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Personal Properties Security Act (PPSR)
Personal Properties Security Act (PPSR)
The Personal Property Securities Bill 2009 and the Personal Property Securities (Consequential Amendments) Bill 2009◦passed by both Houses of Parliament on 26
November 2009.◦Commencement date 30 January 2012 .◦The PPS Act is now in force with a two year
transitional period
OverviewPersonal Property Securities Act 2009Aim of the legislation is:
◦to bring an end to the inconsistent and◦duplicate laws and registers which presently◦govern personal securities law in the various
Australian jurisdictions◦It replaced 70 Commonwealth and State Acts,
administered by 30 government agencies
PPS REGISTERUp to 30 existing federal and state registers
will be migrated to the PPS Register, including:◦ASIC register of company charges◦co-operatives register of charges◦bills of sale ( finance security-personal property)◦motor vehicle securities◦ship mortgages◦crop liens◦stock liens ( stock agistment)◦register of trade marks
PPS RegisterOn the PPS register, the end time for the
security must be defined, in particular:◦ goods used by consumers - security can’t be for more
than 7 years (but can be renewed)
◦ motor vehicles - security can’t be for more than 7 years (but can be renewed)
◦ BUT no stated end time needed for company charges It is wholly electronic see www.ppsr.gov.au Accessible 24/7
Key DifferencesPPS Register – www.ppsr.gov.auKey differences to current position:
◦ Operates on the basis of notice rather than document registration
◦ Registration is by ‘financing statement’
◦ Notice can be registered before any secured transaction takes place
◦ One registration can cover multiple security interests
Registration of Security Interests
RegistrationNot mandatory to register security interests
No time limit for registering
“PMSIs”/Interests to be registered within 15 days -PMSI = Purchase Money Security Interest/LoanBUT failure to register/perfect will have
consequences for enforcement and priority
How to Search the Register
Electronic Searching of the Register www.ppsr.gov.au PPS Register can be searched by grantor details
or property details (if there is a serial number on the particular property)
PPS register will be maintained by ITSA
OLD registers transferred and verified
Access to the PPSR Register
Unlike current company charges - copies of the security documents are not included in the register
Information is included via the financing statement
Interested persons will be able to receive a copy of the security agreements from the grantor within 10 business days of a request being made
Access to the Register
Only authorised users can access the register e.g. credit providers and current and potential security holders
To protect privacy there will be no general public access except for authorised purpose – but may be difficult to regulate
What is Personal PropertyPersonal Property means property (including a
licence) including: ◦ tangible items such as:◦ cars, boats, aircraft, ◦ livestock, crops and minerals ◦ that have been extracted in any form intangible items
such as ◦ intellectual property and contract rights, ◦ designs, patents, ◦ plant breeders rights and ◦ trademarks financial property such as currency, ◦ A document of title, investment instruments and
negotiable instruments.◦ investment entitlements (e.g. stockbroker accounts)
Exclusions – Personal Property
It specifically excludes;land fixtures water rights a right entitlement or authority (including access
entitlements) that is granted by or under a law of the Commonwealth, a State or Territory declared by that law not to be personal property for the purposes of the Act
What is Personal PropertyWhat is personal property security Three elements ;
◦ an interest in relation to personal property provided for by a transaction that, in substance, secures payment or performance of an obligation
This is regardless of the form of the transaction or the identity of the person who has title to the property
Examples of Security Interests .Charges that secure obligations - no distinction between fixed and floating charges:
◦ Retention of title arrangements/clauses in Contracts
◦ Chattel mortgages
◦ Lease of goods
◦ Hire purchase agreements
◦ Consignment
What Forms of Documents ?
Form of documentationThere is no prescribed form of security
agreement:◦ General security agreement◦ Specific security agreement
All security is effectively ‘fixed’ - parties need to agree to terms of security arrangements
Parties to determine when the property can be disposed of by the grantorPPSA (the Act) determines how current fixed and
floating securities are dealt with in future
Who Can Use PPSR ?
Entities coveredPPSA applies to security interests granted by -
corporationspartnershipsmanaged investment schemesregistrable and non registrable legal entitiesIndividuals - May be a Useful for Asset Protection ……..
How to register/Create a Security
Creating a security interest◦ Step 1 – entering into a transaction
◦ Step 2 – attachment of the security interest to the personal property (enforceable against the grantor)
◦ Step 3 – possession, control or written security agreement (enforceable against third parties)
◦ Step 4 – perfecting the security interest
“Attachment” under PPSR
Attachment A security interest attaches to personal property when the grantor has rights in the collateral* that
are transferrable to the secured party and the secured party gives value in return for the security interest
Collateral is the personal property to which a security interest (EG a loan) is attached
How Attachment HappensAttachment For an attached security interest to be
enforceable against third parties, section 20 of the PPSA requires that either the collateral is in the possession of the secured party , the collateral has been perfected by control or the grantor and the secured party have entered into a valid written security agreement (Contract)
It is contemplated that security agreements can be entered into electronically
“Perfection” & How to get Priority
Perfection Perfection is required to obtain priority over another
security interest, or survive a dealing in the same collateral.
The main methods of ‘perfection’ are (section 21) taking control of collateral that is controllable property (e.g. bank accounts, investments) registering a security interest in the collateral taking possession of the collateral or temporarily perfecting a security interest in the collateral
Control/Controllable Property
Control Controllable property is defined as :
an investment instrumentan account (e.g. bank accounts/investments) investment entitlements investment instruments (e.g. shares) letters of creditnegotiable instruments not evidenced by a certificate (e g bills of exchange)
Priority - Example
A perfected security interest will have priorityover an unperfected security interest – section55(3)
Example :Atherton Cranes Pty Ltd (AC) grants a security interest in one of its cranes to Cth Bank Company later grants a security interest in the same crane to Westpac
Westpac registers the crane on the PPS register, Commonwealth Bank does not, the security interest held by Westpac will have a higher priority
Priority Continued /-
A security interest perfected by control (of controllable property) will have priority over a security interest perfected by any other means – section 57(1) example (investment instrument) Atherton Cranes borrows $20,000 from ANZ to invest in a pizza oven and grants ANZ a security interest in shares issued by Macquarie ANZ perfects its security interest by registering the shares on the PPS register
Atherton Cranes later borrows another $25,000 from Westpac and grants Westpac a security interest in the same shares issued by Macquarie
Priority Cont/-Westpac perfects its security interest by taking
control of the shares Westpac’s security interest would have priority over ANZ’s interest because Westpac has perfected its interest through control, while ANZ has perfected only by registration
Where competing security interests are both perfected by control, priority is determined by the order in which the secured parties took control of the collateral – section 57(2) (PPSA Act)
What Does Priority Mean?
Priority between security interests perfected by means other than control is also determined by the first in time principle – section 55(4)
It is necessary to determine the priority time the priority time will not necessarily be when the security interest was perfected
Priority TimeProviding a security interest is continuously perfected,
the priority time will be the earliest of:
registration on the PPS register
possession of the collateral
when the interest is temporarily perfected by force of the PPS Act
Priority between unperfected security interests is determined by the order of attachment of the security interest – section 55(2)
ExceptionsExceptions to the general priority rules –
Purchase money security interests (PMSI)
PMSI is essentially where the secured party has provided finance or given value required by the grantor to acquire the collateral, (e.g. vendor finance)
PMSIs have ‘super-priority’ over the same collateral (which has been granted by the same grantor) which has been perfected by registration or possession however, a security interest which has been perfected by control has priority over a PMSI
Enforcement and RemediesEnforcement and remediesChapter 4 PPSA governs the enforcement of security
interests
Any secured party regardless of priority ranking, may enforce its interest
Secured parties are not required to obtain judgment prior to enforcement
The PPSA is not a code and will be able to be used in conjunction with other rights and remedies available
Rules - enforcement
Important rules regarding enforcementA general standard of honesty and commercial
reasonableness is to apply to enforcement actions
Parties can contract out of enforcement provisions (depending on use of collateral)
May use land law to enforce security interest in some circumstances
May seize liquid assets from third party
Seizure of Collateral/Security
Seizure of collateralSecured party may seize collateral by any lawful
method
Higher ranking priority holders may seize collateral from lower ranking priority holders
Higher ranking priority holder must pay enforcement costs of lower ranking priority holder where lower ranking priority holder initially seized the collateral
Disposal of CollateralDisposal of collateralThree methods of disposing of collateral:
◦ sale to a third party
◦ sale where the collateral is purchased by the enforcing secured party lease or license to a third party
◦ Must obtain market value for collateral or best price reasonable same duty required as a controller under Corporations Act
Retaining ,Keeping Hold of Collateral/Security
Retaining collateral
Secured party may retain collateral if it is not predominantly used for a personal, domestic or household purpose
Retention of seized collateral is not an absolute right
The grantor and other interest holders may object – in which case collateral must be sold
Rules after enforcement
Proceeds must be distributed in accordance with the provisions in section 140 PPSA Statement of account must be provided within 20 business days of a request to do so
Redemption and Reinstatement
There is a right of redemption available to;
the debtor, the grantor and higher ranking secured creditors.
Redeemer must pay the amount required to discharge the obligation
Reinstatement is allowed prior to the exercise of enforcement.
Achieved by paying amount of arrears and any enforcement costs
Transitional Provisions
Any existing security interest that is not migrated to the PPS register after commencement of the Act will be deemed ‘temporarily perfected’.
Applies for the period starting immediately before the registration commencement time and ending on the earlier of the time when the security interest ceased to be continuously perfected otherwise than by temporary perfection the end of the month that is 24 months after the registration commencement time
After the 24 month transitional period ends, the priorities will be determined under the substantive provisions of the legislation
What to do Now- Things to Check?Be aware that old Retention of title clauses in sale
contracts may not work without PPSR Registration
Review and revise Contract Documentation. -you still need adequate Contracts & agreements
* PPSR can be a useful Asset Protection device in the event of bankruptcy or insolvency……..www.assetandpropertyprotection.com.auContact : Alex Tees , SKYPE alexteesPhone : 02 2813230/07 4031 7411/0409813622Email: atees@legalexchange.com.au
Estate Planning Presentation
Important disclaimerNo person should rely on any part of the contents of
this presentation without first obtaining advice from a qualified professional person. This presentation is given on the terms and understanding that the author is not responsible for the results of any actions taken on the basis of information in this presentation, nor for any error in or omission from this presentation. The author hereby expressly disclaims all and any liability and responsibility to any person, whether a purchaser, recipient or reader of this presentation or not, in respect of anything, and of the consequences of anything, done or omitted to be done by any such person in reliance, whether wholly or partially, upon the whole or any part of the contents of this presentation.
Basics – No Will ? – Consequences / Solutions , Avoid Problems and more angst at a time of
Grieving...........................No Will/Intestacy :means you don’t choose who
receives your property/assets ; - The Succession Act Formula will apply Intestacy = 3 x amount of delay + Costs!Spouses/Children suddenly have no moneySuper’ Pay outs delayedSolutions ; see a Lawyer get a Temporary Will Form
Done ! Incapacity – Powers of Attorney (Wills only operate after death !) (Call us 24hrs!?)
“MODERN SUCCESSION & ESTATE PLANNING “
Due to increasing complexity in family relationships and business/investment structuring, along with complicated tax and legal regimes - modern estate planning, done properly, must encompass issues such as : Efficient intergenerational transfer of wealth with
harmony Asset protection (Keeping out “Predators/Creditors” &
Keeping the Wealth in the Family ) Tax (at both State and Federal level) Superannuation (Formation + Review of Deeds) Trusts, (Formation + Review of Deeds) – safe storage (
www.trustdeedregister.com (.com.au) – registration ? Investments/insurance structuring Resolution of disputes and other issues through the use
of an “Independent Referee” – Dispute Resolution
WHAT Lawyers should DO in co-operation with Accountants and Financial
PlannersProvision of strategies and advice in collaboration with
other professionals ( Accountants/Financial Planners) to deliver the optimum outcome(s) for client (s):Modern Estate Planning Strategies ( Before and after death )Testamentary Trusts ( Trusts created after death)Family TrustsSelf-managed superannuation funds (SMSF)Business succession planning.(a “will” for a
Business )
Estate Planning - HOW a Lawyer should and can OPERATE
Timeframes agreed with client and referrer at each stage to ensure efficient completion and accountability
Fixed Fees or a fixed range of fees & the First meeting with client(s) is purely a scoping exercise & obligation free ( often in Accountants/Financial Planners ‘ office )
Collaboration/Reporting to Accountant/Fin’Planner at each stage = Further Fee & protection opportunities..for you
Systematic and efficient delivery ( x 3 Meetings)Technical and client-related queries welcomed from all
Referrers/Client(s) Referral to other Specialist Tax Services
Why is it different ? - the way it is recommended to operate compared to OTHER LAW FIRMS ?
High level technical expertise in superannuation , taxation , and Trust law – Solicitor(s) should work with and have access to the resources of Accounting advisory firms.(throughout the World)
Specialist Solicitors who understand and appreciate the Financial planning process, work together with Clients’ Financial Planners & Accountants.
Encourage First meetings/other meetings at Financial Planners/Accountants’ office and/or clients home/office.
Fixed price contracts (or Fixed Range) (Approx 75% Tax Deduction)
Comprehensive Estate Planning Portfolio / Folder. Delivery meetings can be Optional Family meetings to
include the children – builds bridges to next generation
A Modern Will – Creative use of Trusts after Death…(as well as * Other structures )
Will Maker/Testator makes a Will to flexibly provide ;Optional Testamentary Trust or other *Structures
created after Death (*Note Tax laws may change !?)“Beneficiaries” Persons receiving Money & Property ,
receive it via a Trust of which they or their Nominated Person become Trustee
Provides Tax Efficiency and Asset Protection* If the law changes Provision for Other Structures
such as Partnerships, Joint Ventures and different types of Companies/Corporations may be necessary…..
Example – Optional Trusts After Death
EXECUTOR
(May not be the same Person)
TRUSTEE (S)
TRUST TRUST TRUST
The Efficient Will – *Possible use of Trusts after Death………..
Optional Discretionary Testamentary
Trust
!
WILL
Trustee
Tax savings, especially for
minor beneficiaries
Flexibility of distributions
Asset protection for trust assets
Beneficiaries include: ( THOSE RECEIVING GIFTS )· Primary Beneficiary
–Surviving Spouse/Children
· Family Members· Related Entities
Trustee - Primary Beneficiary(Surviving Spouse/Children)
B
EXECUTOR
Case Study 1 – Wealthy Woman marries a much less Wealthy Gentleman – Who Needs Protection ?
Assets and Possible Family Situation ( Married or Unmarried) Possibly have one child Woman owns a House/Property Woman a High income earner/ & WealthyPerhaps the Husband will never have a high income
earning capacity
Case Study 1 - ESTATE PLANNING - WISHES & Concerns - Whose ? !!
Protect the child if both or One Spouse diesEnsure Husband does not receive too much “loot”
from His Wealthy Wife if she dies first ? ( & Protect the Child as well !)
Ensure the Husband at least has a Roof over his head and adequate provision while he cares for the child if Wife dies before him…
Ensure Equity & Sensitivity …………
Case Study 1 -Possible Strategies
A Separate Care for the Spouse Trust for the Husband with little wealth
A Separate Trust for the Husband with sufficient Money/Property
A Separate Trust for the child with another relative of the Wife as Trustee (Husband given right to occupy Family Home for life ,while Child receives all the Wifes’ Estate………)
Recommend and Ensure the Husband owns Adequate & generous Life Insurance over the Life of his Wife in case she dies first…….
* If the Partners are willing – Pre Nuptial/Post Nuptial Agreements
( very sensitive issues here !) – Binding Financial Agreements
Case Study 2 – George & Marina
George 55, Marina 54 - both retired Children ; Jessica 27 (De Facto), Sarah , 22 (Married) Jack 21, (Has a Disability, numerous Partners)
Case Study 2 – George & Marina
Home Joint tenants
Investment Property 1
Joint tenants
Managed funds
SMSF (Self Managed Super’ Fund)
Shares SMSFDirect property SMSF
ASSETS
Case Study 2 – George & Marina
ESTATE PLANNING - Wishes & Concerns
George to Marina and vice versa in the first instance
Then equally to children
Specific protection required for Jack due to disability
Wealth to be retained in the family
Derive some tax efficiency
Case Study 2 – George & Marina
“Estate Assets” Testamentary Trusts & *other optional Structure (s)
Family Home Sever tenancyInvestment Property 1
Sever tenancy
SMSF (Super Fund)
BDBN (Binding Death Benefit Nomination)
Possible STRATEGIES
Case Study 2 – George & Marina
Concern StrategyProtection of family wealth from spousal and other claims
Testamentary Trusts (TTs) & other Structures with crisis provisions (removal of Trustees, Directors, “Controllers” etc)
Protection for Jack - Control - Conflicts of interest
Protective Trust - ‘Family’ control - Testamentary Protector
Understanding of “non-estate assets” and planning required
Sever joint tenancy (Family Home)Cascading Binding Death Benefit Nominations (Super’)
STRATEGIE(S) - WILLS
STRATEGIES – SMSF- Super’Funds
Concerns & Strategy
Maximise superannuation benefits during lifetime, potential inability of survivor to recontribute to super
- Use “Reversionary” pensions Optimising tax with protection(*BDBN = Binding Death Benefit Nomination) - Cascading
*BDBNs - first, reversionary - then, *LPR(* Legal Personal Representative ) Ongoing control of SMSF -Corporate Trustee appropriate ?
Other Possible Strategies – Some “Non Estate Property” – Family Trusts /Super’
Concerns & Strategy (Wills may not Work!)1) Transition of control of Family Trust -Trust Deed Review - Deed of Future Dealing / Alter Trust Deed ? ( to take in succession) see www.trustdeedregister.com
2) “The Business” Release of value in the business – how to pass on to family - “Buy/Sell” Agreements ;- Business Succession Agreement – “A Will for a
Business”
3) Superannuation Nominate LPR as beneficiary, Insurance(s) Nominate LPR as beneficiary
Case Study 3 – Simpler Case
FAMILY SITUATIONJack, 53 & Jill 49 - both still working4 children :
Mark 23 … single (Jacks child first marriage) Steve 21 … single, (Jacks child first marriage) Marina 20 … De Facto (Jills child 1st marriage ) Helena , Age 3 (Jack & Jills child 2nd Marriage)
Case Study 3 Jack & Jill - Assets
Home - Joint tenants
Investment property – Joint Tenant
SMSF (Self Managed Super’ Fund)
Shares SMSF
Jack & Jill (not over the Hill) (3)
• Possible ESTATE PLANNING WISHES & Concerns• Jack to Jill and vice versa in the first instance• Then equally to children• Specific protection required for Helena due to young age• Keep wealth in Family ;Wealth to be retained in the
family• Derive some tax efficiency
After Jack & Jill Die …. (3)
Some Strategies :1.Estate Assets Optional Testamentary
Trusts2.Home - Sever Joint tenancy3.Investment Prop - Sever Joint tenancy4.SMSF (Super Fund) - BDBN (Binding Death Benefit Nomination(s)
General Wills Strategies
Concern StrategyTax efficiency Trust structure
- income splitting properties - 102AG concessions for minorsExecutors discretions
Ability for younger beneficiaries to ‘fritter-away’ wealth
Qualifying Age – eg 25“Young Mens disease”(beware “young ladies disease” as well !)
Estate conflicts – Loans
Equalisation provisions
STRATEGIES – WILLS (cont)
Summary
No two strategies are the same No two Testamentary Trusts are the same Strategy must be consistent and coherent across estate
and non-estate assets Must be a collaborative approach –Advisers/Lawyers Don’t forget Enduring Powers of Attorney /Guardianship
Specialist strategy and intellectual property – no ‘one size fits all’
REGISTER WILLS /Store Register Trust/SMSF Trust Deeds
Thank You ! – Reminder – Optimal Process Any Questions ?
Contact Alex Tees, skype alexteesMobile 0409813622 Cairns 07 4031 7411Sydney 02 9281 3230 Email alext.tees@grubersbeckett.com.auEmailatees@bigpond.com
Process ; www.assetandpropertyprotection.com.au
1) Get Facts Straight – List Assets/Property2) Compare Notes with Clients Accountant,
Financial Planner3) Interview to Confirm instructions4) Explanation/Signing Interview5) Optional Family Meeting ?
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