Professor Hugh Beale OUTLINE OF A TYPICAL PPSA SCHEME

 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 GENERAL COVERAGE

 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 SCOPE OF APPLICATION

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” QUASI-SECURITY

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 REGISTRATION OF SIMILAR-LOOKING TRANSACTIONS

 Perfection and priority rules apply  Surplus rules do not  Even if on recourse basis  Financier may collect in full OUTRIGHT SALES OF RECEIVABLES

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 NOTICE FILING

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) METHODS OF PERFECTION

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 PRIORITY VS SECURITY INTERESTS

 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 PROCEEDS

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 PRIORITY AGAINST BUYERS

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)] MOTOR VEHICLES

 Greater publicity  If search at each stage, existing SIs will be revealed  Otherwise, check at each stage of provenance NON-SERIAL NUMBER EQUIPMENT

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 REMEDIES