Why PPSA registration deadlines matter Daniel Turk & Loren Smith | October 2012 | Corporate & Commercial
In the case of Barclays Bank plc [2012] NSWSC 1095, the Supreme Court of NSW recently made orders allowing a secured party a later time for registration of its interest on the PPSA register after it failed to lodge its interest within the specified time.
Who does this impact? Financiers and suppliers of goods who take security interests over personal property that requires registration under the Personal Property Securities Act 2009 (“PPSA”).
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What does it mean? Financiers and suppliers of goods must be aware of time frames for registration of security interests. Should they be remiss, they may undermine the protection of such security interests and may find their interest is unenforceable. The Court will grant extensions of time for the deadline for registration to avoid the interests being void under s588FL of the Corporations Act (Cth) 2001 (“the Corporations Act”) provided there is no prejudice.
Relevant legislation The Corporations Act •
Section 588FL provides that: >> A PPSA security interest registered over a company’s asset which has not been registered within the designated time will vest in the company if the company goes into administration, liquidation or executes a deed of company arrangement (“the critical time”). >> For PPSA security interests arising from security agreements, the designated time the security interest must be registered is the later of 20 days after the date of the security agreement or six months prior to the critical time.
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Section 588FM allows a court to fix a later time for registration of a PPSA security interest under s588FL.
The proceedings
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Also, Centrebet had not granted any security to any other creditor other than security that would arise by common law or statute in the course of its ordinary business.
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Barclays approached the Court for an order under section 588FM of the Corporations Act fixing 9 August 2012 as the registration time for security interests granted to Barclays by Centrebet.
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Centrebet consented to Barclays’ application to extend the time for registration of its security interest.
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Having the registration time extended meant that Barclays interest would not be at risk of being void under s588FL if Centrebet went into administration or liquidation.
Background facts •
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In January 2012, Sportingbet plc executed an agreement with Barclays in relation to a UK £8 million term loan facility provided to Sportingbet plc by Barclays (“the Facility Agreement”). An Australian company, Centrebet International Pty Ltd, a subsidiary of Sportingbet plc (“Centrebet”) was also party to the Facility Agreement and granted security to Barclays by executing a General Security Deed with Barclays on 24 April 2012. Barclays retained legal advisers to provide a legal opinion in respect of the enforceability of the General Security Deed over Centrebet. That legal opinion relevantly stated (in accordance with s588FL(2) of the Corporations Act): “... in order to perfect the security interest created under the deed in respect of the collateral to which it attaches…a financing statement should be registered… in compliance with the PPSA within 20 business days of the day the deed comes into force...”
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The PPSA registration over Centrebet was not registered by Barclays until 9 August 2012, 108 days after the registration deadline.
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Relevantly, between 23 May 2012 (the end of the 20 business day registration period) to 9 August 2012 (the date of registration), there had not been any material change in Centrebet’s financial status.
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You snooze, you may lose – Why PPSA registration deadlines matter Daniel Turk & Loren Smith | October 2012
Decision •
A decision to extend the time for registration of Barclays’ security interest to 9 August 2012 was made, under section 588FM of the Corporations Act.
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His Honour Black J was convinced that the failure to register the relevant security interests within the designated timeframe was due to inadvertence by Barclays’ legal advisors.
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In justifying this decision his Honour referred to cases in respect of section 266 of the Corporations Act, which is comparable to s588FL(2) of the Corporations Act. Relevantly, section 266 of the Corporations Act provides that in situations where a company is in administration or liquidation, a charge on that company’s property is void as security against the administrator or liquidator unless notice of the charge is given within a specific timeframe.
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You snooze, you may lose – Why PPSA registration deadlines matter Daniel Turk & Loren Smith | October 2012
In this instance, however, his Honour was also satisfied that it would be a proper exercise of the court’s discretion to make an order under s588FM of the Corporations Act fixing a later time for registration of the security interests in this case, relevantly the date of registration of the security interests on 9 August 2012, having regard to:
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>> The evidence as to Centrebet’s strong financial position; and >> The fact that the risk of prejudice to other creditors from such an order is remote.
Comment •
Financiers and suppliers need to register their security interests in time.
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The length of the delay prior to registration of the security interest is a relevant factor in the application of the court’s discretion under s588FM to extend the time for registration.
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An extension of time may be given on the basis that it does not prejudice the rights of any person who has, between the date the security interest was granted and the date of registration, obtained any security over the collateral subject to the security. Registration should be at the same time as a security agreement is entered to best protect a secured partner interest.
For more information, please contact: Daniel Turk Partner T: 02 8257 5727 M: 0408 667 220 daniel.turk@turkslegal.com.au
Loren Smith Lawyer T: 02 8257 5775 M: 0403 115 895 loren.smith@turkslegal.com.au
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