On 31 January 2014, the transitional period of protection for unregistered security interests will come to a close.
From midnight on 31 January 2014, those security interests which have existed as unregistered transitional security interests will cease to lose their priority and convert to unsecured interests.
What is a transitional security interest?
A transitional security interest is a security interest (an interest in goods or property) which existed before 30 January 2012 and continues to exist. For example, if someone leased a generator to their client before 30 January 2012 and the generator was still being leased today, this lease is a transitional security interest.
From 30 January 2012, transitional security interests were given a grace period of two years to ensure that they had time to become registered. During this period, they had special protection without being registered.
What does this mean for your clients?
Clients who have been relying on the transitional period to protect their security interests will no longer be covered. This could impact clients under the following circumstances:
- clients with long term retention of title arrangements
- clients who have entered into leases of equipment
- clients with related party loans
- clients with unsecured loans
- clients with long term leases of goods.
Clients who have relied on the transitional period as protecting their security interest should make immediate plans to convert these arrangements into formal documented and registered security interests before midnight on 31 January 2014.
What if my client doesn’t take action?
If your clients don’t take action to protect themselves and their security interests in the relevant period, they risk losing their priority to other creditors or liquidators. This may cause them significant loss. Their interest will effectively become an unregistered, unsecured interest at the bottom of the pecking order.
Castle is able to assist clients in formalising their security interest and registering same on the PPSR. Call today on 03 9898 6666 to discuss your clients’ requirements.