Interests

Personal Properties Security Act (PPSR)

Personal Properties Security Act (PPSR)

The Personal Property Securities Bill 2009 and the Personal Property Securities (Consequential Amendments) Bill 2009◦passed by both Houses of Parliament on 26

November 2009.◦Commencement date 30 January 2012 .◦The PPS Act is now in force with a two year

transitional period

OverviewPersonal Property Securities Act 2009Aim of the legislation is:

◦to bring an end to the inconsistent and◦duplicate laws and registers which presently◦govern personal securities law in the various

Australian jurisdictions◦It replaced 70 Commonwealth and State Acts,

administered by 30 government agencies

PPS REGISTERUp to 30 existing federal and state registers

will be migrated to the PPS Register, including:◦ASIC register of company charges◦co-operatives register of charges◦bills of sale ( finance security-personal property)◦motor vehicle securities◦ship mortgages◦crop liens◦stock liens ( stock agistment)◦register of trade marks

PPS RegisterOn the PPS register, the end time for the

security must be defined, in particular:◦ goods used by consumers - security can’t be for more

than 7 years (but can be renewed)

◦ motor vehicles - security can’t be for more than 7 years (but can be renewed)

◦ BUT no stated end time needed for company charges It is wholly electronic see www.ppsr.gov.au Accessible 24/7

Key DifferencesPPS Register – www.ppsr.gov.auKey differences to current position:

◦ Operates on the basis of notice rather than document registration

◦ Registration is by ‘financing statement’

◦ Notice can be registered before any secured transaction takes place

◦ One registration can cover multiple security interests

Registration of Security Interests

RegistrationNot mandatory to register security interests

No time limit for registering

“PMSIs”/Interests to be registered within 15 days -PMSI = Purchase Money Security Interest/LoanBUT failure to register/perfect will have

consequences for enforcement and priority

How to Search the Register

Electronic Searching of the Register www.ppsr.gov.au PPS Register can be searched by grantor details

or property details (if there is a serial number on the particular property)

PPS register will be maintained by ITSA

OLD registers transferred and verified

Access to the PPSR Register

Unlike current company charges - copies of the security documents are not included in the register

Information is included via the financing statement

Interested persons will be able to receive a copy of the security agreements from the grantor within 10 business days of a request being made

Access to the Register

Only authorised users can access the register e.g. credit providers and current and potential security holders

To protect privacy there will be no general public access except for authorised purpose – but may be difficult to regulate

What is Personal PropertyPersonal Property means property (including a

licence) including: ◦ tangible items such as:◦ cars, boats, aircraft, ◦ livestock, crops and minerals ◦ that have been extracted in any form intangible items

such as ◦ intellectual property and contract rights, ◦ designs, patents, ◦ plant breeders rights and ◦ trademarks financial property such as currency, ◦ A document of title, investment instruments and

negotiable instruments.◦ investment entitlements (e.g. stockbroker accounts)

Exclusions – Personal Property

It specifically excludes;land fixtures water rights a right entitlement or authority (including access

entitlements) that is granted by or under a law of the Commonwealth, a State or Territory declared by that law not to be personal property for the purposes of the Act

What is Personal PropertyWhat is personal property security Three elements ;

◦ an interest in relation to personal property provided for by a transaction that, in substance, secures payment or performance of an obligation

This is regardless of the form of the transaction or the identity of the person who has title to the property

Examples of Security Interests .Charges that secure obligations - no distinction between fixed and floating charges:

◦ Retention of title arrangements/clauses in Contracts

◦ Chattel mortgages

◦ Lease of goods

◦ Hire purchase agreements

◦ Consignment

What Forms of Documents ?

Form of documentationThere is no prescribed form of security

agreement:◦ General security agreement◦ Specific security agreement

All security is effectively ‘fixed’ - parties need to agree to terms of security arrangements

Parties to determine when the property can be disposed of by the grantorPPSA (the Act) determines how current fixed and

floating securities are dealt with in future

Who Can Use PPSR ?

Entities coveredPPSA applies to security interests granted by -

corporationspartnershipsmanaged investment schemesregistrable and non registrable legal entitiesIndividuals - May be a Useful for Asset Protection ……..

How to register/Create a Security

Creating a security interest◦ Step 1 – entering into a transaction

◦ Step 2 – attachment of the security interest to the personal property (enforceable against the grantor)

◦ Step 3 – possession, control or written security agreement (enforceable against third parties)

◦ Step 4 – perfecting the security interest

“Attachment” under PPSR

Attachment A security interest attaches to personal property when the grantor has rights in the collateral* that

are transferrable to the secured party and the secured party gives value in return for the security interest

Collateral is the personal property to which a security interest (EG a loan) is attached

How Attachment HappensAttachment For an attached security interest to be

enforceable against third parties, section 20 of the PPSA requires that either the collateral is in the possession of the secured party , the collateral has been perfected by control or the grantor and the secured party have entered into a valid written security agreement (Contract)

It is contemplated that security agreements can be entered into electronically

“Perfection” & How to get Priority

Perfection Perfection is required to obtain priority over another

security interest, or survive a dealing in the same collateral.

The main methods of ‘perfection’ are (section 21) taking control of collateral that is controllable property (e.g. bank accounts, investments) registering a security interest in the collateral taking possession of the collateral or temporarily perfecting a security interest in the collateral

Control/Controllable Property

Control Controllable property is defined as :

an investment instrumentan account (e.g. bank accounts/investments) investment entitlements investment instruments (e.g. shares) letters of creditnegotiable instruments not evidenced by a certificate (e g bills of exchange)

Priority - Example

A perfected security interest will have priorityover an unperfected security interest – section55(3)

Example :Atherton Cranes Pty Ltd (AC) grants a security interest in one of its cranes to Cth Bank Company later grants a security interest in the same crane to Westpac

Westpac registers the crane on the PPS register, Commonwealth Bank does not, the security interest held by Westpac will have a higher priority

Priority Continued /-

A security interest perfected by control (of controllable property) will have priority over a security interest perfected by any other means – section 57(1) example (investment instrument) Atherton Cranes borrows $20,000 from ANZ to invest in a pizza oven and grants ANZ a security interest in shares issued by Macquarie ANZ perfects its security interest by registering the shares on the PPS register

Atherton Cranes later borrows another $25,000 from Westpac and grants Westpac a security interest in the same shares issued by Macquarie

Priority Cont/-Westpac perfects its security interest by taking

control of the shares Westpac’s security interest would have priority over ANZ’s interest because Westpac has perfected its interest through control, while ANZ has perfected only by registration

Where competing security interests are both perfected by control, priority is determined by the order in which the secured parties took control of the collateral – section 57(2) (PPSA Act)

What Does Priority Mean?

Priority between security interests perfected by means other than control is also determined by the first in time principle – section 55(4)

It is necessary to determine the priority time the priority time will not necessarily be when the security interest was perfected

Priority TimeProviding a security interest is continuously perfected,

the priority time will be the earliest of:

registration on the PPS register

possession of the collateral

when the interest is temporarily perfected by force of the PPS Act

Priority between unperfected security interests is determined by the order of attachment of the security interest – section 55(2)

ExceptionsExceptions to the general priority rules –

Purchase money security interests (PMSI)

PMSI is essentially where the secured party has provided finance or given value required by the grantor to acquire the collateral, (e.g. vendor finance)

PMSIs have ‘super-priority’ over the same collateral (which has been granted by the same grantor) which has been perfected by registration or possession however, a security interest which has been perfected by control has priority over a PMSI

Enforcement and RemediesEnforcement and remediesChapter 4 PPSA governs the enforcement of security

interests

Any secured party regardless of priority ranking, may enforce its interest

Secured parties are not required to obtain judgment prior to enforcement

The PPSA is not a code and will be able to be used in conjunction with other rights and remedies available

Rules - enforcement

Important rules regarding enforcementA general standard of honesty and commercial

reasonableness is to apply to enforcement actions

Parties can contract out of enforcement provisions (depending on use of collateral)

May use land law to enforce security interest in some circumstances

May seize liquid assets from third party

Seizure of Collateral/Security

Seizure of collateralSecured party may seize collateral by any lawful

method

Higher ranking priority holders may seize collateral from lower ranking priority holders

Higher ranking priority holder must pay enforcement costs of lower ranking priority holder where lower ranking priority holder initially seized the collateral

Disposal of CollateralDisposal of collateralThree methods of disposing of collateral:

◦ sale to a third party

◦ sale where the collateral is purchased by the enforcing secured party lease or license to a third party

◦ Must obtain market value for collateral or best price reasonable same duty required as a controller under Corporations Act

Retaining ,Keeping Hold of Collateral/Security

Retaining collateral

Secured party may retain collateral if it is not predominantly used for a personal, domestic or household purpose

Retention of seized collateral is not an absolute right

The grantor and other interest holders may object – in which case collateral must be sold

Rules after enforcement

Proceeds must be distributed in accordance with the provisions in section 140 PPSA Statement of account must be provided within 20 business days of a request to do so

Redemption and Reinstatement

There is a right of redemption available to;

the debtor, the grantor and higher ranking secured creditors.

Redeemer must pay the amount required to discharge the obligation

Reinstatement is allowed prior to the exercise of enforcement.

Achieved by paying amount of arrears and any enforcement costs

Transitional Provisions

Any existing security interest that is not migrated to the PPS register after commencement of the Act will be deemed ‘temporarily perfected’.

Applies for the period starting immediately before the registration commencement time and ending on the earlier of the time when the security interest ceased to be continuously perfected otherwise than by temporary perfection the end of the month that is 24 months after the registration commencement time

After the 24 month transitional period ends, the priorities will be determined under the substantive provisions of the legislation

What to do Now- Things to Check?Be aware that old Retention of title clauses in sale

contracts may not work without PPSR Registration

Review and revise Contract Documentation. -you still need adequate Contracts & agreements

* PPSR can be a useful Asset Protection device in the event of bankruptcy or insolvency……..www.assetandpropertyprotection.com.auContact : Alex Tees , SKYPE alexteesPhone : 02 2813230/07 4031 7411/0409813622Email: [email protected]

Estate Planning Presentation

Important disclaimerNo person should rely on any part of the contents of

this presentation without first obtaining advice from a qualified professional person. This presentation is given on the terms and understanding that the author is not responsible for the results of any actions taken on the basis of information in this presentation, nor for any error in or omission from this presentation. The author hereby expressly disclaims all and any liability and responsibility to any person, whether a purchaser, recipient or reader of this presentation or not, in respect of anything, and of the consequences of anything, done or omitted to be done by any such person in reliance, whether wholly or partially, upon the whole or any part of the contents of this presentation.

Basics – No Will ? – Consequences / Solutions , Avoid Problems and more angst at a time of

Grieving...........................No Will/Intestacy :means you don’t choose who

receives your property/assets ; - The Succession Act Formula will apply Intestacy = 3 x amount of delay + Costs!Spouses/Children suddenly have no moneySuper’ Pay outs delayedSolutions ; see a Lawyer get a Temporary Will Form

Done ! Incapacity – Powers of Attorney (Wills only operate after death !) (Call us 24hrs!?)

“MODERN SUCCESSION & ESTATE PLANNING “

Due to increasing complexity in family relationships and business/investment structuring, along with complicated tax and legal regimes - modern estate planning, done properly, must encompass issues such as : Efficient intergenerational transfer of wealth with

harmony Asset protection (Keeping out “Predators/Creditors” &

Keeping the Wealth in the Family ) Tax (at both State and Federal level) Superannuation (Formation + Review of Deeds) Trusts, (Formation + Review of Deeds) – safe storage (

www.trustdeedregister.com (.com.au) – registration ? Investments/insurance structuring Resolution of disputes and other issues through the use

of an “Independent Referee” – Dispute Resolution

http://www.trustdeedregister.com/

WHAT Lawyers should DO in co-operation with Accountants and Financial

PlannersProvision of strategies and advice in collaboration with

other professionals ( Accountants/Financial Planners) to deliver the optimum outcome(s) for client (s):Modern Estate Planning Strategies ( Before and after death )Testamentary Trusts ( Trusts created after death)Family TrustsSelf-managed superannuation funds (SMSF)Business succession planning.(a “will” for a

Business )

Estate Planning - HOW a Lawyer should and can OPERATE

Timeframes agreed with client and referrer at each stage to ensure efficient completion and accountability

Fixed Fees or a fixed range of fees & the First meeting with client(s) is purely a scoping exercise & obligation free ( often in Accountants/Financial Planners ‘ office )

Collaboration/Reporting to Accountant/Fin’Planner at each stage = Further Fee & protection opportunities..for you

Systematic and efficient delivery ( x 3 Meetings)Technical and client-related queries welcomed from all

Referrers/Client(s) Referral to other Specialist Tax Services

Why is it different ? - the way it is recommended to operate compared to OTHER LAW FIRMS ?

High level technical expertise in superannuation , taxation , and Trust law – Solicitor(s) should work with and have access to the resources of Accounting advisory firms.(throughout the World)

Specialist Solicitors who understand and appreciate the Financial planning process, work together with Clients’ Financial Planners & Accountants.

Encourage First meetings/other meetings at Financial Planners/Accountants’ office and/or clients home/office.

Fixed price contracts (or Fixed Range) (Approx 75% Tax Deduction)

Comprehensive Estate Planning Portfolio / Folder. Delivery meetings can be Optional Family meetings to

include the children – builds bridges to next generation

A Modern Will – Creative use of Trusts after Death…(as well as * Other structures )

Will Maker/Testator makes a Will to flexibly provide ;Optional Testamentary Trust or other *Structures

created after Death (*Note Tax laws may change !?)“Beneficiaries” Persons receiving Money & Property ,

receive it via a Trust of which they or their Nominated Person become Trustee

Provides Tax Efficiency and Asset Protection* If the law changes Provision for Other Structures

such as Partnerships, Joint Ventures and different types of Companies/Corporations may be necessary…..

Example – Optional Trusts After Death

EXECUTOR

(May not be the same Person)

TRUSTEE (S)

TRUST TRUST TRUST

The Efficient Will – *Possible use of Trusts after Death………..

Optional Discretionary Testamentary

Trust

!

WILL

Trustee

Tax savings, especially for

minor beneficiaries

Flexibility of distributions

Asset protection for trust assets

Beneficiaries include: ( THOSE RECEIVING GIFTS )· Primary Beneficiary

–Surviving Spouse/Children

· Family Members· Related Entities

Trustee - Primary Beneficiary(Surviving Spouse/Children)

B

EXECUTOR

Case Study 1 – Wealthy Woman marries a much less Wealthy Gentleman – Who Needs Protection ?

Assets and Possible Family Situation ( Married or Unmarried) Possibly have one child Woman owns a House/Property Woman a High income earner/ & WealthyPerhaps the Husband will never have a high income

earning capacity

Case Study 1 - ESTATE PLANNING - WISHES & Concerns - Whose ? !!

Protect the child if both or One Spouse diesEnsure Husband does not receive too much “loot”

from His Wealthy Wife if she dies first ? ( & Protect the Child as well !)

Ensure the Husband at least has a Roof over his head and adequate provision while he cares for the child if Wife dies before him…

Ensure Equity & Sensitivity …………

Case Study 1 -Possible Strategies

A Separate Care for the Spouse Trust for the Husband with little wealth

A Separate Trust for the Husband with sufficient Money/Property

A Separate Trust for the child with another relative of the Wife as Trustee (Husband given right to occupy Family Home for life ,while Child receives all the Wifes’ Estate………)

Recommend and Ensure the Husband owns Adequate & generous Life Insurance over the Life of his Wife in case she dies first…….

* If the Partners are willing – Pre Nuptial/Post Nuptial Agreements

( very sensitive issues here !) – Binding Financial Agreements

Case Study 2 – George & Marina

George 55, Marina 54 - both retired Children ; Jessica 27 (De Facto), Sarah , 22 (Married) Jack 21, (Has a Disability, numerous Partners)


Home Joint tenants

Investment Property 1

Joint tenants

Managed funds

SMSF (Self Managed Super’ Fund)

Shares SMSFDirect property SMSF

ASSETS


ESTATE PLANNING - Wishes & Concerns

George to Marina and vice versa in the first instance

Then equally to children

Specific protection required for Jack due to disability

Wealth to be retained in the family

Derive some tax efficiency


“Estate Assets” Testamentary Trusts & *other optional Structure (s)

Family Home Sever tenancyInvestment Property 1

Sever tenancy

SMSF (Super Fund)

BDBN (Binding Death Benefit Nomination)

Possible STRATEGIES


Concern StrategyProtection of family wealth from spousal and other claims

Testamentary Trusts (TTs) & other Structures with crisis provisions (removal of Trustees, Directors, “Controllers” etc)

Protection for Jack - Control - Conflicts of interest

Protective Trust - ‘Family’ control - Testamentary Protector

Understanding of “non-estate assets” and planning required

Sever joint tenancy (Family Home)Cascading Binding Death Benefit Nominations (Super’)

STRATEGIE(S) - WILLS

STRATEGIES – SMSF- Super’Funds

Concerns & Strategy

Maximise superannuation benefits during lifetime, potential inability of survivor to recontribute to super

- Use “Reversionary” pensions Optimising tax with protection(*BDBN = Binding Death Benefit Nomination) - Cascading

*BDBNs - first, reversionary - then, *LPR(* Legal Personal Representative ) Ongoing control of SMSF -Corporate Trustee appropriate ?

Other Possible Strategies – Some “Non Estate Property” – Family Trusts /Super’

Concerns & Strategy (Wills may not Work!)1) Transition of control of Family Trust -Trust Deed Review - Deed of Future Dealing / Alter Trust Deed ? ( to take in succession) see www.trustdeedregister.com

2) “The Business” Release of value in the business – how to pass on to family - “Buy/Sell” Agreements ;- Business Succession Agreement – “A Will for a

Business”

3) Superannuation Nominate LPR as beneficiary, Insurance(s) Nominate LPR as beneficiary

Case Study 3 – Simpler Case

FAMILY SITUATIONJack, 53 & Jill 49 - both still working4 children :

Mark 23 … single (Jacks child first marriage) Steve 21 … single, (Jacks child first marriage) Marina 20 … De Facto (Jills child 1st marriage ) Helena , Age 3 (Jack & Jills child 2nd Marriage)

Case Study 3 Jack & Jill - Assets

Home - Joint tenants

Investment property – Joint Tenant

SMSF (Self Managed Super’ Fund)

Shares SMSF

Jack & Jill (not over the Hill) (3)

• Possible ESTATE PLANNING WISHES & Concerns• Jack to Jill and vice versa in the first instance• Then equally to children• Specific protection required for Helena due to young age• Keep wealth in Family ;Wealth to be retained in the

family• Derive some tax efficiency

After Jack & Jill Die …. (3)

Some Strategies :1.Estate Assets Optional Testamentary

Trusts2.Home - Sever Joint tenancy3.Investment Prop - Sever Joint tenancy4.SMSF (Super Fund) - BDBN (Binding Death Benefit Nomination(s)

General Wills Strategies

Concern StrategyTax efficiency Trust structure

- income splitting properties - 102AG concessions for minorsExecutors discretions

Ability for younger beneficiaries to ‘fritter-away’ wealth

Qualifying Age – eg 25“Young Mens disease”(beware “young ladies disease” as well !)

Estate conflicts – Loans

Equalisation provisions

STRATEGIES – WILLS (cont)

Summary

No two strategies are the same No two Testamentary Trusts are the same Strategy must be consistent and coherent across estate

and non-estate assets Must be a collaborative approach –Advisers/Lawyers Don’t forget Enduring Powers of Attorney /Guardianship

Specialist strategy and intellectual property – no ‘one size fits all’

REGISTER WILLS /Store Register Trust/SMSF Trust Deeds

Thank You ! – Reminder – Optimal Process Any Questions ?

Contact Alex Tees, skype alexteesMobile 0409813622 Cairns 07 4031 7411Sydney 02 9281 3230 Email [email protected]@bigpond.com

Process ; www.assetandpropertyprotection.com.au

1) Get Facts Straight – List Assets/Property2) Compare Notes with Clients Accountant,

Financial Planner3) Interview to Confirm instructions4) Explanation/Signing Interview5) Optional Family Meeting ?

mailto:[email protected]