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May 8, 2016

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Securing your Personal Property: PPSR heading to Fiji

Key Points

 

  • The Personal Property Securities Act 2017(“Act”) was passed in Fiji on 15 September 2017 and will become effective on a date to be published in the Fiji Government Gazette.. The Act has wide-reaching implications on its financial sector.

  • The Act creates the Personal Property Securities Registry (“PPSR”) which is a completely online portal to register your security interests in personal property.

  • Registration will give your security interests priority by the date of registration and will make them enforceable.

 

Introduction

 

The Personal Property Securities Act 2017 introduces the creation of a security interest in personal property to secure payment of a loan or some other obligation. The Act will further strengthen Fiji’s financial system, benefiting a wide spectrum of transactional arrangements:

 

  • For lenders: The Act allows banks and other finance institutions to take and perfect security interests over a much wider range of collateral, which allows lenders to better manage and reduce its risk.

  • For borrowers: The Act means that borrowers have the ability to use a much greater range of collateral to secure loans. This in term will mean greater access to credit, as well as much more favourable credit terms from lenders. Credit is more readily available in markets where secured transactions or personal property securities regimes are in place.

  • For purchasers of personal property: The Act allows companies and individuals to use the PPSR to check whether any personal property they are purchasing (such as a second-hand car) has an existing security interest over it.

  • For small businesses: Small businesses can use the PPSR to check the credit-worthiness of its customers.

 

Fiji is one of the last jurisdictions among its Pacific Island peers to introduce a secured transactions regime. The introduction of the Act is definitely long overdue, and will allow Fiji to keep up with international standards and enable the development of its finance sector.

 

The Act applies to all personal property, including equipment, inventory, livestock, investment property such as securities and motor vehicles. The Act does not apply to certain transactions including interests in real property, interests in wages or salaries, or the mortgage of a ship subject to registration under the Maritime Transport Act 2013.[1]

 

 

Personal Property Securities Registry

 

The Act creates the Personal Property Securities Registry (PPSR). The PPSR is fully electronic, and is used to receive, index, store and retrieve notices by electronic means delivered by secured parties and creditors.[2] Secured parties (such as lenders or other financiers who hold a security interest) will be able to register their interest on the PPSR, which will have the effect of ‘perfecting’ the security interest.

 

How is a security interest created and enforceable?

 

The Act allows a wide range of collateral to be used by debtors and those seeking access to credit as security for the lending of money by secured parties such as banks and other credit providers.

 

A security interest ‘attaches’ to collateral and becomes enforceable by a lender under the Act when the following conditions are met:

 

  • value is given by the secured party (i.e. the lender providing a loan to a borrower);

  • the borrower has rights granted in the collateral; and

  • one of the following occur: 

         -  ​the borrower signs a security agreement describing the collateral;

        -  the lender has possession of the collateral; or

        -  the collateral is the control of the lender.[2]

 

After a security interest is validly created through attachment to the collateral, the Act gives a secured party three methods of ‘perfecting’ its interest. A security interest may be ‘perfected’ by a secured party via the following methods:[3]

 

  • the registration of the interest on the PPSR;

  • taking possession of the collateral;

  • taking control of the collateral.

 

One of the best ways to perfect your security interest is through registering your security interest in the collateral on the PPSR. This enables a secured party to best demonstrate and determine priority between security interests in the same collateral.

 

The Act sets out general priority rules:

 

  • a perfected security interest has priority over an unperfected security interest;

  • priority between perfected security interests is determined by the order of whichever of the following occurs first in relation to a particular security interest:

         -  the registration of a notice on the PPSR;

        -  the secured party taking possession of the collateral;

        -  the temporary perfection of a security interest in accordance with the Act;

  • priority between unperfected security interests in the same collateral is to be determined by the order of attachment of the security interests.

 

It’s important to have a security interest perfected as soon as possible, as delay may mean that your interest will take a lesser priority over other interests. Timing is everything.

 

What you need to do?

 

The good news is that your current security interests will be protected under the Act if you correctly register your interests. You will need to review of all personal property where you have an interest and then prepare for registering the interest on the register. The Act allows secured parties to register a notice of a prior lien or transaction (i.e. a transitional notice) on the PPSR at any time; however, the Act imposes a 180-day deadline for these transitional notices to take priority over notices under the Act.[4] If you register your current security interests before the 180-day deadline, you will have priority over any interest created under the new Act. However, if you delay and the deadline passes, newer interests may have priority over yours. 

 

Losing priority may have a real effect on your ability to enforce a security interest as other parties may have first priority to enforce a security interest in that collateral.

 

Failure to register correctly

 

It’s important that when you go to register your interests that you do it correctly as it will be deemed an offence if a false filing is made with malicious or fraudulent intent.

 

Any person who attempts to conceal or otherwise alters collateral subject to a security interest with the intent to defraud or otherwise prevent a secured party of the ability to enforce its security interest is guilty of an offence liable upon conviction to a fine not exceeding $50,000 or imprisonment for a term not exceeding 10 years or both.

 

Moreover, failure to correctly identify the debtor or the secured party, including misspelling a name will be regarded as “seriously misleading” and may void the registration and your priority.

 

Next Steps?

 

The Act has now been passed by parliament and is expected to come into force soon. It is therefore essential that financiers and businesses that have existing security interests get ready to register these interests on the PPSR to ensure protection and priority.

 

The Pacific Legal Network advises clients across the Pacific on personal property securities legislation, including registering security interests.  For more information on how the Act will affect you and how to ensure that your interests are protected, please contact us.

 

Contact

 

For more information please contact:

 

 

Tomasi Tuitoga

Partner

T +679 327 5160

E tomasi.tuitoga@hanifftuitoga.com.fj

 

 

 

[1] Personal Property Securities Act s 9.

[2] Personal Property Securities Act s 69.

[3] Personal Property Securities Act 2017 ss 22-24.

[4] Personal Property Securities Act 2017 s 111.

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

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