As previously reported (IFLR, December 1999) the PPSA, which was passed by parliament in October 1999, will introduce a regulatory regime for all security interests taken in personal property (which covers property including goods, motor vehicles, livestock and shares and other investment products, but not land and buildings). Holders of security interests in personal property will need to register prescribed details of their interests on the Personal Property Securities Register (PPSR) to perfect those interests. Registration will usually ensure priority for a security over another security that is not registered.
At the end of 2000, the Ministry of Economic Development released for comment a draft of the Personal Property Security Regulations, which establish the rules and procedures for the PPSR database. The PPSR will be a searchable electronic online register with access via the internet or a dedicated business-to-business connection. Those wishing to register a security interest must complete a financing statement which, depending on the type of collateral (personal property) the interest is over, will include various pieces of information that adequately describe the property. For example, if the security interest is in a motor vehicle, the financing statement will require the vehicle's serial, chassis and registration numbers, the make, year and model. Registration is for a maximum of five years; after that the security interest must be re-registered.
The PPSR allows financing statements to be renewed, amended or discharged by way of a financing change statement. It is the obligation of a secured party that the information supplied is accurate and kept up to date. Should the information be incorrect, a person with a separate interest in the property may give a written demand to the secured party to amend or discharge the statement. The secured party then has 15 working days to comply with or challenge that demand, otherwise the registrar is obliged to make the requested change to the financing statement.
The Ministry of Economic Development soon hopes to announce the implementation date for the PPSA (and Regulations and PPSR), which is now expected to be in late 2001 or early 2002. It is committed to giving at least six months' notice of the implementation date. Once implemented, there will be a further six-month transition period during which existing securities may be registered. If an existing security is not registered on the PPSR, it will lose priority to a PPSR-registered security even if that registered security arose later in time. Therefore, anyone with an existing security interest in personal property in New Zealand should register that interest during the transitional period.
This applies to security interests registered on existing New Zealand registers (including debenture securities over companies) and also to a range of interests that do not require registration at present. For example, both mortgages over shares and retention of title (Romalpa) interests should be registered when the PPSA comes into effect. The PPSA does not allow any dispensation for late registration, so security holders only have a limited time to ensure that their interests will continue to be protected under the new regime.
James Aitken and Hamish Dixon