With the introduction of the Personal Properties Securities Register, there is now a streamlined process where a party is able to register a security interest over personal property.

However, while the PPSR has made it easier to register security interests and is significantly cheaper, it does not prevent the registration of an invalid security interest.

Recently, ERA Legal acted on behalf of the liquidator of a company where a number of registered security interests did not secure any actual obligation.

Under the old system, a liquidator would need to approach the court for relief in such circumstances. However, with the enactment of the PPSA, there is an administrative mechanism built into the Act to enable the removal of an invalid security interest without the need for an approach to the court and its associated costs.

The steps that need to be taken in order to remove a security interest are as follows:

1. an Amendment Demand is issued by the party seeking the removal of the interest to the party with the registered interest;
2. an Amendment Statement is to be provided to the PPS Registrar by the party seeking the removal of the interest;
3. the PPS Registrar will issue an Amendment Notice to the secured party and assess any response received; and
4. the PPS Registrar will make a decision on whether to remove the security interest.

Amendment Demand

An Amendment Demand is a written demand sent by the grantor to the secured party requiring the secured party to amend or remove the registration. The Amendment Demand must:

• demand an “authorised amendment” pursuant to section 178 of the PPS Act, being:
  • an amendment to end effective registration (including an amendment to remove the registration), because no collateral described in the registration secures any obligation (including a payment) owed by a debtor to the secured party; or
  •  an amendment to omit the collateral, because particular collateral in which the person has an interest does not secure any obligation (including a payment) owed by a debtor to the secured party.
• give the secured party at least 5 business days in order to register a financing change statement with PPSR to amend the registration;
• clearly identify the PPSR registration number;
• clearly identify the person who is making the demand; and
• provide any evidence as to why the amendment should be made.

Amendment Statement

If the time period in the Amendment Demand has expired, no application has been made to register a financing change statement and there are no proceedings in Court in relation to the Amendment Demand, the issuing party can then provide an Amendment Statement to the PPS Registrar, requesting the PPS Registrar make the amendment. The Amendment Statement is a prescribed form and is available on the PPSR website. The Amendment Statement should include a copy of the Amendment Demand and any supporting documents.

Amendment Notice

Once the PPS Registrar has received the Amendment Statement, if the document is complete and not defective, the PPS Registrar will issue an Amendment Notice to the secured party which will:

1. state the amendment demanded;
2. invite the secured party to respond before the end of a set period (at least five business days);
3. inform the secured party that the Registrar must register a financing change statement amending the registration in accordance with the amendment demand unless the Registrar suspects on that the amendment is not authorised under the PPSA; and
4. provide details of any other matter that the Registrar considers relevant.

The length of time provided by the Registrar is not a set time but is at the discretion of the Registrar. In our recent experience, the Registrar allowed the secured party ten business days to respond.

Registrar’s decision

Once the time has expired for the secured party to respond or to register a financing change statement, the Registrar will provide a written decision. In our case, the Registrar was satisfied with the information we provided, and removed the registration entirely.

Advantages of the administrative process

The administrative process to remove a security interest is a cheaper process than making an application to the court, and it does not entail the risk of an adverse costs order. In our case, it enabled the liquidator to access funds, pay the costs of the winding up, and make a distribution to creditors with minimum fuss.

Although the process will generally be cheaper and quicker than court proceedings, it is not without complexity, and the statutory process must be strictly complied with in order to achieve the desired outcome. In the event you wish to apply to remove a disputed PPS registration, it will be to your advantage to enlist the assistance of professionals with specific experience and direct lines of communication to the relevant Registry personnel. ERA Legal have the contacts and experience to get the job done quickly and efficiently. Please do not hesitate to contact us with any enquiries in this field.