Online registration of interests in receivables: what is it all about?

1. Professor Louise Gullifer, University of Oxford Online registration of interests in receivables: what is it all about?

2. Why register? • Give publicity of a financier’s interest in an asset to others • Proposing to buy the asset • Proposing to take a security interest in the asset • Proposing to lend money or extend credit to the owner of the asset • To preserve priority over anyone taking an interest after you

3. The current position in receivables financing • If • Client is a company and • security interest (mortgage or fixed or floating charge) created • MUST be registered within 21 days in Register of Company Charges • Electronic form • Scanned certified copy of charge document • If not registered, void against other secured creditors and on insolvency • If • Client is a company and • Absolute assignment (purchase) of receivables • Cannot register in Register of Company Charges

4. The current position in receivables financing (priority) • Rule in Dearle v Hall • First to give notice to debtor has priority • UNLESS knows (or ought to know) of previous assignment or charge when took assignment • If no notice to debtor • First in time to be created (not to be registered) wins

5. The current position in receivables financing (priority) • Effect of registration (or lack of it) • Registration (of security interests) gives actual notice or constructive notice to those who are expected to search the register • Unregistered interests (eg of purchaser), • no constructive notice • No means of public notice • Have to give notice to debtor to secure priority • Risk in non-notification financing • Subsequent financier cannot discover unregistered purchase by searching register

6. The current position in receivables financing • If • Client is NOT a company • Must register a general assignment of existing and future book debts (or any class thereof) in the Bills of Sale register (s.344 Insolvency Act 1986) within 7 days • Includes absolute assignment and security interest • Priority position as above

7. Proposed Online system • One registration for whole relationship between financier and client • Online registration, in advance of final transaction (if desired) • Applies to security interests over, and purchases of, receivables • Priority by date of registration • Unregistered interests void in insolvency • Purchases not treated as security interests for other purposes eg no accounting for surplus • Could apply to both corporate and non-corporate clients

8. Systems already in place • USA: Article 9 Uniform Commercial Code • Canada: Personal Property Security Acts in every province • New Zealand: Personal Property Securities Act 1999 • Australia : Personal Property Securities Act 2009 • Jersey: Secured Interests (Jersey) Law 2012

9. How does it work? • Example: part of Australian PPSA tutorial http://www.ppsr.gov.au/Help/Tutorials/Pages/default.aspx#CR

10. What does it cost? • Australia: • Registration of duration • under 7 years $8 • between 7 years and 25 years $40 • Unlimited $140 • Search of register $4 • New Zealand • Registration $20 • Search of register $3 • Ontario • Registration of duration • Up to 25 years $8 a year • Search of register $8

11. Benefits • All interests on register: total transparency • No need to give notice to debtor to protect priority • Priority rules clear and simple

12. More information and this presentation • Available at http://securedtransactionslawreformproject.org/ • Slides at news and events tab