OUTLINE OF A TYPICAL PPSA
SCHEME
Professor Hugh Beale
GENERAL COVERAGE
 Creation (aspects) and attachment
 Perfection
 registration, also possession, control of financial collateral
 Priority vs other SIs, other purchasers
 Rights and duties before default
 Remedies on default
 Private International law provisions
 Not only traditional securities
 Quasi-securities
 RoT devices
 Deemed SIs
 Outright sales of trade receivables
 Operating leases, commercial consignments
SCOPE OF APPLICATION
Any device with a security purpose,
created by any party
 company, sole trader/partners, consumer
Traditional securities
 Pledge, mortgage or charge, contractual lien
Fixed and floating charges not distinguished
 SI may authorise debtor to dispose of some or all
collateral
 Debtor has power to dispose of cash, inventory and
other items usually sold
QUASI-SECURITY
• Conditional sales, Hire-purchase
agreements, Finance leases
• Consignments (and sometimes other…)
• Retention of title clauses for inventory
– Priority and perfection rules apply
• PMSI super-priority
– On D’s default, treated as security only
• any surplus to D
• SP must resell in reasonable fashion
• No need to distinguish
• “single security interest”
REGISTRATION OF SIMILAR -LOOKING
TRANSACTIONS
• Operating leases, commercial
consignments (e.g. floor plans with
sale-or-return)
• “Deemed SIs”
• UCC: outside scheme - but if in
doubt file!
• Canada, NZ: Operating leases > 1
year, commercial consignments
– file or lose effectiveness and priority
– rights on D’s default not affected
OUTRIGHT SALES OF RECEIVABLES
Perfection and priority rules apply
Surplus rules do not
 Even if on recourse basis
 Financier may collect in full
“NOTICE FILING”
• SP (or agent) may file to perfect SI
• Filing before or after security
agreement
• Multiple transactions with same debtor
• Voluntary, but unfiled non-possessory
SI
– ineffective in debtor’s insolvency
– loss of priority against other SPs
– ineffective against buyers who don’t know
of SI
NOTICE FILING
• No submission of charge document
• Financing statement – Borrower’s (‘debtor’s) name and address
– Creditor’s (‘secured party’s’) name and
address
– brief details of property (‘collateral’)
• On-line registration
• On-line searching
METHODS OF PERFECTION
• Filing a financing statement
• Possession (by SP or 3rd person
holding for SP)
• Automatic perfection (i.e. when SI
attaches)
• Temporary perfection
– ‘Continuous perfection’ when method
changes
• Control (investment securities, bank
accounts)
PRIORITY VS SECURITY INTERESTS
• Date of filing (or perfection by
possession)
• SP with control has priority
• SP who provided finance to buy the
collateral has priority over previously
perfected SIs (PMSI ‘super-priority’)
– ‘purchase-money security interest’ (PMSI)
– whether supplies collateral or finances
purchase
– ‘cross-collateralisation’
– Provided registration and notice
PROCEEDS
SI normally attaches to proceeds
 With same priority
Proceeds
 Proceeds of sale
 Fruits
 Products (commingled goods, accessions, new
goods)
Thus RoT supplier’s PMSI priority continues
into new goods, proceeds
 But as against receivables financier, by date of registration
PRIORITY AGAINST BUYERS
• Unperfected (unfiled) SI ineffective
against buyer who doesn’t have actual
knowledge of it
• Perfected SI effective against buyer,
unless
– buys from D in ordinary course of D’s
business
– small value for private purposes
MOTOR VEHICLES
• File and search by VIN
• If FS omits VIN, SI ineffective against
buyer unless has actual knowledge of
SI
• If filed, SI effective against any buyer
except
– sales by dealer in ordinary course of
business, where B takes free of SI created
by the dealer [(but not by a previous
owner)]
NON-SERIAL NUMBER EQUIPMENT
Greater publicity
If search at each stage, existing SIs will
be revealed
Otherwise, check at each stage of
provenance
REMEDIES
• Scheme for distribution of surplus and
payment of deficit
• n/a ‘deemed’ SIs
• Remedies
• Some mandatory
• Surplus rules
• Notice of sale
• Good faith provision on manner of sale
REMEDIES
Collection of receivables by SP
Possession on default (anticipated?)
Disposal by sale in reasonable manner
Notice before sale unless ready market
Effect of disposition
Account of distribution
Retention (foreclosure)
Redemption