Personal Property Security rules

It is expected that from 30 January 2010 shipowners that do not register their interest in a vessel (under the Personal Property Security Legislation), that is bareboat leased to an Australian based operation will have their ownership in the asset exposed and can potentially lose title over the vessel

The new Personal Property Security (“PPS”) Legislation is intended to create a simple online registration system for all security interests. It applies to goods but does not apply to land interests. The new system resets the priority of security interests to the time of registration or perfection rather than the time of grant.

The main area of application of this new regime for shipowners is to leases of “goods” for more than 12 months.  It would seem that ships are goods for the purposes of the PPS rules.

Under the current law if you bareboat lease a vessel to an Australia ship operator and they fail to pay the rental you may be able to take the vessel back, even if there is a liquidator appointed.

However, under the PPS rules this right will be lost unless you register your vessel lease (and you may be able to register it as a Purchase Money Security Interest “PMSI” which has super priority!). For existing leases you have a 2 year window in which to register or your priority may be lost.

The register is to be maintained by the Insolvency Trustee and Services Australia (“ITSA”). At this stage the register is not online!

Once the register is running you should confirm any interests registered by you or against you by doing a search. You should ensure that new lease documentation complies with the rules.

To access the ITS website, click here. 

To access the government website where these new rules are explained, click here.

Please feel free to contact Stephen Adrian, our practice leader in relation to this reform.

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Contact

Stephen Adrian
T  +61 (0)3 8635 1800
sadrian@moorestephens.com.au

www.moorestephens.com.au