Lending and taking security in Australia - Minter Ellison

MULTI-JURISDICTIONAL GUIDE 2013FINANCEand validity of the title to the interest in land. Accordingly, theregistered proprietor of an estate of interest in land obtains what isknown as an "indefeasible" title to its interest. This means title isnot defeated by existing defects in title prior to registration or otherunregistered interests. Importantly for financing transactions, theregistered proprietor includes a mortgagee of Torrens land. Thereare some limited exceptions to indefeasibility, including priorregistered interests, fraud, easements and surveying errors, amongothers.Common forms of securityGenerally, the most common form of security granted over realestate is a registered real property mortgage. A Torrens titlemortgage operates as a statutory charge on the relevant lot orinterest in the land for the amount of debt or liability secured,once registered (see below, Formalities). By contrast, a commonlaw mortgage over "old system land" (that is, not Torrens land)takes effect as a conveyance or transfer, subject to a right of themortgagor to seek a re-conveyance on payment of the debt at therequired time, known as an "equity of redemption".Personal property in real estate financingsSection 8(1)(f)(i) of the PPSA provides that the PPSA does notapply to the creation or transfer of an interest in land. Accordingly,if a party grants a security interest solely over land, this securityinterest will not be registrable on the PPSR (although the StatebasedTorrens registration rules continue to apply). However, thePPSA is not irrelevant to real estate financings because personalproperty is often an important and valuable part of the collateralpackage securing the finance. In particular, where financiers wishto take specific security over certain personal property such asrental accounts, intellectual property (IP) relating to the propertyor goods on the property, or general security over all the assetsof the borrower, they will wish to ensure their security over suchproperty is properly perfected under the PPSA.Tangible movable property3. What is considered tangible movable property in yourjurisdiction? What are the most common forms of securitygranted over it? How are they created and perfected?Country Q&AWhile it is usual for a general security agreement granted by agrantor to a lender to secure all assets of the grantor includingland, the PPSA excludes interests in land. Therefore, any PPSRregistration in relation to the secured property the subject of thegeneral security agreement will not perfect the security interestin relation to land. To achieve the benefits of indefeasibility inrelation to the land, a lender would strongly prefer a registeredmortgage of land (registered on the Torrens register) over anunregistered general security.FormalitiesThe following formalities must be complied with in relation toregistered mortgages of Torrens title land:• Registered mortgages. A mortgage is registered onrecording the particulars in the freehold land register. To beregistered, a mortgage must be validly executed, stampedwhere required and include a description that sufficientlyidentifies the:• land to be mortgaged;• debt or liability secured by the mortgage; and• interest to be mortgaged.The parties must also observe certain other formalitiesfor registration, each of which vary according to the localrequirements in each jurisdiction. For example:• the prescribed registration forms for instruments ofmortgage vary by size, ink, printing and appearance;• execution requirements vary by jurisdiction (includingrequirements for witnessing the execution of a registeredmortgage and certain requirements to take reasonablesteps to ensure that the person who executes aninstrument of mortgage as mortgagor is identical to theperson who is, or who is about to become, the registeredproprietor of a lot or an interest in a lot);• the relevant certificate(s) of title must accompany themortgage in some States, but not in others where papercertificates of title are not issued).• Mortgages of lease. For leasehold interests in land, amortgage of lease is commonly used. A mortgage of a subleaseis less common.Tangible movable propertyThe PPSA is a law with respect to security interests in personalproperty. Section 10 of the PPSA defines personal property verywidely, as any kind of property other than land, or a right, entitlementor authority that is granted by a law of the Commonwealth, State ora Territory and declared by that law not to be personal property forthe purposes of the PPSA. In section 8, the PPSA also lists certainspecific exclusions (namely, interests to which it does not apply)even if those interests are interests in personal property. The effectof these provisions is that generally the PPSA applies to all securityinterests in both tangible and intangible personal property, forexample, tangible property (goods), financial property (chattel paper,currency, documents of title, investment instruments, negotiableinstruments), intermediated securities, intellectual property and soon.Common forms of securityFollowing the introduction of the PPSA, security over tangiblemovable property is generally created under either:• A general security agreement over the general assets ofa grantor, including tangible movable property and otherproperty such as intangible property.• A specific security agreement over specified goods.Security over tangible movable property which is stock-in-trade("inventory" under the PPSA) is usually a circulating securityinterest over fluctuating assets, known as "circulating assets".Circulating assets are collateral over which the secured party hasgiven the grantor authority to transfer the collateral in the ordinarycourse of the grantor's business free of the security interest. Inaddition, the PPSA deems certain assets to be circulating assets,unless special conditions are satisfied.A security interest over collateral that secures the obligations of agrantor to pay the purchase price of the collateral is a purchasemoney security interest (PMSI) under the PPSA. Other examples ofPMSIs include the interest of a supplier on retention of title terms,and the interest of a lessor of goods under a "PPS Lease". PMSIsare significant in the PPSA environment as they afford their holder aform of super-priority (that gives that secured party priority over therelevant collateral in priority to even a prior-perfected secured party).FOR MOREINFORMATIONabout this publication, please visit www.practicallaw.com/finance-mjgabout Practical Law Company, please visit www.practicallaw.com/about/practicallaw

MULTI-JURISDICTIONAL GUIDE 2013FINANCEin respect of the relevant bank accounts. It is customary for bankaccounts that are the subject of such security to be held withan authorised deposit-taking institution (ADI). Where the securedparty holds a security interest over an account maintained byanother ADI (not the secured party):• The security interest in that ADI account is most commonlyperfected by registration of a financing statement on the PPSR.• It is market practice in Australia for the secured party toenter into an agreement with the ADI in respect of thatsecurity interest (often known as an account bank deed).Without such an agreement, any security interest which theADI takes in respect of the account will have priority overthe secured party's security interest (even if perfected byregistration) because the ADI is said to have perfected itssecurity interest by control over the account (section 57(1),PPSA). Even where the ADI holds no such security interestcapable of perfection by control, rights of combination or setoff which the ADI may have in respect of the depositor wouldlikely prevail as against the secured party's registered PPSAsecurity interest, hence the need for an account bank deed.Secured party is the deposit holderWhile security over rights in respect of bank accounts can begranted to a person other than the bank with whom the relevantaccount is held, prior to the PPSA there was some uncertaintywhether a charge or a mortgage over a bank account in favourof the bank with whom the account is held was effective as asecurity. This is because it was unclear whether a bank couldtake security over its own indebtedness as it could be regardedas "conceptually impossible" to do so (Broad v Commissionerof Stamp Duties [1980] 2 NSWLR 40 at 46). Following thedecision in Cinema Plus Ltd (Administrators Appointed) v ANZBanking Group Limited [2000] NSWCA 195 (which adopted theposition taken in the House of Lords case of Re Bank of Creditand Commerce International SA (No 8) [1998] AC 214), analternative view arose that security over a bank account createdin favour of the bank with which the account is held is effective.The PPSA clarifies the position where the secured party takingsecurity over deposits in bank accounts (by way of a specificsecurity agreement or other document) is also the deposit holdingADI. An ADI can take a security interest in an account that iskept with the ADI and, subject to the attachment rules under thePPSA, the security is automatically perfected by control.Under the PPSA a holder of currency takes the currency free ofany security interest if the holder has no actual or constructiveknowledge of the security interest. Therefore, the practicaleffectiveness of security over cash contained in bank accountsdepends on the extent to which the secured party can exercisecontrol over cash moving out of the account that is the subjectof the security.It is also possible to grant security interests over certain IPagreements (for example, trade mark licences), if the agreementdoes not prohibit the grant of security interests. However, asecurity interest over an IP agreement is subject to the termsof the agreement. For example, a security interest granted by alicensee/borrower over an IP agreement may be of little value to afinancier if the licensor has the right to terminate the agreementwhen the licensee encounters financial difficulties.Common forms of securityFollowing the introduction of the PPSA, the most common formsof security granted over IP are general security agreements andspecific security agreements.FormalitiesUnder the PPSA, any security interest over IP (including an IPagreement) must be registered on the PPSR to preserve its priority.IP is generally serial numbered property for the PPSA, so if it isconsumer property it must be described by serial number in thefinancing statement (if it is commercial property this is optional).In addition, certain IP rights are allocated different serial numbersduring their life. For example, if a patent application is registered, itis allocated a registration number that is different to its applicationnumber. The financing statement should be updated to reflect suchchanges to avoid the risk that the security interest registration isdeemed to have a defect resulting in the security interest becomingunperfected(section 166, PPSA). Section 167 of the PPSA allowsfive business days to update the financing statement to correct thedefect.Under the PPSA it is generally necessary to register a securityinterest granted by a company within 20 business days of thedate on which the relevant security agreement comes into force(if no other method of perfection is used).In addition, specific registers exist for certain types of IP (patents,registered trade marks and registered design rights) and securityinterests can be recorded in those IP registers. Those registersare maintained by the Intellectual Property Office of Australia(IP Australia).An application to record a security interest against a registeredtrade mark must be made by both the security interest holder andthe registered owner, and submitted to IP Australia. The securitydocument itself is not required to be filed with IP Australia.An application to register a security interest against a patent or aregistered design may be submitted by either party and should besubmitted to IP Australia. IP Australia requires evidence of theinterest being registered (usually a copy of the document creatingthe security).Country Q&AIntellectual property7. What are the most common types of intellectual propertyover which security is granted in your jurisdiction? What arethe most common forms of security granted over intellectualproperty? How are they created and perfected?Intellectual propertyThe most common forms of IP over which security interestsare granted are trade marks, patents, registered designs andcopyright.Any security interests existing before the commencement of thePPSR on 30 January 2012 will not be automatically recordedagainst the PPSR (except security interests which were registeredon the ASIC Register of Company Charges and automaticallymigrated to the PPSR). For example, security interestspreviously recorded against IP Australia's registers have not beenautomatically migrated onto the PPSR. Accordingly, such earliersecurity interests must be separately recorded on the PPSR.There is a two-year transitional period from 30 January 2012 fordoing so.FOR MOREINFORMATIONabout this publication, please visit www.practicallaw.com/finance-mjgabout Practical Law Company, please visit www.practicallaw.com/about/practicallaw

MULTI-JURISDICTIONAL GUIDE 2013FINANCEProblem assets8. Are there types of assets over which security cannot begranted or can only be granted with difficulty? Which assetsare difficult or problematic when security is granted overthem?Future assetsSecurity can be granted over most types of assets, including futureassets, fungible assets, intangible assets (such as contracts,debts, shares, and other securities), insurance, and IP rights. AsAustralia is a common law jurisdiction, the most common formsof security over these types of assets (before the commencementof the PPSA) were fixed and/or floating charges.The introduction of the PPSA has affected the way that security overpersonal property is taken. In particular, distinctions between thelegal form of security transactions have largely been removed andeffective security is created by granting a security interest in therelevant property, including future property. For more information,see Question 29.Fungible assetsSee above, Future assets.Other assetsSee above, Future assets.FORMALITIESDeeds and deed polls of release must be both:• In writing.• Executed as a deed, sealed (whether actual sealing, ordeemed sealing under various statutory provisions) anddelivered.Discharges of real property mortgages must be in the formprescribed by the relevant State's or Territory's land titles office.The requirements vary between States and Territories, includingspecific requirements as to:• The form of the discharge and any annexure (which must bethe current version of the form and in certain circumstancesmust be licensed for use).• How the discharge is printed (for example WesternAustralian discharges must be printed double sided, butNSW and Queensland discharges must be printed singlesided).• Execution of the discharge, including with respect tothe exact form of language to be used in the executionclause, discharges executed under power of attorney, andrequirements for witnesses and identification of signatories.Releases of financing statements are simply performed electronicallyon the PPSR.Country Q&ARELEASE OF SECURITY OVER ASSETS9. How are common forms of security released? Are anyformalities required?Common forms of security (other than real property mortgages), suchas charges, equitable mortgages and (following the introductionof the PPSA) general security agreements and specific securityagreements, are usually released either by:• A deed of release of secured property between the securityprovider and the security holder.• A deed poll of release given unilaterally by the securityholder in favour of the security provider, if there is noreservation of rights by the security holder.In addition to the deed or deed poll of release, the appropriatesupporting de-registrations of the security from the register onwhich the original security was recorded, should be effected.In the case of personal property, the secured party must dischargea financing statement registered on the PPSR electronically byupdating the PPSR using the relevant financing statement'sregistration number and the token required to access that financingstatement.SPECIAL PURPOSE VEHICLES (SPVs) INSECURED LENDING10. Is it common in your jurisdiction to take security over theshares of an SPV set up to hold certain of the borrower'sassets, rather than to take direct security over those assets?It is not common practice to take security solely over the sharesof an SPV that has been set up to hold certain of the debtor'sassets. Generally, financiers also require direct security overthose assets. The primary reasons for this are to:• Ensure control over assets and the ability to maximise theproceeds of realisation of the security.• Mitigate competing claims by ensuring first ranking security(with appropriate negative pledge covenants) over the assetsand cash flows of the SPV (and thereby minimise the risk ofstructural subordination).• Minimise administration risk. Administration risk describesthe risk for a financier that its security becomes subjectto a moratorium (section 441A, Corporations Act) if anadministrator is appointed to the company. This risk isreduced if the financier has security over all, or substantiallyall, of the company's assets (which may not be the case ifsecurity is simply taken over a shareholding in the SPV).In the case of a real property, the secured party must providethe discharge of mortgage form for the relevant state or territoryin which the mortgage is registered. The mortgagor (or otherrelevant person such as an incoming financier) must be lodged atthe land titles office for that state or territory.Where possible, a financier will also take security over the sharesin an SPV to give additional flexibility in enforcement.FOR MOREINFORMATIONabout this publication, please visit www.practicallaw.com/finance-mjgabout Practical Law Company, please visit www.practicallaw.com/about/practicallaw

MULTI-JURISDICTIONAL GUIDE 2013FINANCEQUASI-SECURITY11. What types of quasi-security structures are common inyour jurisdiction? Is there a risk of such structures beingrecharacterised as a security interest?Certain quasi-security arrangements are available. However, sincethe introduction of the PPSA, distinctions between the legal formof security transactions have largely been removed and nearly allof the quasi-security structures described below are now treated assecurity interests (although specific cases in relation to the correctcharacterisation of most quasi-security arrangements have not yetbeen considered by the Australian courts in a PPSA context). Inaddition, before adopting such quasi-security arrangements, allapplicable stamp duty and taxes must be carefully considered asthese can be significant (see Question 29).discounting). A company's debtors continue to deal with thecompany but are required to make payments into a nominatedbank account controlled by the factoring company.Hire purchaseThis is when a credit institution acquires an asset and leases it toa lessee immediately before, or at the outset of, the hire purchase.The purchase price is paid in instalments to the finance institution(not the original vendor) who retains the legal title until fullrepayment.Retention of titleA retention of title clause in the assignment contract providesthat while possession of the asset may pass to the assignee, legaltitle only passes on full repayment. A valid clause gives the sellerpriority over secured creditors on the buyer's insolvency (seeQuestion 21).As quasi-security arrangements have now largely been re-characterisedas a grant of security, a security holder under one of these typesof quasi-security arrangements must perfect its security interest overthe relevant collateral by registering a financing statement on thePPSR within a specified timeframe. Under the PPSA, some of thesearrangements (such as hire purchase arrangements and retentionof title arrangements) are now characterised as purchase moneysecurity interests (that is, security interests securing the purchaseprice of the collateral), which give priority advantages to the securityholder if the security holder complies with certain timeframes forperfection of the security interest (see Question 3).Importantly, under the PPSA, financing statements are registeredin respect of property and not security interests. This means that,as long as a financing statement adequately describes the propertywhich is the subject of a security interest, a separate financingstatement does not need to be registered for each subsequentsecurity interest taken by the security holder in the relevant property(for example, one financing statement can perfect multiple suppliesof goods under a retention of title arrangement). This means thata single financing statement can be registered at the outset of atrading relationship to cover all supplies made under a standard setof terms. However, a separate financing statement is required if asubsequent security interest is taken by a different security holderover the same property). See Question 29 for more information onthe PPSA.The various quasi-security (now generally treated as security)arrangements commonly used in Australia are set out below.Sale and leasebackThis is an arrangement where one party sells property to a buyer,who leases the property back to the seller at an agreed amount(usually equivalent to the purchase price plus interest) for a specificperiod (usually the economic life of the asset) with a repurchaseoption. If the lessee defaults, the lessor retains the asset.FactoringThis arrangement allows businesses to sell their trade debts toraise finance, or to limit their administrative duties or bad debtlosses. A company usually sells its receivables at a discount to afactoring company in return for immediate cash payment (invoiceOther structuresThe following structures are also used:• Sale and repurchase agreements (reciprocal purchaseagreements (repos)). An entity transfers absolute title ina fungible asset (typically a security) to another entity. Inreturn, the transferee undertakes to transfer the security,equivalent to the original security, back to the transferorat the end of the transaction. On default, the parties'respective obligations terminate and are offset.• Flawed asset/security over deposit (SOD). The flawed assetcontractual arrangement restricts the depositor (borrower)from withdrawing money from the deposit account, heldby the financier, during the loan term. The financier canuse the funds in the account to set off amounts owed to itby the borrower. The SOD (also known as a chargeback) isa security in favour of a financier over a cash deposit heldwith that financier. The impact of the PPSA on these typesof arrangements remains to be seen, however clause 12(2)of PPSA indicates that these types of arrangements areintended to be covered by the PPSA regime. It is thereforelikely that the Australian courts will consider a flaweddeposit arrangement to be a security interest requiringregistration.• Right of set-off. This contractual arrangement allows afinancier to consolidate a loan, or set off the loan balance,against money in the borrower's bank account. The PPSAdoes not deem this type of arrangement to be a securityinterest.• Specific and irrevocable power of attorney. This enables afinancier to do something that the borrower fails to do. Itis commonly used where the borrower has a right to callfor more capital from a parent entity. The financier, asattorney, can call on the capital and use the funds to paythe outstanding debt. • Security deposit. A supplier (pursuant to a supplyagreement) or a landlord (pursuant to a lease) may requirea security deposit to be paid to secure the customer or thetenant's ongoing obligations (for example, the payment ofrent or to make good any damage to property).Country Q&AFOR MOREINFORMATIONabout this publication, please visit www.practicallaw.com/finance-mjgabout Practical Law Company, please visit www.practicallaw.com/about/practicallaw

MULTI-JURISDICTIONAL GUIDE 2013FINANCECountry Q&AGUARANTEES12. Are guarantees commonly used in your jurisdiction? How arethey created?Guarantees are very common in Australian financing transactions.A guarantee takes effect as a secondary obligation that dependson the existence of a primary obligation (for example, under a loancontract). Often, financiers to a corporate group will require crossguarantee from all obligors in the group (that is, each guarantorguarantees the performance of each other guarantor's obligations).By contrast, an indemnity is a primary liability. It is a separateand independent obligation to make good, by payment of money,specified loss suffered by the beneficiary of the indemnity. Typically,financiers insist borrowers provide indemnities to supplement theguarantee and give full effect to the parties' intentions that thefinancier be provided adequate credit support irrespective of theefficacy of the primary liability.The usual principles of the law of contract apply to guaranteesand indemnities (including the requirements that there be anagreement, intention to create legal relations, privity, considerationand so on). There are also formalities in some States and Territories,including a requirement a guarantee be in writing and signed bythe guarantor. The Consumer Credit Code also specifies certainformalities for guarantees by natural persons in respect of certaincredit contracts.Guarantees may be discharged by operation of law in certaincircumstances. For example, where the underlying loan contractis varied and the variation may prejudice the guarantor, such asan increase in the guaranteed monies without the guarantor's priorconsent being obtained either in the initial guarantee or at the timeof the increase. There are many circumstances in which a guaranteemight be discharged by operation of law and, consequently, usuallythe market has developed generally accepted provisions thatparties incorporate into guarantees to prevent guarantors beingreleased from their guarantee obligations unexpectedly. Welladvisedfinanciers usually insist on supplementing their contractualrights under those provisions by obtaining confirmations of theeffectiveness of the guarantee from all guarantors, whenever suchcircumstances arise.RISK AREAS FOR LENDERS13. Do any laws affect the validity of a loan, security or guarantee(or the terms on which they are made or agreed)?Financial assistanceA company registered in Australia can only provide financialassistance to a person to purchase shares in the company, or theshares of the company's holding company (even if that holdingcompany is incorporated outside of Australia), if:• That assistance does not materially prejudice the companyor its shareholders, or the company's ability to pay itsshareholders.• That assistance is approved by shareholders under a processknown as a "whitewash".• There is a special exemption available under theCorporations Act (these are rarely available in a typicalacquisition financing transaction).If a financial assistance issue arises on a transaction, partiestypically undertake a whitewash. The whitewash involves passinga resolution at a general meeting of the company, which approvesthe giving of financial assistance. The resolution must be either:• A special shareholders' resolution where the personacquiring the shares (or its associates) cannot vote.• A resolution by all of the ordinary shareholders.If immediately after the acquisition the company will be a subsidiaryof a listed domestic company, the financial assistance must beapproved by a special resolution passed at a general meeting of thatcompany.In addition, the financial assistance must be approved by aspecial resolution passed at a general meeting of the company tobecome the holding company, if immediately after the acquisitionthe company will have a holding company that both:• Is a domestic company but not listed.• Is not itself a subsidiary of a domestic company.Notice of all shareholders' resolutions must be lodged withthe ASIC at least 14 days before the provision of the financialassistance. Any special resolution passed must be lodged by thecompany, listed domestic company or holding company within 14days after it is passed.Corporate benefitDirectors of Australian companies have duties, under statute andcommon law, to act in good faith, in the company's best interests,and for a proper purpose. When determining if the transactionis sufficiently beneficial to the company, both direct benefits(such as the company's ability to use the financing facility) andindirect benefits (for example, if the company requires the ongoingsupport of other companies within the group) can be considered.Importantly, each company must derive sufficient benefit itselfwhen entering into a finance transaction. It is not sufficient that thebenefit is derived by the corporate group (of which the company isa member) as a whole or by other members of its corporate group.It is possible to reduce the risk of the transaction being voidableunder corporate benefit rules by obtaining shareholders' approvalfor the transaction. From a director's perspective amending thecompany's constitution to allow the directors of wholly ownedsubsidiaries to act in the best interests of the holding (parent)company offers some personal protection.Loans to directorsThere are certain restrictions for a company making or guaranteeinga loan to its directors or the directors of a related company:• Related party benefits. If the company is a public companya loan to a director would constitute the giving of a relatedparty benefit (for further restrictions on related partybenefits, see below).• Commercial benefit. Whenever a financier makes fundingavailable, the financier must satisfy itself that thereis sufficient commercial benefit. Absence of adequatecommercial benefit to a company which enters intoan agreement means that the agreement may not beenforceable against that company. • Directors' duties. A board of a company proposing to grant aloan to a director must exercise their powers and dischargetheir duties both:FOR MOREINFORMATIONabout this publication, please visit www.practicallaw.com/finance-mjgabout Practical Law Company, please visit www.practicallaw.com/about/practicallaw

MULTI-JURISDICTIONAL GUIDE 2013FINANCE• in good faith in the best interests of the company andfor a proper purpose; and• with the degree of care and diligence that a reasonableperson would exercise if they were a director of thecompany in the company's circumstances.The board must consider the company itself and the benefit itmight receive and the detriment it might suffer. To commit acompany to an agreement that is not in its best interest is abreach of the directors' fiduciary duties.If there is no commercial benefit to the company or the benefitis inadequate, having regard to the risk that it assumes, then acourt may find that the agreement is unenforceable with respectto that company.In general, there are specific liability exemptions for mortgageesin possession of land, in relation to:• Past contamination (occurring before the mortgagee gainedpossession).• Remediation obligations.However, mortgagees can be liable for environmental harm causedafter they acquire possession. In NSW, for example, financiers canincur liability for land contamination, regardless of their involvementin the contamination, under the Contaminated Land ManagementAct 1997 (NSW).STRUCTURING THE PRIORITY OF DEBTSWhere loans conflict with a fiduciary duty that a director owes,a range of remedial orders will be available to the company,including compensation and pecuniary penalty orders.UsuryIndividuals are largely protected from being charged excessive ratesof interest under unfair contract terms regulations. These statutoryprotections, however, do not extend to corporate borrowers. In thesecircumstances, the adequacy and appropriateness of the interestcharged by one corporate party to another are governed by the termsof the relevant contractual arrangements and the application of thecommon law.The approach of the common law is particularly relevant incircumstances where a default rate of interest is charged (thatis, a higher rate of interest is charged under, for example, a loanagreement where an event of default has occurred). Higher rates ofinterest in such circumstances are vulnerable to being deemed apenalty if it can be shown not to be a genuine pre-estimate of thedamage which could result from the default.OthersA public company, or an entity that the public company controls,cannot give a financial benefit to a related party of the publiccompany unless the public company or entity obtains theapproval of the public company's members in accordance withthe provisions of the Corporations Act and either:• The public company gives the benefit within 15 monthsafter the approval.• The giving of the financial benefit falls within definedexceptions set out in the Corporations Act. Some of theseexceptions are where the financial benefits are givenon arm's length terms or given to or by a closely heldsubsidiary.See also Question 23.14. Can a lender be liable under environmental laws for theactions of a borrower, security provider or guarantor?A financier's environmental liability in relation to its security overland depends on the law of the relevant state or territory.15. What methods of subordination are there?Contractual subordinationContractual debt subordination is common. Parties typically use asubordination agreement to rank or otherwise regulate contractualdebt claims by way of subordination. By contrast, a priority agreementis the appropriate document to regulate priority in relation to securityand enforcement rights. Where parties wish to rank both debt claimsand priority of securities, an inter-creditor agreement is used.Common subordination mechanisms include:• Contractual subordination. A subordinated creditorundertakes to defer payment of some or all of its claimsuntil the senior loans are paid in full.• Trust subordination. Contractual subordination is combinedwith a declaration of trust by a subordinated creditor infavour of, initially, a senior creditor over amounts of thesubordinated debt received (including on the debtor'sinsolvency) by the subordinated creditor.• Non-trust turnover subordination. The subordinated creditorundertakes to transfer proceeds it receives on the debtor'sinsolvency to the priority creditor.• Subordination and assignment. This combines contractualsubordination with an assignment (charge) by thesubordinated creditor, in favour of the priority creditor, ofthe:• subordinated debt claim; and/or• proceeds on the debtor's winding-up.Structural subordinationStructural subordination occurs where a financier who lends tothe parent becomes subordinated to other financiers who lend tosubsidiaries in the group. The financier to the parent is structurallysubordinated because it will not have access to a subsidiary'sassets until that subsidiary's creditors have been paid in full.Inter-creditor arrangementsInter-creditor arrangements are common, and are typically used incircumstances where creditors want to regulate both the priority(and proceeds) of security and subordinate competing debts. Typicalparties include the senior and junior financiers and any obligorsCountry Q&AFOR MOREINFORMATIONabout this publication, please visit www.practicallaw.com/finance-mjgabout Practical Law Company, please visit www.practicallaw.com/about/practicallaw

MULTI-JURISDICTIONAL GUIDE 2013FINANCEthat have provided security for the transaction. In a syndicatedtransaction, where there is common security, the inter-creditorarrangements are often set out in the security trust deed, and thesecurity trustee is a party.DEBT TRADING AND TRANSFER MECHANISMSLending to trustees of trusts is common practice, especially inthe real estate investment trust (REIT) market. Lenders needto ensure the trustee has power under the constituent trustdocuments (such as trust deed) to borrow and grant security.Lenders should also verify that the trustee's indemnity out of trustproperty is not flawed. Trusts are not separate legal personalitiesbut merely an equitable obligation imposed on the trustee.Country Q&A16. Is debt traded in your jurisdiction and what transfermechanisms are used? How do buyers ensure that theyobtain the benefit of the security and guarantees associatedwith the transferred debt?Participations in a syndicated loan (whether as an underwriteror existing participant) are generally considered to be tradableassets and secured debt is commonly traded. Financiers usually"sell down" their participation by transfer or, less commonly,sub-participation.The existing participants usually appoint a security trustee tohold security, granted by the borrower group, for their benefit.The class of beneficiaries for which the security trustee holdsthe security typically covers any future participants. Therefore,an incoming participant simply accedes to the security trust asa beneficiary, and the departing participant transfers its rights tothe incoming participant (usually by a substitution agreement).An assignment of debt may constitute a deemed security interestunder the PPSA which will require perfection and certain noticeformalities (there are various exceptions under section 8 ofthe PPSA). Therefore, it is preferable that a transfer of debt iseffected by a novation/substitution agreement which should avoidany registration and notice requirements under the PPSA.AGENT AND TRUST CONCEPTS17. Is the agent concept (such as a facility agent under asyndicated loan) recognised in your jurisdiction?The concept of agency is recognised in Australia, provided thatthe extent of the agent's authority is clearly delineated in therelevant authorisation.ENFORCEMENT OF SECURITY INTERESTS ANDBORROWER INSOLVENCY19. What are the circumstances in which a lender can enforce itsloan, guarantee or security interest? What requirements mustthe lender comply with?General rulesA financier's ability to enforce its loan, guarantee or security isgenerally regulated by the underlying document. For example, afinancier can usually enforce or accelerate its loan on an eventof default or other enforcement event, as defined in the loanagreement. This also applies to securities.Under the PPSA, a secured creditor, when enforcing its securityover personal property in accordance with the enforcement powersin the PPSA, is required to act honestly and in a commerciallyreasonable manner. The obligation does not apply where a securedcreditor appoints a receiver, a receiver and manager or (in somesituations) controller.There is no general statutory requirement to serve a notice beforeenforcing a security, except for consumer credit transactions(including retail mortgages and guarantees). However, in relationto on-demand facilities, the courts require reasonable notice (inmost cases, short) to be provided. Reasonableness is assessed byreference to the mechanics of effecting payment.GuaranteesGuarantees can only usually be enforced following a default bythe principal obligor (for example, under its loan documentation).Generally, the terms of the guarantee determine whether separatedemands must be made against the principal obligor andguarantor.Syndicated loan documentation usually contains comprehensiveprovisions outlining the scope of the facility agent's capacity,authority and liability in its role as agent. Typically, those provisionslimit the facility agent's obligations to those set out in the financedocuments. Such provisions will also provide that the facilityagent does not act as trustee or have any fiduciary relationshipwith any other financier (except as expressly set out in the financedocuments).18. Is the trust concept recognised in your jurisdiction?Australia recognises trusts and they are very common in Australianfinancing arrangements.A security trustee can enforce its rights in the Australian courtswhere it holds the security on trust for the financiers.SecuritiesThe courts are generally not involved in the enforcement ofconsensual security interests against corporate borrowers. Thecourt can, however, order that securities granted to parties relatedto the company, when the security has been enforced within sixmonths after its creation, are void (Corporations Act 2001). Thisis regardless of whether the security has been properly registeredwithin the required time period.Under the PPSA regime, there are prescriptive rules governingenforcement of security interests in personal property, includingnotices that must be given to a debtor or a higher ranking securityholder. Most rules can be contracted out of (except in the case ofcertain consumer transactions). The PPSA enforcement provisionsdo not apply to security interests created before 30 January 2012,where a privately appointed receiver (or receiver and manager) isrealising assets of a corporate borrower or guarantor, and mayotherwise be contracted out of in many instances.FOR MOREINFORMATIONabout this publication, please visit www.practicallaw.com/finance-mjgabout Practical Law Company, please visit www.practicallaw.com/about/practicallaw

MULTI-JURISDICTIONAL GUIDE 2013FINANCEWhen exercising a power of sale over real property, the securedcreditor is required to satisfy various notice requirementscontained in State-based property legislation.Methods of enforcement20. How are the main types of security interest usually enforced?What requirements must a lender comply with?Security interests in personal propertyA secured creditor has enforcement rights under the securityagreement and relevant legislation. For example, a secured creditorgenerally has the right under the security agreement to enforce itssecurity by appointing a receiver, or a receiver and manager. Inaddition, a holder of a registered security over all, or substantiallyall, of a company's assets can appoint a voluntary administrator.Under the PPSA (which does not apply to interests in land),there is no requirement to obtain a judgment before exercisingenforcement rights. A range of additional enforcement options areavailable, depending on the nature of the collateral, including:• Collection of liquid collateral (for example, as receivables).• Seizure of assets.• Disposal of collateral.• Purchase of the collateral (or some of it) by the securedcreditor following the giving of relevant notices and expiry ofnotice periods without objection.• Foreclosure (without the need for a court order), providedthe secured debt is extinguished.The PPSA enforcement provisions do not apply where a privatelyappointed receiver, receiver and manager or (in some situations)controller is realising assets of a corporate borrower or guarantor,and may otherwise be contracted out of in many instances.Mortgages over landState and Territory laws regulate real property mortgages. All suchlegislation provides for an implied power to sell an interest inland that is the subject of the mortgage. In most jurisdictions,a prescribed default notice must be served before the power ofsale can be exercised. Enforcement does not, however, require anapplication to the court. The purchaser takes an interest in landfree from all prior interests that rank below the secured creditorexercising the power of sale, and subject to certain limitedinterests that are protected by statute.• Taking reasonable care to protect the property.• Obtaining the maximum sale price possible in thecircumstances of the case.A mortgagor can restrain the sale where it can be shown thateither:• The power of sale has not become exercisable.• The mortgagee is in breach of the duty to sell.Foreclosure is available in respect of mortgages over land, but isnot commonly used. A court order is required to effect foreclosureover land and extinguishes the secured debt.Rescue, reorganisation and insolvency21. Are company rescue or reorganisation procedures (outside ofinsolvency proceedings) available in your jurisdiction? Howdo they affect a lender's rights to enforce its loan, guaranteeor security?Voluntary administration and schemes of arrangements providefor company rescue or reorganisation outside of insolvencyproceedings.Voluntary administrationThe voluntary administration process under Part 5.3A of theCorporations Act 2001 is the principal method of corporaterescue and reorganisation in Australia. It aims to ensure thecontinued existence of an insolvent, or nearly insolvent companyor, if that is not possible, a better return to creditors than wouldbe the case from liquidation.Voluntary administration has two essential features:• Appointment of an administrator who runs the company.• Imposition of a moratorium on litigation, recovery ofproperty and enforcement of security interests, to preventcreditors (but not secured creditors with all asset security)from taking actions adverse to the company's interests.The company's directors, rather than a secured creditor or liquidator,usually appoint the administrator. On appointment, the administratorassumes control of the company's business and property. Theadministrator must convene the first creditors' meeting within eightbusiness days of appointment. The creditors can resolve to either:• Replace the administrator.Country Q&AA secured creditor has two common enforcement options. It caneither:• Appoint a receiver in relation to the interest in land or rentalincome.• Enter into possession as mortgagee (including by appointmentof an agent) and afterwards exercise a power of sale.A mortgagee is not a fiduciary prior to the collection of proceeds.However, in most jurisdictions, a mortgagee must act in goodfaith when exercising the power of sale. This includes:• Taking reasonable steps to determine the market value ofthe mortgaged property before selling it.• Appoint a creditors' committee to liaise with theadministrator.Following the meeting, the administrator has 25 business days toinvestigate the company's operations. The administrator's recommendationsmust be presented at the second creditors' meeting.This report must address various matters, including the reasonsfor the company's failure and any options for restructuring.The administration period can, and frequently is, extended byapplication to the court and creditors can adjourn the secondmeeting for a period of up to 45 business days.FOR MOREINFORMATIONabout this publication, please visit www.practicallaw.com/finance-mjgabout Practical Law Company, please visit www.practicallaw.com/about/practicallaw

MULTI-JURISDICTIONAL GUIDE 2013FINANCECreditors have three options at the second meeting:• Placing the company into liquidation.• Returning the company to the directors' control.• Executing a Deed of Company Arrangement (DOCA), whichbinds:• the deed administrator;• the company;• all unsecured creditors (irrespective of whether theyconsent); and• secured creditors and owners or lessors of property usedby the company that:vote for the DOCA; orare bound by an order of the court.Implementation of a DOCA only requires a creditors' resolution. Ifa poll is called, a majority of creditors, both in number and valueof debt, must vote in favour of the resolution. If the poll does notproduce a result, the administrator has a casting vote.There are only a few terms that must be included in a DOCA andtherefore a number of different arrangements can be agreed.Secured creditors and the moratoriumSubject to the consent of the administrator or court order, asecured creditor is not entitled to enforce its security during themoratorium.The key advantage of a scheme of arrangement are that, unlikea DOCA:• It can give a binding release of claims against third parties(for example, claims by the company's shareholders orcustomers against the company's financiers, insurers ordirectors).• If passed by requisite majorities, it can bind dissentingsecured creditors.• It can be used to effect a restructure even though acompany is solvent.22. How does the start of insolvency procedures affect a lender'srights to enforce its loan, guarantee or security?If a company goes into liquidation, ongoing litigation proceedingsbetween the insolvent entity and its creditors are stayed, includingclaims to recover unsecured loans. Where a judgment has alreadybeen obtained, execution is not allowed, and if execution waslevied within six months of the liquidation, the effect of theexecution will be reversed.In relation to guarantees, if a guarantee has been given of theinsolvent company's debts, the liquidation of the insolvent companydoes not affect the creditor's rights to enforce the guarantee.Subject to questions of double recovery, if the insolvent companyis the guarantor of a third party, the creditor will be entitled toprove for the guaranteed debt in the winding-up.Country Q&AEnforcement of a security interest that has commenced beforeadministration can be stayed or limited by the court on theadministrator's application, if the court is satisfied that an administrator'sproposed action will adequately protect the securedcreditor's interests.However, a creditor who holds security over all, or substantiallyall, of the company's property can enforce the security within 13business days of the administrator's appointment.During the moratorium, no legal proceedings can be startedagainst the company and no further steps can be taken in anyproceedings which have already started, unless the administratorconsents or a court order is obtained.Similarly, during this period, guarantees of the company's debtscannot be enforced against a director of the company, the spouseor a relative of a director, without the creditor first obtaining acourt order.Schemes of arrangementThe scheme of arrangement procedure, familiar to most common lawjurisdictions, is generally less flexible than voluntary administration,and requires:• Court approval (including for any amendment to thescheme).• Approval by a super majority of each class of creditors (thatis, 75% by value and 50% by number in each class ofcreditors).The stay does not affect a secured creditor's right to enforce itssecurity.23. What transactions involving loans, guarantees, or securityinterests can be made void if the borrower, guarantor orsecurity provider becomes insolvent?The Corporations Act 2001 contains provisions relating to theinvalidation of transactions on insolvency. If the transaction isvoidable, the court can make a range of orders, including for therepayment of money received by the creditor under the transaction,or the release/discharge of debts or securities. There are also anumber of general law rules which affect the validity of loans,guarantees and security interests.Generally speaking, a security is voidable on the followinggrounds.Failure to registerUnder the PPSA and the Corporations Act, a security interestgranted by a company must be perfected by control or possession,or registered on the PPSR, to be enforceable against third partieson insolvency. A financing statement should be registered on thePPSR within 20 business days of the date on which the relevantsecurity agreement came into force, or at least six months beforethe start of winding-up or voluntary administration for mostsecurity interests (other than deemed security interests that donot secure payment or performance of an obligation and securityFOR MOREINFORMATIONabout this publication, please visit www.practicallaw.com/finance-mjgabout Practical Law Company, please visit www.practicallaw.com/about/practicallaw

MULTI-JURISDICTIONAL GUIDE 2013FINANCEinterests where no other method of perfection is used). The courtmay extend this period if it is considered just and equitable inthe circumstances.The transitional provisions provide temporary protection forsecurity interests in existence at the PPSA's commencement date(30 January 2012) for two years.There is no requirement to register guarantees, although if theguarantee document contains a security interest of some kind,such as a turnover trust, it may be advisable to do so.Breach of directors' dutiesWhere a loan, guarantee or security interest has been givenby a company in breach of directors' duties, the court can, onapplication, make a wide variety of orders. Generally speaking, ifthe company has had the benefit of the funds, it will be obliged toeffect repayment (although unfair terms may be modified).The principal directors' duties, in this context, are the duties toact for a proper propose and in the interests of the company asa whole, which will include the interests of creditors where acompany is in the zone of insolvency.In addition, a loan, guarantee or security may be voidable on thegrounds listed below if the company goes into liquidation.into within four years before the company goes into administrationor liquidation. There is no requirement that the company wasinsolvent at the time of the transaction.Transaction for the purpose of defeating creditorsA security granted to defeat or delay creditors, or interfere withtheir rights, can be set aside at any time if there was an intentto defraud creditors. In addition, security granted to obstructcreditors' rights can be set aside if the company either:• Was insolvent at the time.• Goes into administration or liquidation within ten years.Unfair loanAn unfair loan granted by a company at any time before theinsolvency proceedings is liable to be set aside, whether or not thecompany was insolvent at the time the loan was made. A loan isunfair if the interest or the charges in relation to the loan either:• Were extortionate at the time the loan was made.• Have become extortionate, following a variation.See Question 13.24. In what order are creditors paid on the borrower's insolvency?Unfair preferenceA security is voidable, irrespective of whether the securityprovider had an intention to confer a preference, if all of thefollowing apply:• The security secures repayment of a pre-existing unsecureddebt.• The company is insolvent at the time.• The company goes into administration or liquidation withinsix months of granting the security.There is a similar rule that renders security over circulating assetsunenforceable (except as to new value) if a company goes intoadministration or liquidation within six months of granting thesecurity.Uncommercial transactionA loan, guarantee or security may be set aside if both:• The company that makes the loan, or grants the guaranteeor security, is either insolvent at the time, or goes intoadministration or liquidation within two years.• A reasonable person in the company's position would nothave entered into the transaction.Related party transactionAny unfair preference or uncommercial transaction entered intowith a related party can be set aside if entered into within fouryears before the company goes into administration or liquidation.Unreasonable director related transactionsTransactions between an insolvent company and a director (or anentity controlled by a director) that would not have been enteredinto by a reasonable person in the company's position, havingregard to the consideration received, can be set aside if enteredSecured creditorsSecured creditors have priority for payment on the borrower'sinsolvency out of the relevant secured property.The PPSA affects priority between competing security interests(in relation to security interests over the same property).A secured creditor's interest in circulating assets (primarilyinventory, cash and receivables) is subordinated to:• The claims of employees (excluding directors and theirrelatives) for unpaid wages, leave entitlements and pensionpayments (in practice, the beneficiary of this is usually theCommonwealth government, which pays these claims and issubrogated to the employee's position).• Certain liquidation expenses.The Corporations Act 2001 also provides for mandatory set-offof mutual credits, debts and dealings, provided a creditor had nonotice of the debtor's insolvency at the time when the relevantcredit was extended or received.Recoveries under insurance policies are held for the benefit ofcreditors for whom the claim arose, and have priority. This iseffectively a form of statutory trust over the proceeds of insurancerecoveries.Unsecured creditorsAll unsecured creditors rank equally, subject to certain limitedpriority claims and certain subordinated claims. The followingclaims have priority (in order): • Liquidators' expenses for preserving, realising or gatheringin the insolvent company's property, and carrying on thecompany's business and similar expenses incurred by anadministrator during the voluntary administration period.Country Q&AFOR MOREINFORMATIONabout this publication, please visit www.practicallaw.com/finance-mjgabout Practical Law Company, please visit www.practicallaw.com/about/practicallaw

MULTI-JURISDICTIONAL GUIDE 2013FINANCE• Liquidators' and administrators' fees and disbursementspayable to any related parties of the liquidator oradministrator.• Employees' (excluding directors and their relatives) unpaidwages, pensions, leave entitlements and periodic paymentsin respect of injury compensation.• Redundancy (retrenchment) payments.• Subject to court approval, any creditors' costs forindemnifying the liquidator (for example, for litigationcosts).Subordinated creditorsWhere the insolvent company is party to the agreement,Australian courts respect an agreed subordination of debts (seeQuestion 15). Unlike the US, there is no concept of equitablesubordination.Shareholder claims, in their capacity as a member of the company(for example for dividends), generally rank behind all other claims.In 2010, the Australian parliament passed legislation to reversethe 2007 decision of the High Court, which held that shareholders'compensation claims for misleading and deceptive conduct by thecompany, or its failure to disclose material information, are notbrought in their capacity as a member and therefore rank equallywith other unsecured creditors' claims. This legislation does notapply to non-shareholder compensation claims (such as claimsby the holders of promissory notes or bonds). The legislation alsocontains provisions which rank post-insolvency interest ahead ofshareholder claims.Subject to some statutory exceptions, security interests in thesame secured asset perfected by registration have priority inaccordance with the time of registration.A security interest can secure future advances, so a subsequentsecurity holder needs a priority agreement to protect its priorityposition.Security interests perfected by control have priority over securityinterests perfected by registration.The interests of suppliers of goods or financiers of asset acquisitionsthat have been perfected by registration have "super-priority" undera purchase money security interest if registered within certaintimeframes.Mortgages over landPriority is determined by the order of registration at the relevanttitles office. Notice of a prior mortgage has no effect on the orderof priority and the first registered mortgage generally has firstpriority. However, notice of a subsequent security interest willaffect the ability to claim priority for future advances made afternotice of a subsequent security interest.A registered mortgage over land has priority over a companycharge or security interests over land, unless the secured creditor'sinterest under the charge or security interest is recorded on theregister before the mortgage is taken.Common law regulates the priority of unregistered mortgages.Generally, the first in time prevails but there are many exceptions.Country Q&ASecurity interests over personal propertyUnder the PPSA, a security interest in personal property isperfected where the following all apply:• It has attached to the relevant asset (in general, attachmentoccurs where the grantor has rights in the asset and value isgiven for the security interest).• It is enforceable against third parties (generally achieved bythe grantor's execution of a security agreement containing adescription of the secured property).• A financing statement has been registered, the interestis temporarily perfected under the transitional provisionsor the secured party has possession or (in limitedcircumstances) control of the relevant collateral.Security interests not validly perfectedUnder the PPSA, all security interests (other than for commercialconsignments, transfers of an account or chattel paper and certainleases) must be perfected by registration, possession or control inorder to be enforceable in insolvency. All security interests whichwere previously registered with ASIC have been migrated to thePPS Register and are therefore perfected by registration (whereregistration was required by statute). Unperfected interests areineffective as against a liquidator although temporary protectionis afforded for two years following the PPSA's commencement forinterests that were not registrable before the commencement ofthe PPSA.CROSS-BORDER ISSUES ON LOANSSecurity interests which existed at the PPSA registrationcommencement date (30 January 2012) are temporarily perfected.Temporary perfection expires when the interest is perfected underthe PPSA or, otherwise, on 30 January 2014.Generally, competitions between two security interests whichboth exist at the PPSA registration commencement date will bedetermined in accordance with pre-existing law.A perfected security interest ranks above an unperfected securityinterest in the same secured asset.Priority between unperfected security interests in the samesecured asset is determined by the order of attachment of thosesecurity interests.25. Are there restrictions on the making of loans by foreignlenders or granting security (over all forms of property) orguarantees to foreign lenders?There are generally no restrictions on a foreign lender makinga loan, or receiving the benefit of security or a guarantee inrelation to that loan. However, the foreign lender and its borrowermust consider Australian interest withholding tax, which can bepayable on any interest payments.In relation to receiving the benefit of a security interest, theforeign lender must show that the secured property is solelybeing held as security for the purposes of an agreement thatFOR MOREINFORMATIONabout this publication, please visit www.practicallaw.com/finance-mjgabout Practical Law Company, please visit www.practicallaw.com/about/practicallaw

MULTI-JURISDICTIONAL GUIDE 2013FINANCEwas entered into both in good faith and in the ordinary courseof a money lending business (and not dealing with any matterunrelated to that business) (Foreign Acquisition and TakeoversAct 1975).If a foreign person acquires a security interest in shares in anAustralian corporation or in Australian urban land but does notcarry on the business of lending money, that foreign person maybe required to obtain the Australian Treasurer's approval beforetaking the security.A foreign lender's establishment of a new business in Australia,the taking, or enforcing, of security, or receiving a guarantee, mayalso require the Australian Treasurer's prior approval if the foreignlender is either:• A political body of, or an entity otherwise controlled by (orthat could be controlled by), a foreign government, theiragencies or related entities (and any associates).• An entity in which a foreign government, its agencies orrelated entities from a single country hold an aggregateinterest (direct or indirect) of 15% or more or in whichforeign governments, their agencies or related entities frommore than one country hold an aggregate interest of 40% ormore.However, if such a lender is regulated by APRA as an AuthorisedDeposit-taking Institution (ADI), it is not required to notify theAustralian Treasurer when taking security over an asset as part ofa "lending agreement" or when the security is enforced and theasset is sold. Notification is required however, if the security isenforced and the ADI gains control over the asset(s) and retainsit for more than 12 months.26. Are there exchange controls that restrict payments to aforeign lender under a security document, guarantee or loanagreement?Generally, there are no exchange controls that can preventrepatriation or realisation of loan payments/security proceeds byforeign lenders.However, in addition to implementing the United Nations' sanctionsunder the Charter of the United Nations Act 1945, the AustralianGovernment also imposes targeted financial sanctions on certainforeign persons and entities in implementing its own foreignpolicy. The legislative framework for such autonomous sanctions iscurrently set out in the Autonomous Sanctions Act 2011 and theAutonomous Sanctions Regulations 2011 (Autonomous SanctionsLaw) and is administered by the Department of Foreign Affairs.TAXES AND FEES ON LOANS, GUARANTEES ANDSECURITY INTERESTS27. Are taxes or fees paid on the granting and enforcement of aloan, guarantee or security interest?Documentary taxesNSW currently levies a stamp duty, called a mortgage duty, onsecurity documents (regardless of the governing law) chargingassets, located wholly or partly in NSW. The amount of mortgageduty payable is calculated as a percentage of the proportionof the total amount of the advances secured referable to NSW,currently at 0.4%.Under the NSW Duties Act 1997 it is the security provider whois liable to pay the mortgage duty. However, and of particularrelevance to the mortgagee, a security document is unenforceableif it has not been duly stamped and would be inadmissible asevidence in Australian courts.The other Australian states and territories no longer imposemortgage duty on security documents.Registration feesThe PPSR levies a nominal registration fee for each securitydocument entered into by an Australian company or a registeredforeign company.On the initiation of security enforcement proceedings, court filingfees are payable by the entity initiating proceedings.Notaries' feesSecurity documents do not require notarisation to be registered orenforced in Australian courts.28. Are there strategies to minimise the costs of taxes and feeson the granting and enforcement of a loan, guarantee orsecurity interest?Previously, there were techniques for minimising stamp dutycosts. However, additional anti-avoidance provisions wereintroduced in July 2009 to the NSW Duties Act 1997 whichnegated the use of these structures. The only way to attemptto reduce stamp duty is through a global mortgage packageapproach. This involves calculating the amount of secured assetslocated in NSW as a percentage of the global assets securing thesame moneys. The duty (0.4%) is then paid on this percentage ofthe secured amount, rather than on the whole secured amount.Country Q&AIf the Autonomous Sanctions Law provides for such a restrictionto apply to a relevant financier, the specific authorisation of theMinister for Trade of the Australian Government is necessary inrelation to the entering into of financial transactions with, or themaking available of assets to or for the benefit of, that financier.(For the current list of restricted persons, see www.dfat.gov.au/un/unsc_sanctions/index.html.)REFORM29. Are there any proposals for reform?On 30 January 2012 Australia implemented a major overhaulof its personal property security legislation. The PPSA replacedover 70 Commonwealth, State and Territory Acts and is supportedFOR MOREINFORMATIONabout this publication, please visit www.practicallaw.com/finance-mjgabout Practical Law Company, please visit www.practicallaw.com/about/practicallaw

MULTI-JURISDICTIONAL GUIDE 2013FINANCEW www.comlaw.gov.auONLINE RESOURCESW www.legislation.qld.gov.au/Acts_SLs/Acts_SL.htmDescription. Official website maintained by the AustralianGovernment containing up to date Commonwealth legislativeinstruments (including Acts, Regulations and Determinations).W www.legislation.nsw.gov.auDescription. Official website maintained by the New South WalesGovernment containing up to date New South Wales legislativeinstruments (including Acts, Regulations and Determinations).W www.legislation.act.gov.auDescription. Official website maintained by the Australian CapitalTerritory Government containing up to date Australian CapitalTerritory legislative instruments (including Acts, Regulations andDeterminations).W www.nt.gov.au/lant/parliamentary-business/legislation.shtmlDescription. Official website maintained by the Northern TerritoryGovernment containing up to date Northern Territory legislativeinstruments (including Acts, Regulations and Determinations).Description. Official website maintained by the QueenslandGovernment containing up to date Queensland legislative instruments(including Acts, Regulations and Determinations).W www.legislation.sa.gov.au/index.aspxDescription. Official website maintained by the South AustralianGovernment containing up to date South Australian legislativeinstruments (including Acts, Regulations and Determinations).W www.thelaw.tas.gov.au/index.w3pDescription. Official website maintained by the TasmanianGovernment containing up to date Tasmanian legislative instruments(including Acts, Regulations and Determinations).W www.legislation.vic.gov.auDescription. Official website maintained by the VictorianGovernment containing up to date Victorian legislative instruments(including Acts, Regulations and Determinations).W www.slp.wa.gov.au/legislation/statutes.nsf/default.htmlDescription. Official website maintained by the WesternAustralian Government containing up to date Western Australianlegislative instruments (including Acts, Regulations andDeterminations).Country Q&Aby an online register (PPSR), which replaced approximately30 Commonwealth, State and Territory registers including theASIC Register of Company Charges. This legislation is basedon concepts used in equivalent legislation in Canada and NewZealand.The PPSA applies to security interests in all types of propertyother than land, although there are certain statutory exclusions.It introduces a functional approach to personal property securitieswhere the form of the transaction (and the identity of the personwith title to the secured property) is not important if the substantiveeffect of the transaction is to secure payment of an amount orperformance of an obligation. Therefore, legal distinctions betweendifferent types of security transactions have largely been removed.In addition, under the PPSA, in some circumstances a person cangrant a security interest in property it does not own (for example,property that it holds on lease, or that it has acquired on retentionof terms but has not yet paid for).The introduction of the PPSA has fundamentally changed howsecurity interests in personal property are taken and perfected,and extends to a range of transactions that were not previouslyconsidered security (or even quasi-security) before the introductionof the PPSA. For example a security interest may be created undercertain leases, retention of title supply arrangements, flawed assetarrangements and turnover trusts.Generally, the PPSA will apply if secured property is located inAustralia or if the grantor of the security interest is an Australianentity.The PPSA provides for a two-year transitional period, beginningon 30 January 2012, which will afford a level of protection topre-existing security interests.Given the very recent overhaul of personal property security lawsin Australia, there are currently no proposals for further reform.FOR MOREINFORMATIONabout this publication, please visit www.practicallaw.com/finance-mjgabout Practical Law Company, please visit www.practicallaw.com/about/practicallaw

MULTI-JURISDICTIONAL GUIDE 2013FINANCECONTRIBUTOR PROFILESMATTHEW CUNNINGHAMPartnerMinter EllisonT +61 2 9921 4230F +61 2 9921 8253E matthew.cunningham@minterellison.comW www.minterellison.comDANIEL MARKSPartnerMinter EllisonT +61 2 9921 4093F +61 2 9921 4691E daniel.marks@minterellison.comW www.minterellison.comProfessional qualifications. Bachelor of Laws (First ClassHonours) (Macquarie University); Bachelor of Civil Law(Oxford); Admitted in Australia (New South Wales), 1999;Admitted in England and Wales, 2005Areas of practice. Corporate finance; syndicated finance;bilateral finance; technology, media and telecommunications;agribusiness; real estate and property finance; acquisitionfinance; private equity, restructuring and workoutsNon-professional qualifications. Bachelor of Economics(Macquarie)Recent transactions• Advising a club of banks on the A$936 million clubfinancing of an international wheat, barley and canolaproducer.• Advising a syndicate of banks on the A$104 millionsyndicated financing of a global industrial diversifiedwheat producer.• Advising a syndicate of banks on the A$144 millionsyndicated financing of a major dairy processor,manufacturer and distributor.• Advising an Australian building products manufactureron the refinancing of its A$535m Australian andoffshore facilities.• Advising a club of 7 banks on the provision of a A$200million multicurrency facility to a global manufacturerof polymer resins.• Advising a large Australian bank on the A$185 millionfinancing of a leading Australian listed REIT’s acquisitionof ten regional shopping centres across NSW,Queensland and Western Australia.Professional qualifications. Bachelor of Laws (MacquarieUniversity); Admitted in Australia (New South Wales), 1992;Admitted in Australia (ACT), 1999Areas of practice. Project/PPP Finance, REIT Finance, CorporateFinance and Property and Construction Finance.Non-professional qualifications. Bachelor of Economics(Macquarie University), 1991Recent transactions• Acting on syndicated financings for listed and wholesalefunds, including Mirvac Group, Charter Hall Office REIT,various Goodman Group funds, Australand Property Group,various AMP Capital funds, Colonial’s Direct PropertyInvestment Funds and Abacus Property Group.• Advising the bank group on Lend Lease’s Barangaroo SouthProject.• Advising the bank group on Fraser/Sekisui’s joint venture‘Central Park’ project in Sydney.Professional associations/memberships. Banking & FinanceServices Law Association, Committee Member; Law Society ofNew South Wales; Asia Pacific Loan Market AssociationCountry Q&AProfessional associations/memberships. Law Society ofNew South Wales; Asia Pacific Loan Market AssociationFOR MOREINFORMATIONabout this publication, please visit www.practicallaw.com/finance-mjgabout Practical Law Company, please visit www.practicallaw.com/about/practicallaw

MULTI-JURISDICTIONAL GUIDE 2013FINANCECONTRIBUTOR PROFILESLEIGH DE JONGPartnerMinter EllisonT +61 2 9921 4662F +61 2 9921 8162E leigh.dejong@minterellison.comW www.minterellison.comSTEWART ROBERTSONPartnerMinter EllisonT +61 2 9921 4962F +61 2 9921 8010E stewart.robertson@minterellison.comW www.minterellison.comCountry Q&AProfessional qualifications. Bachelor of Laws (Honours)(Monash University); Admitted in Australia (New SouthWales), 2004; Admitted in Australia (Victoria), 2004Areas of practice. Project Finance, Construction andProperty Finance, Corporate and REIT Finance and Energyand Resources Finance.Non-professional qualifications. Bachelor of Business(Monash University)Recent transactions• Advising a major Australian bank on revolving cashadvance and bank guarantee facilities to the newlyformedSCA Property Group in connection with thespin-off of Woolworths’ property portfolio in Australiaand New Zealand (consisting of 69 neighbourhood,sub-regional and freestanding shopping centres) valuedat approximately A$1.4 billion.• Advising a major Australian bank in relation to aconstruction facility for a commercial office tower in the‘Kings Square’ development in Perth.• Advising Export Development Canada in relationto export credit provided by it (via reinsurancearrangements) in connection with Brookfield Rail’sUS$882 million combined project and corporatefinancing, to be used to fund the expansion program forits track infrastructure throughout the mid-west of WA.Professional qualifications. Bachelor of Laws (CanterburyUniversity); Master of Laws (Honours) (Canterbury University);Admitted in New Zealand (Canterbury), 1995; Admitted inEngland and Wales, 1998; Admitted in Australia (New SouthWales), 2003Areas of practice. Leveraged and acquisition finance, M&Afinance, corporate finance, syndicated finance, bilateral financeand property and construction finance.Non-professional qualifications. Bachelor of Commerce(Canterbury University)Recent transactions• Advising Oil Search Limited on its US$500 million selfarranged syndicated facilities.• Advising the Mezzanine Agent in respect of the creditors’scheme of arrangement for NEC (formerly PBL Media).• Advising the syndicate of international and domesticfinanciers in respect of facilities provided to Hastie GroupLimited and subsequent restructuring of those facilities.Professional associations/memberships. Law Society of NewSouth Wales; Asia Pacific Loan Market AssociationProfessional associations/memberships. Law Society ofNew South Wales; Asia Pacific Loan Market AssociationFOR MOREINFORMATIONabout this publication, please visit www.practicallaw.com/finance-mjgabout Practical Law Company, please visit www.practicallaw.com/about/practicallaw