AUSTRALIA Law and Practice Contributed by: Alastair Gourlay, Lewis Grimm, Joanne Dwyer and Kathryn Sutherland-Smith, Jones Day
Retention of Title In Australia, retention of title clauses in the sup - ply or leasing of goods are recognised and may constitute security interests for the purposes of the PPSA. These clauses usually specify that, while possession passes to the purchaser, legal title (and the risk of loss or damage) does not pass until the full purchase price has been paid. To be enforceable, the security interest should be recorded into a written and signed agreement and subsequently perfected. Suppliers will typically have a security interest in goods if they are in the business of leasing goods and minimum term or period requirements are satisfied, or if the clause in substance secures payment. Suppliers should register these inter - ests such that they have priority and are enforce - able upon the purchasers’ insolvency, particu - larly where the security interest constitutes a “purchase money security interest” (PMSI) (see 5.8 Priming Liens and/or Claims ). Anti-Assignment Provisions Anti-assignment clauses are common, valid at common law, and recognised in Australia, with their legal effect dependent on their drafting. Where a purported assignment is in contraven - tion of an anti-assignment clause, it would con - stitute a breach and invalidate the assignment. 5.6 Release of Typical Forms of Security Once obligations under a financing arrangement have been fulfilled, a discharge/release of secu - rity over collateral should be effected. Where security over collateral (other than real property) has been created pursuant to a security agree - ment, the security is released by: • a deed of release between the grantor and the secured party, releasing the collateral secured; or
ties. A person is “involved” if they aided, abet - ted, counselled, procured or induced, or have in any way been knowingly concerned in, the contravention. Therefore, a contravention could potentially expose directors or lenders to civil penalties or compensation orders. 5.5 Other Restrictions Shareholder Approval Shareholder approval is not a strict require - ment in respect of granting security/guarantees unless the provision would constitute the giving of financial assistance (see 5.4 Restrictions on the Target . Hardening Periods It is possible for certain transactions (including the granting of security/guarantees) to be chal - lenged as “voidable transactions” and unwound (pursuant to court orders obtained by a liquida - tor) if made during a “hardening period” prior to the appointment of an external administrator. These can include: • uncommercial transactions transactions entered into by a company when insolvent or as a result, becomes insolvent, and where a reasonable person would not have entered into the same; the hardening periods where the transaction involves a related party is four years, whereas a transaction which does not involve a related party is two years; and • unfair preferences transactions which result in an unsecured creditor receiving more for its unsecured debt than it would have in a winding up; the hardening periods where the transaction involves a related party is four years, whereas a transaction which does not involve a related party is six months.
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