Overview of the Whittaker review and Government's response
On 22 September 2023, the Australian Government responded to the 2015 statutory review into the Personal Property Securities Act 2009 (Cth) (Whittaker Review). As part of that response, the Government has released an exposure draft of the Personal Property Securities Amendment (Framework Reform) Bill 2023 for public consultation. The consultation closes on 17 November 2023.
The Government's response comes just under one year since the commencement of the Parliamentary Joint Committee on Corporations and Financial Services inquiry into corporate insolvency in Australia. The Committee's final report was presented to the Senate and House of Representatives earlier this year and made 28 recommendations. The first of those recommendations was a comprehensive and independent review of Australia’s insolvency law, encompassing corporate and personal insolvency. View MinterEllison's alert on the Committee's report.
The reform bill is a clear response to the Committee's 26th recommendation. That recommendation is for the Government to, without further delay, adopt the recommendation of the Whittaker Review where the benefits outweigh the costs.
Key recommendations
The Government's acceptance of 345 of the 394 Whittaker recommendations is welcome.
Highlights include acceptance of the recommendations in relation to:
- removing the requirement that a registration to perfect a security interest over trust assets be made against the relevant trust's ABN;
- removing bailments from the definition of a PPS Lease;
- extending the definition of an ADI account to accounts with foreign banks and RBA accounts;
- removing the requirement for a financing statement in respect of PMSI to tick the PMSI box; and
- exempting a PPS Lease from the vesting provision in s 267 unless the PPS Lease is also an "in substance" security interest.
One of the Whittaker Review's recommendations that the Government has not accepted is repealing sections 588FL and 588FM of the Corporations Act 2001 (Cth). Section 588FL imposes a requirement that security interests granted by a company be perfected within 20 business days of coming into force. If registered out of time and the company enters into external administration within six months, then the security interest vests in the grantor. Section 588FM empowers the Court to make orders to extend the time for registration of interests in limited circumstances.
The Whittaker Review proposed s 588FL be repealed, arguing that, amongst other things, the need for s 588FL had been overtaken by the vesting provision in s 267 of the PPSA. Whittaker also suggested a fallback position if the primary recommendation as to repeal was not accepted.
The Government has rejected the repeal recommendation because s 588FL is said to serve an important purpose of discouraging and protecting against fraudulent registrations made prior to a company's insolvency. The consultation will no doubt test whether this justification has support.
Next steps
For our part, there seems to be much force in the Whittaker Review's recommendation on repealing s 588FL, noting that the Government is open to further consultation on Whittaker's alternative recommendations. Perhaps, the repeal of long-standing insolvency provisions such as s 588FL should be left to a future independent insolvency commission as recommended by the Committee.
Overall, the framework reform bill is an important and positive law reform development that will progress and simplify a complex area of law. Those interacting with the PPSA regularly, especially those in the finance industry, will need to pay particular attention to the finer details of the reforms as they are finalised and progress into law. In due course, staff training and policy and procedures will require updating. In the short term, those interested stakeholders should consider making submissions on the exposure draft bill.
Contact our team to discuss how this important law reform development may impact you and your business or visit Restructuring and business distress solutions for more information.