Firms work together to develop best practice approach to drafting security documents
Several leading law firms in Australia have worked together in the interest of their clients to develop a best practice industry approach to drafting security documents following the commencement of the Personal Property Securities Act 2009 (Cth) (PPSA). The firms involved are Allens, Ashurst, Herbert Smith Freehills, King & Wood Mallesons and Norton Rose.
The recently implemented PPSA established new rules for the creation, priority and enforcement of security interests in most assets other than land.
Since before the operational commencement of the PPSA on 30 January 2012, Australian businesses and their lawyers have been grappling with the legal and practical considerations of how the far-reaching legislation will affect their business.
Law firms rewrote their standard security documents in response to the extensive and radical changes introduced by the PPSA. In doing so, firms took different approaches to some essential elements of the General Security Agreements (GSA) resulting in extensive negotiations, confusion for clients and unnecessary expense.
In recognition that it is not in clients’ interests for firms to be negotiating their differing views on points of PPSA law during live transactions, the five law firms prepared a suggested standard for the core provisions of a GSA.
The PPSA model clauses are consensus positions that represent a distillation of the firms’ thinking on a range of important issues.
With a consensus approach, negotiations where there is no substantive advantage to be gained can be avoided and the focus can be firmly on delivering commercial solutions.
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Principals and contractors need to be aware that in not registering security interests under the PPSA 2009, they may risk serious consequences.
The New Companies Ordinance (NCO) will come into effect on 3 March 2014. It includes changes that affect the way documents may be executed.
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