Republic Act 11057 or the Personal Property Security Act
(PPSA) was signed into law on August 17 2018. It provides for
new means and requirements for creating, perfecting, and
registering security over personal property in the Philippines.
The PPSA amended or repealed certain laws that are inconsistent
with the new law. This includes those laws relating to the
creation of pledges and chattel mortgages and the registration
procedures for security interests over personal property in the
Under the PPSA, a security interest over personal property
is created by a security agreement. In creating a security
interest, it would be sufficient that the collateral be
reasonably identified, whether in a general or specific manner.
A security agreement may also provide for security interests in
future property, but the security interest in that property
will be created only when the grantor acquires rights in it or
the power to encumber it.
The PPSA further provides that security interest over
personal property may be perfected to bind third parties
through the following means: (a) the registration of a notice
with the registry; (b) possession of the collateral by the
secured creditor; and, (c) control of investment property and
deposit accounts. For tangible assets, a security interest may
be perfected by registration or possession. On the other hand,
security interests in investment property and deposit accounts
may be perfected by registration or control.
The PPSA also sets out a new set of rules for determining
priority of security interest. This depends on the nature and
kind of property involved, and is not entirely dependent on
prior registration at the registry. With regard to enforcement,
a secured creditor may now sell or otherwise dispose of the
collateral, publicly or privately. The debtor is also required
to satisfy any deficiency. Previously, Philippine rules
governing pledges provided that the foreclosure of a pledge
extinguished the debt, and the secured creditor was no longer
entitled to recover any deficiency.
The Philippine Land Registration Authority (LRA) has to
establish a new registry that will enable registration and the
searching of notices on security interests, and to make it
operational before the PPSA is implemented. During the
transitional period (that is, from the date the PPSA becomes
effective until the date when the registry is established and
operational) existing laws will continue to apply.
The Philippine department of finance, in coordination with
the Philippine department of justice, through the LRA, is
tasked to promulgate the rules and regulations to implement the
V De Leon