Are you PPSR prepared?
The Personal Property Securities Act 2017(“Act”), which was passed in Fiji on 15 September 2017, will come into force in Fiji on 31 May 2019, with the Personal Property Securities Register (“Registry”) going “live” at the same time.
The Act indicates significant reform for Fiji’s financial system by allowing a much wider range of moveable property to be pledged as collateral than was previously accepted by lenders, and creating a standardised set of rules governing conflicting security interests in movable property.
In this way, it will facilitate far greater access to credit for individuals and businesses alike, which will, in turn, encourage increased private sector growth in Fiji.
In this article we explain the impact of the Act and what you need to do to ensure that you are PPS prepared.
Impact of the PPS in Fiji
The Personal Property Securities Register (“Registry”) will go “live” on 31 May 2019. The Registry is a vital component to the reform underpinning the Act.
Historically, in the absence of PPS legislation, banks and other lenders were reluctant to accept moveable or personal property as collateral, preferring real property to secure lending. This position has resulted in a systemic lack of access to credit for many individuals and SMEs who may have been deemed too risky to provide finance to without real property or other acceptable collateral, but who may not have significant land holdings, or hold valuable (but not otherwise “acceptable”) moveable property.
The Act provides a single, national regime to regulate security interests in personal property, introducing the concept of the creation of a registrable security interest in personal or moveable property to secure payment of a loan (or some other obligation). It modernises and simplifies existing laws regarding the taking of security interests in personal property as collateral, creating a standardised set of rules to determine the priority of competing security interests in moveable property. The Act also establishes a register of security interests, enabling secured parties to give notice of their security interests to third parties.
In a traditional lending context, the Act allows borrowers the opportunity to offer to lenders far greater types of movable property as collateral (including, for example, motor vehicles, equipment, inventory, crop and livestock, accounts receivable and shares). The protection of registration and enforcement of security interests afforded under the Act will help to mitigate the risks associated with taking collateral over these different types of assets, resulting in a much greater willingness by lenders to extend credit to those offering this wider array of collateral. Lenders can also easily determine their priority position in relation to a particular borrower.
The Act applies to every transaction that, in substance, gives rise to a security interest, without regard to form. In this way, the Act affects a wide variety of other commercial transactions (not just lending transactions) and so may have significant implications for your business (including across ICT operations amongst others!) For example, if you are in the business of leasing equipment, inventory, or vehicles, the commercial consignment of goods, or hire-purchase arrangements (to name a few) the transactions underpinning your business operations may give rise to a registrable security interest, and the Act may apply.
What steps do you need to take to prepare for the PPS?
Register will be going live on 31 May 2019.
The Registry will provide its users with a free, 24/7 online service, eliminating the need for any paper-based filings. The Registry enables a secured party to best demonstrate and determine priority between security interests in the same collateral; under the Act, the first secured party who files a notice on the Registry will have priority over the rights in that collateral against third parties.
The Registry is being completed by the same registry software vendor as for PNG, Solomon Islands, Tonga and Vanuatu (amongst others) so it should be familiar to users who operate in these markets.
Lenders must migrate their existing security interests onto the Registry within 180 days from the go-live date. If you register your current security interests on the Register on or before 26 November 2019, you will have priority over any subsequent interest created under the new Act. However, if you delay and the deadline passes, newer interests may have priority over yours.
The Reserve Bank of Fiji is currently working with Fiji’s largest lenders to migrate their existing security interests. As we have outlined, the Act affects not just traditional lenders, but a wide spectrum of different businesses and commercial transactions; we have seen businesses left in an unprotected position as an unsecured creditor simply because they were not aware that their commercial arrangements had given rise to a registrable security interest. It is therefore vital that you consider your commercial arrangements to identify whether a security interest is created and should be registered.
The Pacific Legal Network has advised extensively on PPS legislation across the Pacific Islands region.
review your loan and security documents to ensure compliance with the Act;
review your customer terms and conditions to identify whether a security interest is created;
amend your commercial arrangements to include PPS provisions; and
ensure your security interests are perfected.
For more information please contact:
T +679 327 5160
T +61 412 951 187