- A security interest under the PPSA only attaches to property the grantor actually owns at the time of attachment. Future property is not captured until the debtor acquires rights in it.
- A general security agreement (GSA) covering “all present and after-acquired property” (ALLPAP) is the standard mechanism for capturing future assets in Australia.
- Narrowly drafted security deeds that list only specific existing assets create a gap: newly acquired property falls outside the charge entirely.
- An unperfected security interest automatically vests in an administrator, liquidator, or trustee in bankruptcy on the debtor’s insolvency under sections 267 and 268 of the PPSA.
- Queensland courts have recently scrutinised security deeds that fail to adequately capture future property, with significant consequences for creditors who believed their security was comprehensive.
A security interest that does not capture future property is a security interest that may be worthless by the time you need it. Under the Personal Property Securities Act 2009 (Cth) (PPSA), secured creditors face a dangerous trap: a security agreement that is perfectly valid when signed can silently fail to cover the debtor’s most valuable assets if those assets did not exist at the time the agreement was executed. Queensland courts have recently examined how security deeds handle future property, and the consequences for creditors with inadequately drafted agreements are severe.
What Is “Future Property” Under the PPSA?
Under the PPSA, “future property” means property that the grantor does not yet own or have rights in at the time the security agreement is entered into. Common examples include:
- Inventory that has not yet been manufactured or purchased
- Receivables arising from contracts signed after the security agreement
- Plant and equipment acquired after the security agreement is executed
- Intellectual property developed post-agreement
- Cash received from trading activities after the security agreement commences
The PPSA draws a critical distinction between present property and future property because a security interest can only attach to collateral once the grantor has rights in that collateral. Section 19(2) of the PPSA sets out the attachment requirements: the secured party must have given value, the grantor must have rights in the collateral or the power to transfer rights, and the security agreement must cover the collateral.
For future property, the grantor has no rights until they acquire the asset. This means attachment cannot occur until that acquisition. A security agreement that is not drafted to anticipate this process will leave significant gaps in the creditor’s security.
The All Present and After-Acquired Property (ALLPAP) Solution
The standard solution in Australian commercial lending is the general security agreement (GSA) covering “all present and after-acquired property” (ALLPAP). A properly drafted ALLPAP clause captures both property the grantor currently owns and any property the grantor acquires in the future, as attachment occurs automatically when the grantor obtains rights in each new asset.
An ALLPAP security interest registered on the Personal Property Securities Register (PPSR) creates a floating charge over the entire undertaking of the debtor business. When the debtor acquires new inventory, new equipment, or new receivables, those assets automatically fall within the security interest without any further documentation.
The practical importance of this is significant. A manufacturing business may have relatively modest assets at any given time but substantial work in progress and future receivables. A creditor whose security only covers assets at the time of execution may find they have security over almost nothing by the time the debtor collapses, while a creditor with an ALLPAP charge has security over the entire debtor estate.
Where Security Deeds Fail: The Future Property Gap
Not all security agreements are created equal. The future property gap arises in several common scenarios:
Narrowly Defined Collateral
Some security deeds define the collateral by reference to specific assets: “the equipment listed in Schedule A,” “the stock held at [address],” or “the motor vehicles registered to the company.” These descriptions capture only what exists at execution. Any asset acquired after that date is outside the security interest.
Outdated Deed Templates
Security agreements executed before the PPSA commenced in 2012 were drafted under the old Corporations Act fixed and floating charge regime. While many of these were transitioned under the PPSA, some organisations continue to use template deeds that do not contain language adequate to capture future assets under the PPSA framework. The terminology that worked under the old regime does not always translate directly.
Purchase Money Security Interest (PMSI) Registration Failures
A purchase money security interest arises when a creditor finances the purchase of specific goods (for example, a supplier who retains title until payment or a financier who lends for the purchase of equipment). A PMSI has a super-priority over other secured creditors, but only if it is registered on the PPSR within the prescribed timeframes: within 20 business days of the grantor taking possession of inventory goods (section 62(2)(a)) and before the grantor takes possession for non-inventory goods. Failure to register within these windows destroys the super-priority and leaves the PMSI holder as an ordinary secured creditor who may rank behind an ALLPAP holder.
Proceeds Gaps
Even a properly drafted ALLPAP security interest can encounter gaps in relation to proceeds. Section 32 of the PPSA provides that a security interest in collateral automatically extends to identifiable proceeds of that collateral. However, if proceeds become mixed with other assets or are converted to a form that is not identifiable, the proceeds security interest may be lost. This is particularly significant with receivables that are collected and deposited into an account that is also used for general business purposes.
Vesting on Insolvency: The Consequences of an Unperfected Security Interest
The consequences of a deficient security interest are most sharply felt when the debtor becomes insolvent. Sections 267 and 268 of the PPSA provide that unperfected security interests vest in an administrator, liquidator, or trustee in bankruptcy on the critical time.
The “critical time” is defined differently depending on the type of insolvency:
- For voluntary administration: when the administration begins (section 513C of the Corporations Act 2001 (Cth))
- For winding up by court order: when the application is filed
- For creditors voluntary liquidation: when the resolution to wind up is passed
- For bankruptcy: when the sequestration order is made or the debtor’s petition is filed
Vesting means the security interest is extinguished and the assets fall into the general pool available to unsecured creditors. A creditor who believed they held security over $500,000 worth of equipment may discover, after the debtor enters administration, that their security agreement had a future property gap that left half that equipment unencumbered.
What Queensland Courts Are Examining
Queensland courts have been examining with increasing frequency the adequacy of security deeds presented by creditors in insolvency proceedings. Administrators and liquidators have become more sophisticated in challenging security arrangements, scrutinising not just registration but the underlying security agreement to identify whether it actually captures the assets the creditor believes are subject to the charge.
Common challenges include:
- Whether the collateral description is sufficiently broad to capture the assets in dispute
- Whether attachment occurred before the critical insolvency time
- Whether the PPSR registration accurately described the collateral and the grantor
- Whether a purported PMSI satisfies the requirements for super-priority
Creditors who are unprepared for this scrutiny may find that security they have held for years is challenged at precisely the moment they most need it.
Practical Steps for Secured Creditors
If you hold a security interest over a debtor’s personal property, the following steps will help you identify and address any future property gap:
- Review the collateral description in your security agreement. Does it use ALLPAP language (“all present and after-acquired property”) or does it list specific assets? If it lists specific assets, you likely have a future property gap.
- Check your PPSR registration. Search the PPSR for your registration and confirm it accurately identifies the grantor (by ACN or ABN for companies, not just by name), the secured party, and the collateral class. A registration that does not accurately identify the grantor may be ineffective.
- Verify your PMSI timing if applicable. If you supplied goods on retention of title or financed the purchase of specific equipment, confirm your PPSI was registered within the prescribed timeframe. A late registration destroys super-priority.
- Review your security agreement for proceeds language. Confirm that proceeds of the collateral are captured and that your agreement addresses the risk of proceeds being mixed with other assets.
- Consider a refreshed security agreement. If your existing deed is outdated or narrowly drafted, consult a commercial lawyer about executing a new agreement that properly captures present and future assets under the PPSA framework.
- Act before insolvency. Once a debtor is in administration or liquidation, your ability to enforce or perfect a security interest is severely restricted. The PPSA and Corporations Act impose a moratorium on enforcement against company property once administration begins (section 440B of the Corporations Act). Audit your security now, not when you receive a notice from an administrator.
Frequently Asked Questions
Does registering on the PPSR automatically mean my security interest covers future property?
No. Registration on the PPSR perfects a security interest that has already attached, but it does not expand what the security agreement covers. If your security agreement does not include future property in the collateral description, registration alone will not capture assets acquired after the agreement was signed. The security agreement governs what is secured; the PPSR registration protects your priority against third parties for what the agreement covers.
What is the difference between a fixed charge and a floating charge under the PPSA?
Under the PPSA, the relevant concept is not “fixed” or “floating” as those terms were used under the old Corporations Act regime. Instead, the PPSA distinguishes between security interests in specific described collateral and security interests in “all present and after-acquired property.” A security interest over a specific asset (such as a particular machine) is closer in nature to a fixed charge; an ALLPAP security interest functions similarly to a floating charge in that it attaches to assets as they are acquired. For security interests that were fixed and floating charges before the PPSA commenced, transitional provisions apply, but these are complex and the adequacy of the security agreement still needs to be reviewed.
Can I perfect a security interest after the debtor has already entered administration?
In most circumstances, no. The vesting provisions in sections 267 and 268 of the PPSA operate at the critical time (when administration, liquidation, or bankruptcy commences). After that point, the security interest has already vested in the insolvency appointee. Additionally, section 440D of the Corporations Act imposes a moratorium on enforcement against company property during voluntary administration, which effectively prevents any action to enforce or vary a security interest over company property without the administrator’s consent or court leave.
What happens if the PPSR registration contains an error in the grantor’s details?
A PPSR registration that contains a seriously misleading error in the grantor’s identifier (such as an incorrect ACN or ABN) may be ineffective, meaning the security interest is treated as unperfected. Under section 164 of the PPSA, a registration is ineffective if a defect in the registration seriously misleads a person searching the PPSR. Correct identification of the grantor by ACN or ABN (not just by company name) is critical, as company names can change or be shared by related entities.
We are a trade supplier who has a retention of title clause. Are we protected under the PPSA?
A retention of title clause (also called a Romalpa clause) constitutes a purchase money security interest under the PPSA. To take priority over other secured creditors for inventory goods, you must register the PMSI on the PPSR before or within 20 business days of the grantor taking possession of the goods. If you have not registered, your retention of title clause may be enforceable as between you and the buyer but will not give you priority over an existing ALLPAP secured creditor (such as the debtor’s bank) in an insolvency. Many trade suppliers have discovered this to their significant detriment since the PPSA commenced in 2012.
If your business holds security interests over debtors’ property and you have questions about whether your security agreements adequately capture future assets, our experienced insolvency lawyers in Brisbane can review your security arrangements and advise on any gaps before they become a problem. Our debt recovery lawyers in Brisbane also advise creditors on enforcement strategy when a debtor enters financial difficulty. Contact Boss Lawyers on 1300 267 711 to discuss your situation.
This is general information only and is not legal advice. You should obtain professional advice specific to your circumstances. Mark Harley, Principal Solicitor, Boss Lawyers Pty Ltd.
