Vehicle Securities that operates now.
Because the register is electronic, registrations will be effective almost immediately, so there will be little risk of searches failing to disclose pending registrations. In fact, it will be possible to obtain a "real time" search with updated information at any time.
It will also be possible for lenders to register a financing statement before any funds are advanced. That way, creditors can ensure they have priority over the personal property before they release any funds.
Summary
The PPSA significantly changes the laws relating to securities over personal property. It will affect many businesses and it is important that you take action now so that you are ready for the commencement date of 1 May 2002. If you think you may be affected by the PPSA the time to act is now and there is no room for complacency.
Copyright The Lawlink Group Ltd 2001
Every effort has been made to ensure that this information is accurate. However, it is general introductory information only. It does not constitute legal advice and should not be relied on as such. Specialist legal advice should be sought in particular matters. Any reference to law and legislation is to New Zealand law and legislation.
Annabel Sheppard is an associate with the Christchurch Lawlink firm of Wynn Williams & Co. She has expertise in banking, finance, and commercial law.
Email annabel.sheppard@wynnwilliams.co.nz
Web site: Wynn Williams
March 2002
"http://www.wynnwilliams.co.nz/" target= "_new"> Wynn Williams
March, 2002
Copyright © 2009 FindLaw, a Thomson Reuters business. All rights reserved.