AUSTRALIA Law and Practice Contributed by: John Schembri and Erin Cartledge, Gilbert + Tobin
The most common form of perfection is register- ing a financing statement on the PPSR in respect of the collateral. A registration may be made by filing a financing statement electronically on the PPSR and, once made, reflects instantaneously on the PPSR. A registration may be made at any time a person believes on reasonable grounds that the secured party described in the registra- tion is or will become a secured party in rela- tion to the collateral and, with some exceptions, must be made within 20 business days of the security agreement coming into force. Certain kinds of registrations (for example, registrations relating to security over inventory) need to be made in a shorter timeframe, such as within 15 business days or even on the same business day as the security interest is granted. Most registra- tions can be registered with no end date, and the registration will remain perfected over time. Registrations for certain asset classes (including motor vehicles) have limited durations and may need to be refreshed. A secured party may perfect security by way of control over certain classes of collateral, including ADI accounts, investment instruments (including shares), intermediated securities (including listed shares), letters of credit and negotiable instruments. For instance, in respect of certificated investment instruments generally (ie, certificated shares), perfection by control typically occurs when the secured party has physical possession of the share certificate and can transfer, or otherwise deal with, the securi- ties. A common method by which transferability is facilitated in Australia is through the execution of blank share transfer forms by the holder of such shares. This would typically be a completed and signed share transfer form with the section relat- ing to the transferee’s details left blank, allowing
the secured party to transfer to itself or another entity to enforce its security interest. Perfection by control is established once control is estab- lished, without any need to register that secu- rity interest, and perfection will be maintained for as long as the secured party maintains con- trol. While perfection by control affords the best possible priority against competing interests, secured parties will often also effect a registra- tion on the PPSR against the grantor in case control is inadvertently relinquished. A secured party may perfect by way of posses- sion. A secured party must have actual or appar- ent possession of the property and cannot have possession if the grantor has actual or apparent possession. The security interest is perfected once the secured party has possession, with- out any need to register that security interest, and perfection will be maintained for as long as the secured party has possession. As with per- fection by control, it is advisable for a secured party that intends to perfect by possession to also effect a registration on the PPSR against the grantor in case possession is inadvertently relinquished. The manner in which a security interest is per- fected over personal property will affect its prior- ity on enforcement. A security interest in person- al property that is perfected will take priority over any unperfected security interest. Where there are two perfected security interests, the security interest that is perfected earlier in time will, in most circumstances, take priority over the later- perfected security interest. A security interest that is perfected by control is the highest-ranking security interest and will rank ahead of a security interest perfected by any other means, including, for instance, a security interest that is perfected earlier in time by registration. A security inter- est over collateral that secured the obligations
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