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Registers of Security Interests
In the 1980s all States enacted legislation which set out to give good title to purchasers in good faith of goods over which a lender may have a security of which the purchaser had no notice. To prevent large scale frauds governments have established public registers of such securities which give notice to intending purchasers. Most of the securities covered to-date are over motor vehicles, and as indicated earlier, in excess of 50 percent of leasing and equipment finance volumes are motor-related.
Given that these registers of vehicle encumbrances are State-based and motor vehicles have a capacity to cross State borders, AELA members had a major interest in their practical operation. Much lobbying effort over the years therefore was invested in linking them and ensuring commonality of processes such that by 2008 they were almost virtually national.
The issue of security interests in equipment is further complicated by the variety of registration requirements as between Bills of Sale and ASIC Company Charges registers as well as by the Commonwealth registration system for inter-state trucks, changes to some States’ registration/proof of identity requirements and the national VIN system for new vehicles. For a number of years therefore, AELA has supported the reform and rationalisation of this complex legal area. Pleasingly this process is well advanced.
A number of overseas jurisdictions have introduced or are evaluating comprehensive regimes for the recording of financial interests in all non-real estate assets, covering for example debts, insurance, licenses and intellectual property. These are known at law as personal property securities (PPS). More particularly, in May 2002, New Zealand introduced a PPS regime leading to the Australian Standing Committee of Attorneys-General also undertaking such a review, following which the Council of Australian Governments committed to the introduction of the reform by May 2010. When introduced, the reforms would apply to all arrangements which are regarded in substance or which are deemed to be ‘security interests’ in personal property, and would include equipment leases, hire purchase and chattel mortgages.
As such, this development is relevant to equipment financiers across the full spectrum of their activities. A key element of PPS reform is that title (eg. under a lease or hire purchase) would have no bearing on priorities, rather what matters is whether there is an actual or deemed interest or whether and when that interest is registered. When implemented, these reforms will abolish many laws and merge registers dealing with company charges, bills of sale, vehicle, stock, etc into one register which determines priority between secured creditors, supported by one electronic registration procedure, ie. one law, one register and one process. AELA has been closely involved in this significant microeconomic reform.
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