PPS Framework changes and Australia’s Agriculture Industry
5 mins reading time
As we covered in our recent Proposed PPS Framework Reform article, a statutory review of the operation and effectiveness of the Personal Property Securities (PPS) regime has been undertaken (the Whittaker Review). The Whittaker Review ultimately made 394 recommendations for changes to the PPS regime, which aims to make it more simplified, clearer and more accessible to users.
In response to the Whittaker Review, the Australian Government has consulted, and proposes to adopt, 345 of the changes.
Whilst the proposals are not yet law, it pays for businesses to start thinking now about the potential reforms, the impacts they will have on businesses, and the changes that will be required to be made to the business’ trading documents and internal credit processes, and so on.
Impact on Agriculture Industry
Importantly for businesses in Australia’s Agriculture Industry, there are some proposed changes that will be of direct impact, including:
- The removal of the specific “Agriculture” collateral class;
- A change to the concept of “commingled goods”;
- The possible addition of a separate register for “construction and heavy industry machines”; and
- The possible deletion of sections 85 and 86 of the Personal Property Securities Act 2009 (Cth) (PPSA).
Proposed PPS Framework change – Removal of the “Agriculture” collateral class
The Australian Government supports a proposal to reduce the number and type of “collateral classes” available to choose from on the PPS Register, down from 9 classes to only 6 classes. This includes removing the specific collateral class of “Agriculture” (crops and livestock) and relocating it just into the general “Goods” collateral class.
Proposed PPS Framework change – “Commingled Goods”
The current PPS laws can sometimes disadvantage a party that holds a security in ‘commingled’ goods, given that ‘commingled’ goods cannot be separated out from the greater bulk in which they have been mixed. For example, once multiple different suppliers tip their grain into a silo, they cannot practicably separate back out “their” specific grain from the larger bulk!
The proposed changes intend to clarify the meaning of “commingled” goods further, and to provide a more comprehensive definition. For example, goods are considered “commingled” if:
- The goods are mixed with other goods into a mass; and
- The identity of the goods is lost in the mass.
Businesses are reminded that a security interest in goods which are commingled into a larger mass will remain attached because a secured party will be able to enforce against their relevant share.
Further consultation – addition of separate register
The Government will also consult with Agriculture businesses on the addition of a separate register for “construction and heavy industry machines”.
Further consultation – removal of sections 85 and 86
The Government will also seek feedback from Agriculture businesses on whether sections 85 and 86 of the PPSA should be retained or deleted. These sections currently set out specific rights and priority treatment for security interests as they relate to crops and livestock.
Important reminder for businesses
Once (or if) the amendment legislation is passed, it is thought that businesses will be afforded a two-year transition period.
To comply with the upcoming changes, businesses will need to:
- Amend T+Cs, finance documents and other contracts and trading documents, etc, to reflect the new terminology, definitions, timeframes, rights and obligations.
- Update internal policy documents, checklists, training materials and other resources used by staff (particularly the business’ accounts and credit control teams).
- Carefully consider its security position against potential competing creditors, especially where crops and livestock are concerned.
- Make PPS Registrations in different categories to those used currently.
- Possibly get used to having to use and access another register.
How can Macpherson Kelley assist?
Compliance with the changes (once passed) will be essential in order for businesses to meet, comply with and benefit from the protections afforded by the PPS regime.
Whilst the use of the PPS regime remains voluntary, non-compliance could have critical impact on businesses, including loss of assets, inability to recover assets or monies owed, and relegation to the “end of the queue” as an unsecured creditor in the event of the grantor’s insolvency.
Contact us
Macpherson Kelley has extensive experience in the Agriculture sector. For further detail on the proposed changes, or for advice and assistance on your business’ current and future PPS compliance measures, please contact our Agribusiness team.
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PPS Framework changes and Australia’s Agriculture Industry
As we covered in our recent Proposed PPS Framework Reform article, a statutory review of the operation and effectiveness of the Personal Property Securities (PPS) regime has been undertaken (the Whittaker Review). The Whittaker Review ultimately made 394 recommendations for changes to the PPS regime, which aims to make it more simplified, clearer and more accessible to users.
In response to the Whittaker Review, the Australian Government has consulted, and proposes to adopt, 345 of the changes.
Whilst the proposals are not yet law, it pays for businesses to start thinking now about the potential reforms, the impacts they will have on businesses, and the changes that will be required to be made to the business’ trading documents and internal credit processes, and so on.
Impact on Agriculture Industry
Importantly for businesses in Australia’s Agriculture Industry, there are some proposed changes that will be of direct impact, including:
- The removal of the specific “Agriculture” collateral class;
- A change to the concept of “commingled goods”;
- The possible addition of a separate register for “construction and heavy industry machines”; and
- The possible deletion of sections 85 and 86 of the Personal Property Securities Act 2009 (Cth) (PPSA).
Proposed PPS Framework change – Removal of the “Agriculture” collateral class
The Australian Government supports a proposal to reduce the number and type of “collateral classes” available to choose from on the PPS Register, down from 9 classes to only 6 classes. This includes removing the specific collateral class of “Agriculture” (crops and livestock) and relocating it just into the general “Goods” collateral class.
Proposed PPS Framework change – “Commingled Goods”
The current PPS laws can sometimes disadvantage a party that holds a security in ‘commingled’ goods, given that ‘commingled’ goods cannot be separated out from the greater bulk in which they have been mixed. For example, once multiple different suppliers tip their grain into a silo, they cannot practicably separate back out “their” specific grain from the larger bulk!
The proposed changes intend to clarify the meaning of “commingled” goods further, and to provide a more comprehensive definition. For example, goods are considered “commingled” if:
- The goods are mixed with other goods into a mass; and
- The identity of the goods is lost in the mass.
Businesses are reminded that a security interest in goods which are commingled into a larger mass will remain attached because a secured party will be able to enforce against their relevant share.
Further consultation – addition of separate register
The Government will also consult with Agriculture businesses on the addition of a separate register for “construction and heavy industry machines”.
Further consultation – removal of sections 85 and 86
The Government will also seek feedback from Agriculture businesses on whether sections 85 and 86 of the PPSA should be retained or deleted. These sections currently set out specific rights and priority treatment for security interests as they relate to crops and livestock.
Important reminder for businesses
Once (or if) the amendment legislation is passed, it is thought that businesses will be afforded a two-year transition period.
To comply with the upcoming changes, businesses will need to:
- Amend T+Cs, finance documents and other contracts and trading documents, etc, to reflect the new terminology, definitions, timeframes, rights and obligations.
- Update internal policy documents, checklists, training materials and other resources used by staff (particularly the business’ accounts and credit control teams).
- Carefully consider its security position against potential competing creditors, especially where crops and livestock are concerned.
- Make PPS Registrations in different categories to those used currently.
- Possibly get used to having to use and access another register.
How can Macpherson Kelley assist?
Compliance with the changes (once passed) will be essential in order for businesses to meet, comply with and benefit from the protections afforded by the PPS regime.
Whilst the use of the PPS regime remains voluntary, non-compliance could have critical impact on businesses, including loss of assets, inability to recover assets or monies owed, and relegation to the “end of the queue” as an unsecured creditor in the event of the grantor’s insolvency.
Contact us
Macpherson Kelley has extensive experience in the Agriculture sector. For further detail on the proposed changes, or for advice and assistance on your business’ current and future PPS compliance measures, please contact our Agribusiness team.