Farmers Get Protection
Hon Max Bradford
Minister for Enterprise and Commerce
October 17th, 1999
The Government has provided farmers with a way to avoid being classed as unsecured creditors in a freezing works collapse, Enterprise and Commerce Minister Max Bradford has announced.
The mechanism is contained in the Personal Property Securities Act, which was given its final reading in Parliament last week.
It will provide the farmer with protection in situations such as the collapses of the Weddel and Fortex works.
In those cases, unpaid farmers were classed as unsecured creditors, and did not recover the money they were owed, because secured creditors, such as banks and finance institutions, took priority.
The Personal Property Securities Act creates a "super priority" for "purchase money security interests". These are security interests in personal property that secure money loaned to enable the purchase of goods.
For instance where a bank lends money to enable a company to purchase new machinery, or where a farmer supplies stock to a freezing works and is paid later.
Under the Act, a farmer with a registered purchase money security interest will not only be a secured creditor, but will also have the benefit of the "super priority". This means they rank ahead of other secured creditors, such as banks.
Provided the creditor, (the bank and the farmer in the above examples), registers their purchase money security interest on the new register, they will have priority over other, prior registered security interests in the same goods, such as a bank who might have a debenture over all of a company's property.
This "super priority" will assist farmers to protect themselves against the potential collapse of agricultural processing companies.
To benefit from the "super priority", a farmer supplying stock to a freezing works on credit must negotiate a security interest with the processing company over the stock.
Then the farmer will be able to register the security interest and obtain priority against prior security interests in the assets of the freezing works, such as that of a bank.
Attached below: Earlier press statement on PPS Act.
Jeremy Kirk, Press Secretary, Max Bradford (04) 471-9836 or 025 424 565
October 10th, 1999
GREATER CERTAINTY FOR SECURITY INTERESTS IN PERSONAL PROPERTY
The passing of the Personal Property Securities Bill will provide greater certainty in personal property transactions, Enterprise and Commerce Minister Max Bradford says.
The Bill was given its final reading in Parliament on 6 October.
Mr Bradford said the legislation would clarify the law and reduce transaction costs associated with giving and taking security interests in personal property.
It will also make it easier and cheaper for those seeking to deal with personal property to check whether the property is subject to a prior security interest.
"The Bill will provide greater flexibility to the business community, by enabling more personal property to be safely borrowed against. This should increase access to credit for consumers and businesses," Mr Bradford said.
The Bill affects all security interests in personal property, such as cars, computers and boats, but doesn't apply to land. A security interest over these items secures the payment of money, or the performance of an obligation.
Some of the main features of the Bill are:
· uniform rules that apply to
every transaction that in substance secures payment or
performance of an obligation;
· the provision of ways for determining priority between competing security interests;
· default provisions for the enforcement of security interests in personal property other than consumer goods;
· the establishment of a centralised personal property securities register, based solely on the internet, which will make it easier and cheaper to find out about an existing security interest.
Jeremy Kirk, Press Secretary, Max Bradford (04) 471-9836 or 025 424 565
Frequently Asked Questions
Q: What is personal property?
A: Personal property is property other than land. This includes property such as motor vehicles, boats, computers, televisions and shares.
Q: What is a security interest?
A: A security interest is a right to use or sell personal property to recover money that has been loaned if it is not paid back. For example, if a person purchases a boat and a finance company lends that person the money to purchase the boat in return for payments being made to a particular timeframe and at a particular interest rate, the finance company has a security interest in the boat.
Q: What is wrong with the current law?
A: The current law is overly complex, inconsistent and inaccessible. At the moment there are many different pieces of law which deal with different types of personal property, different types of security interests, different types of debtor and different types of secured parties. Also, there is no integrated register of security interests in personal property which makes it time consuming and expensive to find out about an existing security interest.
Q: How does the Personal Property Securities Bill fix this?
A: The Bill provides a set of rules dealing with all security interests in personal property. These rules remove the arbitrary distinctions which exist in the current law and make it easier for people dealing with security interests in personal property to know what their rights are.
The Bill also establishes a single, wholly internet-based register of security interests in personal property. This register will provide a cheap and easy way to find out about an existing security. This register will be administered by the Ministry of Commerce.
As a result, the Bill reduces the risks associated with transactions involving personal property, and in particular, it reduces the risks to creditors lending on the security of personal property.
Q: How will this help the commercial world?
A: At the moment people seeking to buy personal property or lend money may not be able to find out about existing security interests. As a result a purchaser may seek a lower price, or the person loaning money may charge more interest, to take into account the risk that the property may not be able to be seized if the debtor defaults. The new register will enable people to easily, cheaply and effectively acquire knowledge of any registered security interest.
The Bill also sets out comprehensive rules for holders of security interests to know their rights as against other holders of security interests in the same property, and against consumers. This makes the law more accessible and certain and allows the business world to get on with business.
Q: How will this help consumers?
A: It is difficult for a consumer buying personal property to know whether they are getting clear title to the property. A person buying a car on the side of the road will not be able to tell whether the bank is owed money on it and may repossess it. Under the new Bill a consumer will be able to access the register of personal property securities on the Internet and find out quickly and cheaply whether the property they are about to purchase has a security interest over it.
The Bill also sets out rules for when a consumer automatically gets clear title, such as when they purchase a motor vehicle from a licensed motor vehicle dealer, or when they purchase goods of a value less than $2000 when the security interest was given.