Charges and the Personal Property Securities Register

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A charge is granted by a company (chargor) to the lender (chargee) to secure the payment of a debt or an obligation over the personal property of a company.

A charge does not give the chargee a legal interest in the property by way of mortgage or possession, but rather a right to enforce the interest it holds when a certain event occurs such as default or insolvency.

The charge can be ‘fixed’ over property that is specifically identified or ‘float’ over all the assets of the company.

What is the difference between a fixed and floating charge?

Fixed Charge

A fixed charge will attach to specific assets of the company such as plant and equipment, motor vehicle vehicles etc.

Whilst the chargor retains the ownership of the assets if they default the chargee has the right to enforce payment of the security interest through proceeds of the sale of the asset.

It is important to note that an asset subject to a fixed charge cannot be mortgaged, sold or transferred without first obtaining the chargee’s consent.

Floating Charge 

This charge ‘floats’ over all company assets and can be current or future assets or even certain categories of assets.

The assets are may change over the duration of the charge and are non-current and will change from time to time.

If there is a default the charge will crystallise but otherwise the chargor can carry on its business normally.

Upon crystallisation, the charge becomes fixed and attaches to the assets and the chargee can enforce its rights to recover the debt.

Once the charge becomes fixed the chargor cannot deal with those assets.

Personal Property Securities Register

A charge can be registered through the Personal Property Securities Register (PPSR).

Property is defined in the Personal Property Securities Act 2009 (Cth) other than land, buildings and fixtures including:

  • goods;
  • motor vehicles;
  • planes;
  • boats;
  • intellectual property (such as copyright, patents and designs);
  • bank accounts and debts (sometimes known as receivables);
  • shares and other financial property; and
  • private commercial licences.

Generally, the PPSR is used by:

  • Financial institutions such as banks and finance companies providing loans where they receive a security interest in an item of personal property
  • Businesses who sell personal property on credit, consignment, or on a retention of title arrangement
  • Consumers who are about to purchase personal property, such as valuable second goods, to make sure the property is free of a security interest.

The PPSR is an official government register managed by the Registrar of Personal Property Securities and it came into effect in 2012.

It is an online noticeboard where the public are able to access information regarding any security interests that are registered over personal property.

How can FC Lawyers assist?

At FC Lawyers we have acted for businesses, lenders and individuals to protect their assets or security interests.

Contact us to discuss how we can help you today.

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