What is the Personal Property Securities Act 2009 (Cth) and why does it matter?

The Personal Property Securities Act 2009 (Cth) (PPSA) is the principal Commonwealth legislation governing security interests in personal property in Australia. It replaced a patchwork of state and territory legislation (including the Bills of Sale Acts, the Goods Securities Act, and numerous other statutes) with a single national system. The PPSA governs the creation (attachment), legal enforceability (perfection), relative priority, and enforcement of security interests in all forms of personal property, including goods, financial property (receivables, bank accounts, shares), licences, and intellectual property. A security interest under the PPSA is broadly defined to include any transaction that in substance secures payment or performance of an obligation, regardless of its legal form — so chattel mortgages, hire purchase agreements, conditional sale agreements, retention of title arrangements, pledges, and fixed charges over personal property all constitute security interests for PPSA purposes.

What is attachment and perfection of a security interest under the PPSA?

Attachment is the process by which a security interest becomes enforceable against the grantor. Under section 19 of the PPSA, a security interest attaches to collateral when: (1) value is given by the secured party (e.g., a loan is made or credit is extended); (2) the grantor has rights in the collateral, or the power to transfer rights; and (3) the grantor has signed a security agreement that describes the collateral, or the secured party takes possession or control of the collateral. Attachment alone is sufficient to make the security interest enforceable between the parties. Perfection is the additional step that makes the security interest effective against third parties (other creditors, liquidators, and trustees in bankruptcy). Under the PPSA, perfection occurs by registration on the PPSR, by possession of the collateral, or by control (for financial collateral). Registration is the most common method. A security interest that is not perfected is generally unperfected, and an unperfected security interest vests in the grantor on their insolvency — meaning the secured party loses priority to the grantor's other creditors and to a liquidator or trustee.

What does 'all present and after-acquired personal property' (ALLPAAP) mean on the PPSR?

An 'all present and after-acquired personal property' (ALLPAAP) registration is a registration on the PPSR that covers all personal property that the grantor owns at the time of the registration and all personal property that the grantor acquires in the future. An ALLPAAP registration is commonly used by commercial lenders who wish to take a floating charge-style security interest over a borrower's entire asset base (other than land and fixtures, which are not personal property for PPSA purposes). An ALLPAAP registration provides the broadest possible security coverage. However, it should be noted that certain categories of collateral are treated as super-priority collateral under the PPSA — specifically, purchase money security interests (PMSIs) — which can take priority over an earlier-registered ALLPAAP in certain circumstances. A PMSI is a security interest that is taken by a seller or financier to secure the purchase price of specific goods, and it has super-priority if it is registered within the required timeframes (within 15 Business Days of delivery of the goods for goods other than inventory, or before delivery for inventory PMSIs).

What happens to an unperfected security interest if the grantor becomes insolvent?

Under section 267 of the PPSA, if a company enters external administration (including voluntary administration, receivership, liquidation, or deed of company arrangement) and has granted a security interest that is unperfected at the critical time (generally, the date of appointment of the administrator, receiver, or liquidator), that unperfected security interest vests in the grantor — that is, it is extinguished and the collateral becomes available to the general body of creditors. This is one of the most significant consequences of failing to register a security interest on the PPSR. It means that a secured party who has provided credit, sold goods on retention of title, or leased or bailed goods without registering on the PPSR may become an unsecured creditor in the grantor's insolvency and receive little or no recovery. The PPSA provides an anti-avoidance provision: if the security interest was perfected within 6 months before the insolvency (or within a shorter period in certain circumstances), the deemed vesting still applies. This prevents last-minute registrations to defeat the insolvency regime.

What rights does a secured party have to enforce a PPSA security interest?

Upon the occurrence of an event of default under the security agreement, a secured party has extensive enforcement rights under Chapter 4 of the PPSA, including: the right to seize the collateral (section 123), the right to dispose of the collateral by sale, lease, or other disposition (section 128), the right to retain the collateral in full or partial satisfaction of the secured obligation (section 134), and the right to appoint a receiver over the collateral (in the case of a charge over all or substantially all of the grantor's property, subject to section 260). Before disposing of the collateral, the secured party must give the grantor a notice of the proposed disposal specifying the method and timing, and allowing a minimum of 10 Business Days for the grantor to redeem the collateral (section 130). The proceeds of disposal are applied in the order prescribed by section 140: first to the costs of enforcement and disposal, then to the secured obligation, then to any subordinate security interests, and finally any surplus is paid to the grantor. A shortfall after disposal remains a personal debt of the grantor.

Security Agreement (PPSA) — Australia — Australia

Create an Australian Security Agreement registrable on the Personal Property Securities Register (PPSR). Covers creation and attachment of security interests under the Personal Property Securities Act 2009 (Cth), collateral description (ALLPAAP, specific goods, receivables, inventory, equipment), perfection by registration, priority rules, proceeds, insurance covenants, all-monies obligations, and PPSA enforcement rights under Chapter 4. Suitable for commercial lenders, financiers, trade creditors, and asset-based finance.

What Is a Security Agreement (PPSA) — Australia?

An Australian PPSA Security Agreement is a formal legal document under which a debtor (the Grantor) grants a security interest in personal property (the Collateral) to a creditor or lender (the Secured Party) as security for the payment or performance of an obligation. The security interest granted by the Security Agreement is registrable on the Personal Property Securities Register (PPSR), the national online register of security interests in personal property in Australia.

The Personal Property Securities Act 2009 (Cth) (PPSA) governs all security interests in personal property in Australia. The PPSA replaced a complex patchwork of state and territory laws (including bills of sale legislation, the Goods Securities Act, and chattel mortgage legislation) with a single national regime modelled on Article 9 of the Uniform Commercial Code (UCC) of the United States and the New Zealand Personal Property Securities Act 1999. The PPSA defines a security interest broadly as any interest in personal property provided for by a transaction that, in substance, secures payment or performance of an obligation.

A Security Agreement serves two primary functions. First, it creates a legally binding obligation between the Grantor and the Secured Party governing the security interest and the Grantor's obligations in relation to the Collateral. Second, it is the underlying security agreement that enables the Secured Party to register a financing statement on the PPSR. Registration perfects the security interest, giving it priority against other creditors and protecting the Secured Party against the risk of losing the Collateral on the Grantor's insolvency.

PPSA Security Agreements are used across a wide range of commercial contexts in Australia, including commercial lending (where a bank or non-bank lender takes security over a borrower's assets), asset-based finance (where a financier provides a revolving credit facility against receivables or inventory), equipment finance (where a hire purchase agreement or chattel mortgage is supported by a security agreement), trade credit (where a supplier takes security over goods supplied on credit), and agricultural finance (where a lender takes security over livestock, crops, or farm equipment).

When Do You Need a Security Agreement (PPSA) — Australia?

A PPSA Security Agreement is needed in Australia whenever a person or business wishes to take a security interest in the personal property of a debtor and register that security interest on the PPSR to obtain priority over other creditors and protection against insolvency.

The most common situations in which a PPSA Security Agreement is required include the following.

Commercial lending. Banks, non-bank lenders, and private financiers routinely require borrowers to execute a Security Agreement granting the lender a security interest over specified assets (or all of the borrower's assets) as a condition of providing a loan or credit facility. Without a registered security interest, the lender would be an unsecured creditor in the event of the borrower's insolvency.

Trade credit and retention of title. Suppliers who supply goods on credit and wish to retain ownership of those goods until payment may rely on a retention of title clause, but the retention of title clause must be registered on the PPSR as a PMSI to protect the supplier's priority. A PPSA Security Agreement formalises the security interest and provides the basis for PPSR registration.

Asset-based finance. Financiers who provide revolving credit facilities against the value of receivables, inventory, or other circulating assets take an ALLPAAP security interest over the borrower's entire asset base. The PPSA Security Agreement sets out the terms of the security interest and the Grantor's ongoing obligations.

Equipment hire and leasing. Lessors of goods (where the lease is for more than one year, or the goods are likely to become an accession to land) may need to register their interest on the PPSR to protect their priority against the lessee's other creditors.

Agricultural and rural finance. Lenders to agricultural businesses take security over livestock (cattle, sheep, pigs, horses), crops, farm equipment, and water licences. PPSR registration against the grantor's ABN or ACN is essential.

Startup and SME finance. Private investors and lenders who provide loans to start-up businesses and SMEs often take a PPSA security interest over the company's assets (including intellectual property, software, receivables, and equipment) to secure their investment.

What to Include in Your Security Agreement (PPSA) — Australia

A well-drafted Australian PPSA Security Agreement should contain the following key provisions.

Parties. The agreement must clearly identify the Secured Party and the Grantor, with full legal names, ABNs or ACNs (which are the grantor identifiers used for PPSR registration for company grantors), and addresses.

Grant of security interest. The core operative provision is the grant of a security interest in the Collateral to the Secured Party. The grant should confirm that the security interest is created under the PPSA and constitutes a security agreement within the meaning of section 10 of the PPSA.

Description of collateral. The collateral description is critically important. For ALLPAAP security interests, the description should state 'all present and after-acquired personal property of the Grantor'. For specific goods, the description must include sufficient detail to identify the property. For receivables, the description should capture all present and future book debts and receivables. The PPSR registration must match the collateral description in the Security Agreement.

Attachment clause. The agreement should confirm the three elements of attachment under section 19 of the PPSA: value given, rights in the collateral, and execution of the security agreement.

Perfection and PPSR registration. The Grantor's consent to PPSR registration, and the waiver of the right to receive a verification statement under section 157, should be expressly stated. The Grantor should also waive specific PPSA rights to the extent permitted by law.

Proceeds. If the security interest extends to proceeds, the agreement should state this expressly, as proceeds of collateral may be captured under section 31 of the PPSA.

Grantor's covenants. The agreement should include positive covenants (such as maintaining insurance, providing financial information, and doing all things necessary to maintain the security interest) and negative covenants (such as not disposing of collateral, not creating competing security interests, and not changing the grantor's name or ABN/ACN without notice).

Enforcement. The agreement should cross-reference the enforcement rights under Chapter 4 of the PPSA and specify the events of default that entitle the Secured Party to enforce.

What Is a Security Agreement (PPSA) — Australia?

When Do You Need a Security Agreement (PPSA) — Australia?

What to Include in Your Security Agreement (PPSA) — Australia

Frequently Asked Questions

Related Documents

Instalment Contract / Hire Purchase Agreement (Australia)

Guarantee and Indemnity (Australia)

Loan Agreement (Australia)

Credit Terms Agreement (Trade Credit) — Australia

Bill of Sale (Australia)