Personal Property Securities (Priority of Statutory Interests) Instrument 2011

Administered by Department of the Treasury

Legislation au F2011L02722 In force Legislative Instrument

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EXPLANATORY STATEMENT

Personal Property Securities (Priority of Statutory Interests) Instrument 2011

Summary

The Personal Property Securities (Priority of Statutory Interests) Instrument 2011 (the Instrument) is made under subsection 73 (4) of the Personal Property Securities Act 2009 (the PPS Act) by the Attorney-General.  The Instrument declares that certain statutory interests created, arising or provided for under the Corporations Act 2001 and Bankruptcy Act 1966 are of a kind to which subsection 73 (2) applies.  The effect of the Instrument is that those Acts will determine the relative priority between statutory interests provided for by those Acts and security interests under the PPS Act.

Background

Generally, the PPS Act’s detailed provisions governing the priority of competing interests in the same collateral only pertain to security interests within the meaning of section 12.  The PPS Act specifically does not apply to a number of interests; in particular, it excludes a lien or charge that is created, arises or is provided for under a law of the Commonwealth, unless the person who owns the property in which the interest is granted agrees to the interest (paragraph 8 (1)(b)).  However, the table in subsection 8 (2) of the PPS Act provides that certain provisions of the PPS Act are applicable to otherwise excepted interests.  Relevantly, item 1 provides that section 73 applies to a lien or charge described in paragraph 8 (1)(b).

Under subsection 73 (2), a Commonwealth, a State or a Territory law may determine the priority between a statutory interest arising under that law and a security interest in the same collateral.  However, the relevant law must declare that subsection 73 (2) applies.  In the absence of such a declaration the Minister may by legislative instrument declare that subsection 73 (2) applies to statutory interests of a kind to which that subsection refers (subsection 73 (4)).

A key intention of PPS reform was to maintain existing rights in the absence of sound policy reasons to alter them.  To this end, this Instrument is intended to maintain the priorities that existed under the Corporations Act and Bankruptcy Act in relation to an administrator’s lien and a controlling trustee’s lien provided for, respectively, under those Acts.  

Notes on Sections
Section 1 – Name of Determination

Section 1 provides for the citation of the Determination as the Personal Property Securities (Priority of Statutory Interests) Instrument 2011.

Section 2 – Commencement

The Instrument commences on 30 January 2012.

Section 3 – Interpretation

This section provides that the definition of Act is the Personal Property Securities Act 2009.

Section 4 – Priority between security interests and declared statutory interests

The Corporations Act, as amended by the Personal Property Securities (Corporations and Other Amendments) Act 2010 (the PPS (CoA) Act), provides that an administrator’s right of indemnity under section 443D has priority over certain debts of the company secured by a circulating security interest in property of the company (section 443E). 

Subsection 443F (1) of the Corporations Act provides that the administrator’s indemnity is secured by a lien over the company’s property.  Under that Act the lien has priority over a security interest to the extent that the right of indemnity has priority over debts secured by the security interest (subsection 443F (2)).

As the lien is created by a Commonwealth law it is generally excluded from the application of the PPS Act (paragraph 8 (1)(b)); however, it is a statutory interest for the purposes of subsection 73(2). Paragraph 4(a) of the Instrument provides that subsection 73 (2) applies to a lien that arises under subsection 443F (1) of the Corporations Act.  The effect of this declaration is that priority between a security interest and a lien under section 443F in the same property is to be determined by the Corporations Act.

Similarly, the effect of paragraph 4(b) is that it provides that the Bankruptcy Act will be the law that determines the priority of the statutory interest, the controlling trustee’s lien created by section 189AC of that Act, and a security interest in the same property.

Consultation

Consultation in regard to PPS reform has been extensive with the Department working closely with key stakeholders including banks, equipment financiers and information brokers.  In the explanatory memorandum to the PPS (CoA) Act, the Department indicated that an Instrument of this kind would be made rather than by including a declaration in the relevant Act.  As the Instrument is designed to maintain certain aspects of the existing law, insolvency practitioners have indicated their support.   

Regulatory Impact Analysis

The Office of Best Practice Regulation has previously advised that the personal property securities reforms do not require a Regulatory Impact Statement because the reforms do not involve compulsion and it will be a commercial decision whether businesses register. It is not designed to impose any additional compliance costs on business or individuals or have any adverse impacts on competition.

Overview

The Personal Property Securities (Priority of Statutory Interests) Instrument 2011, enacted under the authority of the Attorney-General, aims to address a specific gap in the Personal Property Securities Act 2009 (PPS Act) by determining the priority of certain statutory interests. This legislative instrument was introduced to maintain the existing priority rules as stipulated by the Corporations Act 2001 and the Bankruptcy Act 1966, ensuring that these Acts, rather than the PPS Act, govern the priority between statutory interests and security interests in the same collateral. The Instrument is designed to align with the overarching policy objective of the PPS reform, which seeks to maintain existing rights and priorities unless there is a compelling reason to alter them. The Instrument declares that the Corporations Act and the Bankruptcy Act will determine the priority between statutory interests, such as an administrator’s lien and a controlling trustee’s lien, and security interests under the PPS Act. By doing so, it preserves the pre-existing legal framework and avoids any potential conflict or uncertainty in the priority of interests. This approach has been supported by insolvency practitioners and key stakeholders, including banks and equipment financiers, who were extensively consulted during the reform process.

Scope and Application

The Personal Property Securities (Priority of Statutory Interests) Instrument 2011 applies to statutory interests created or provided for under the Corporations Act 2001 and the Bankruptcy Act 1966. Specifically, it addresses the priority between these statutory interests and security interests governed by the Personal Property Securities Act 2009 (PPS Act). The Instrument is made under the authority of the Attorney-General and it aims to maintain the existing priorities as they were under the Corporations Act and the Bankruptcy Act, concerning an administrator's lien and a controlling trustee's lien, respectively. This Instrument ensures that the priority between statutory interests and security interests in the same collateral is determined by the Corporations Act or the Bankruptcy Act, as applicable. The Instrument applies nationally and commences on 30 January 2012. It is worth noting that this Instrument extends the application of the PPS Act by declaring that subsection 73(2) of the PPS Act applies to the specified statutory interests, thus allowing these Acts to determine the relative priority between such interests and security interests under the PPS Act.

Key Provisions

The Personal Property Securities (Priority of Statutory Interests) Instrument 2011 (the Instrument) is designed to clarify the priority of certain statutory interests over security interests under the Personal Property Securities Act 2009 (PPS Act). Section 4 of the Instrument is particularly significant as it declares that subsection 73(2) of the PPS Act applies to specific statutory interests, thereby allowing the Corporations Act 2001 and the Bankruptcy Act 1966 to determine the relative priority between these statutory interests and security interests under the PPS Act (paragraphs 4(a) and 4(b)). This means that, for example, an administrator's lien under the Corporations Act will have priority over a security interest in the same collateral if the Corporations Act so dictates. Entities and parties governed by this Instrument are subject to certain obligations and requirements. Firstly, they must understand and comply with the provisions of the Corporations Act and the Bankruptcy Act when determining the priority of interests in cases involving statutory liens such as an administrator’s lien or a controlling trustee’s lien. This includes ensuring that any agreements or registrations are made in accordance with the specific statutory provisions outlined in these Acts. Additionally, any security interests registered under the PPS Act must be aware of and respect the priority rules as determined by the relevant statutory law. The Instrument also outlines consequences for non-compliance with its provisions. While specific offences and penalties are not detailed in the explanatory statement, breaches of the priority rules established by the Corporations Act and the Bankruptcy Act could result in legal disputes and potential penalties under those Acts. For instance, if an entity incorrectly registers a security interest in a manner that disregards the priority of a statutory lien, they could face legal action from the lien holder or the trustee, potentially leading to financial penalties or other legal remedies. It is crucial for all parties to adhere to the priority rules to avoid such adverse outcomes.

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Commercial Law
Property Law
Instrument
Legislative Instrument
Concepts
Definitions & Interpretation
Priority between security interests and declared statutory interests
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Sourced from the Federal Register of Legislation at 26 August 2026. For the latest information on Australian Government law please go to https://www.legislation.gov.au.