The Personal Property Securities Act and resources joint ventures

By Michael Sheng and Lionel Meehan, Blake Dawson

The Personal Property Securities Act 2009 (PPSA) is one of the most
significant legislative reforms to affect the Australian finance and commercial sectors for many years.

The PPSA is scheduled to come into force in October. It will introduce a nationwide register for security interests in personal property in Australia.

Personal property is not merely property owned by individuals as the name suggests. The term “personal property” is used to distinguish the concept from “real property” (land). Personal property includes all property of both companies and individuals, except land and certain other limited exclusions.

Michael Sheng 盛冕, Blake Dawson Shanghai 博雷道盛上海代表处, Partner 合伙人
Michael Sheng
Blake Dawson

The PPSA will regulate how security interests in personal property are created, the priority of competing security interests in the same personal property, and how security interests in personal property will be treated upon insolvency.

Given the breadth of application of the PPSA, it will have a profound impact upon Australian mining and resources projects. It will be important for businesses participating or considering participating in Australian resources joint ventures and other projects to consider their practices and procedures in order to protect their security interests and investments.

There are four key considerations when assessing the application and impact of the PPSA in relation to any transaction. These are (i) what is personal property, (ii) what is a security interest, (iii) how are security interests perfected, and (iv) what is the priority of security interests. Each of these considerations is discussed in turn below by reference to the example of an Australian mining joint venture (JV) investment.

Personal property

Personal property is an extremely broad concept which refers to all property except land and certain other excluded rights. Examples of personal property include shares, bonds, derivative assets, licences, contractual rights, intellectual property, goods (including minerals), vehicles and many other rights and interests.

Mining rights and tenements (licences) are excluded in most Australian states from being personal property for PPSA purposes. However, yellow goods (for example, trucks, excavators and bulldozers), mining-related (removable) plant such as crushers, generators and portable housing equipment, and minerals (once extracted) are all personal property.

Security interests

Lionel Meehan, Senior Associate 高级律师, Blake Dawson 博雷道盛墨尔本办公室
Lionel Meehan
Senior Associate
Blake Dawson

Security interests are all transactions which grant an interest in personal property and which secure an obligation.

Common examples of transactions which will be regulated as security interests under the PPSA include mortgages, charges, pledges, many leases, sales by retention of title, consignments, transfers of accounts (book debts), many trusts which secure obligations, and any other transaction which grants an interest in personal property to secure obligations.

Mining-related JV agreements can include many security interests. For example, the following common features of JV agreements could be security interests:

cross-charges. These involve each JV party granting security to the other over their interests in the joint venture to secure their ongoing obligations and commitments to the JV;

“trust-for-sale” default mechanisms. Trusts-for-sale are often used in JVs as a mechanism to cure defaults by one JV party. If a party to the JV defaults on its obligations (e.g. does not contribute equity as required), then that defaulting party’s share of minerals is held by the JV operator on trust, sold, and the proceeds used to cure the default;

“farm-in” option entitlements. Farm-ins involve one JV party conducting exploration work or spending money on the JV project, in return for a percentage share in a mining tenement held by another JV party; and

leases of yellow goods and other mining plant and equipment.

Perfecting interests

Security interests must be perfected, otherwise they:

  • are likely to be void upon the administration or liquidation of the grantor (i.e. the person or company giving the security interest);
  • may lose to other perfected security interests in the same collateral (i.e. personal property in which the security interest is granted); and
  • may be extinguished upon transfers of collateral.

A security interest may be perfected by:

  • registration on the PPS Register;
  • taking possession of the collateral (if this is practical);
  • taking control of the collateral (control relates mainly to financial assets); and
  • relying on temporary perfection. Temporary perfection is extended to certain security interests to allow the secured party time to perfect.


The general rule is that the priority of competing security interests in the same collateral is determined by the time of perfection. The earlier the time of perfection, the higher the priority accorded to the security interest.

There are exceptions. For example, the PPSA provides for an important class of security interest called purchase money security interests (PMSIs). PMSIs are security interests granted over new assets acquired, to secure a loan or credit to fund the acquisition cost.

In the context of a mining JV, if the JV leases a truck for use in its mining operations, the truck lease is likely to be a PMSI.

PMSIs are significant because they defeat many (but not all) security interests which are perfected before them. For example, if a company grants an all-assets security interest which is registered on day one, and then acquires an item of equipment on lease (a PMSI) on day two, then the PMSI will win provided it is registered correctly.

Assessment crucial

It will be crucial for companies and investors to review and audit both existing documentation and transactions, and standard trade terms, to identify transactions which will be treated as security interests under the PPSA. All existing and new security interest transactions should be assessed for registration or other perfection without delay to ensure maximum protection. Unperfected or incorrectly perfected security interests may lose their priority and/or be void upon administration or liquidation of the grantor.

Michael Sheng is a partner in the Shanghai office, and Lionel Meehan is a senior associate in the Melbourne office, of Blake Dawson

Blake Dawson Shanghai office

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