A security interest is a form of security for a debt or obligation. In particular, the lender takes interest from the borrower’s personal property to secure a loan or obligation. Upon doing so, this property becomes collateral. This means that, if the borrower defaults, the lender is entitled to the property.
A security interest arises where there is an agreement between a lender and a secured party. If this is the case, registration must be made by virtue of the Personal Property Securities Act (Cth).
This article will explain how to register a security interest.
How to register a security interest
Registering a security interest is extremely important. Here is a brief breakdown of how to register:
1. Beginning the application
Firstly, you will need to provide the type of collateral involved. In this, you will need to distinguish the purpose of the asset. Specifically, whether the relevant asset is used for a commercial or consumer purpose.
Additionally, you will then need to provide the transitional status, and secured party group details. Here, if your security interest existed before 30 January 2012, then select ‘transitional’, and if not, select ‘not transitional’. Furthermore, the secured party group details are essentially the details of the entity that holds the interest. Follow the prompts on the registration website as it will direct you based on whether you have already set up a secured party group.
2. Collateral Information
Upon completing the initial step, further details about the collateral will need to be provided. Here, you must provide the following information:
- Collateral class
- Duration of registration
- Additional details – the nature of the collateral, other assets subject to control, whether the registration is subordinate etc.
- Notice identifier
- Earlier registration number
3. Grantor Details
The next step will require you to provide information about the entity providing you with security interest. If the grantor is an organisation, you will need to provide their:
- Organisation name
On the other hand, if the grantor is an individual, the following information must be provided:
- Information required by the Anti-Money Laundering and Counter-Terrorism financing Act 2006
- Current Australian driver’s license
- Australia proof of age card
- Australian passport
- Australian visa
- Passport from the country they normally live in
- Birth certificate
4. Review, Payment and Confirmation
Lastly, upon completing all the above steps, you will be able to review and pay for your application. Furthermore, it is also recommended that you inform all grantors that the interest has been registered.
Why register a security interest?
As previously stated, a security interest occurs when a lender acquires interest, or ownership, in a personal asset possessed by the borrower. With this, there are risks associated with not registering a security interest, particularly if the grantor becomes bankrupt. Specifically, you may risk losing that asset.
To Sum Up
It is important to secure all of your investments. As previously explained, registering a security interest is not necessarily difficult. With that being said, there can be implications if it is not registered.