PPS - A Glossary of Terms you need to know.

Personal Property

Personal property is any form of property other than land, buildings or fixtures which form a part of that land. It can include tangibles such as cars, art, machinery and crops; as well as intangibles such as intellectual property and contract rights. It can be owned privately or by a company or any other non person entity. It can be either Consumer or Commercial property.

Security Interest

A security interest in personal property is created through a transaction that secures the payment or performance of an obligation. The form of the transaction or the identity of the person who has title to the property has no bearing on the creation of the security interest.

Collateral Items

Collateral Items are personal property to which a security interest is attached. When a security interest is registered, the collateral must be described in accordance with the rules specified in the Act and Regulations. A collateral description must be in accordance with all of the following rules:

• the collateral must be described as one of the following:
• consumer property;
• commercial property;
• the collateral must, or may, be described by serial number, if required or allowed by the regulations;
• the collateral must belong to a single class of collateral prescribed by the regulations;
• any description of proceeds must comply with the regulations.

It is important for users who are registering collateral to understand which type of personal property a security interest relates to because the type of personal property will, to some extent, govern priority disputes between secured creditors. A more precise description of the collateral also makes it easier for prospective lenders and other secured parties to search the Register and determine whether a particular item of personal property is subject to a security interest.

Collateral Classes

The Act divides personal property into a number of classes. Personal property can only fall into one class. The Act specifies rules that apply to how collateral should be described. If collateral is not described according to these rules, the registration will be invalid.

The main collateral classes which are currently proposed to be included in the Regulations are:

• agriculture
• aircraft
• all present and after-acquired property
• all present and after-acquired property except
• financial
• intangible
• motor vehicle
• other goods; and
• water craft.

There are also a number of Collateral Sub Classes including Commercial and Consumer.

Grantor

A grantor is a person or organisation who owns or has an interest in the property to which a security interest is attached. This includes an entity who receives goods under a commercial consignment, a lessee under a PPS lease and a transferor of an account or chattel paper.

Secured Party

A secured party is a company, individual or other entity that has a security interest in a grantor's collateral. This can include individuals or organisations who are involved in:

• taking fixed and floating charges
• long term and finance leases
• chattel mortgages
• retention of title arrangements
• commercial consignments, or
• factoring.

Secured Party Groups

Secured Party Groups (SPG’s) is a concept used in the Personal Property Securities Register to define secured parties. A SPG can include one or more secured parties (either individuals or organisations). It is the SPG that is assigned to a registration, even if the group contains only one secured party.

Perfection

Perfection is a legal term in the context of the PPSR and is used to described a completed or "perfected" security interest. A Perfected Security Interest has priority over a non perfected security interest. In some cases, Perfection may not occur via registration of a security Interest on the PPSR, but in most instances it will.

Priority

Priority is the order in which Secured Parties have claim over Collateral. It is conceivable that Collateral may have multiple Security interests registered against it and the order of Priority determines which secured party has the claim the Collateral. Essentially the rules of priority are:

• Perfected Security Interest Registrations have priority over non perfected Security Interest registrations.
• Priority between two or more perfected security interests is determined by order of attachment (read date and time of registration)
• Priority between two or more non-perfected security interests is determined by order of attachment (read date and time of registration)

Fixed and Floating Charges

What is a floating charge?A floating charge is an interest in the general property of a company (the assets of a company) that is granted by the company to a lender. The floating charge is an interest in the company’s property as it exists from time to time. This makes it possible for the company that has given the charge to deal with a specific item of property without first needing to seek the permission of the secured party.

However, if there is an act of default, the floating charge will ('crystalise') attach to the company’s property that is currently available. At that point the charge effectively fixes to the available property.

In personal property securities (PPS) terminology, a floating charge will become a security interest in a circulating asset.

What is a fixed charge? In contrast to a floating charge, a fixed charge is one that attaches to a specific asset from the start. The property subject to the charge is identifiable. This prevents the grantor from dealing with the property without some sort of specific permission from the secured party that has taken the charge in the property. In PPS terminology, a fixed charge will be a security interest in a non-circulating asset.

Disclaimer: This document provides general information about the PPS and the PPSR and does not constitute legal advice. You should seek legal or other professional advice to consider the application of PPS to your individual circumstances.