Unperfected PPSA security interests in insolvency part I: The commercial significance and costs of the vesting provisions

Abstract

This is the first of two articles which critically examine the "vesting provisions" in relation to the Personal Property Securities Act 2009 (Cth) (PPSA). These are s 267 of the PPSA, which provides that a security interest "'vests in the grantor'" if it is unperfected at the time of one of several specified events indicating the grantor's insolvency, and s 588FL of the Corporations Act 2001 (Cth), which provides that a security interest "vests in the company" if it is perfected by registration and no other means, the grantor is a company, and the registration time is outside of one of several specified time periods. This article focuses on the commercial significance and costs of these provisions. Part II explores their operation. Part III explores their commercial significance by identifying when they lead to different outcomes than those which would have been generated anyway under other provisions of the PPSA. Part IV explores the costs of the provisions, including why they cannot be addressed through more discrete amendments to the PPSA. This raises the question of whether these provisions are necessary at all, which is explored in the second article.