In a highly commendable move, last Friday the five international law firms of Allens, Ashurst, Herbert Smith Freehills, King & Wood Mallesons and Norton Rose jointly released “the PPSA model clauses” for a General Security Agreement (GSA), which they had been working on together to prepare. The clauses may be found on the websites of all of those firms. Here is the link to the announcement on Allens’ site (link), and to the model clauses themselves (link).
They note that where different firms take different approaches to some essential elements of GSAs, those differences are not necessarily a matter of right/wrong, better/worse, but can cause confusion and unnecessary negotiation as parties seek to impose their preferred position on others, often based on an imperfect understanding of another firm’s approach. Without guidance, they observe, it may take a long time before the market settles.Their stated objective in jointly publishing the clauses, is to assist the functioning of the market post-PPSA, with a view to helping the market to develop a settled practice. They also believe this is in clients’ interests.
Their joint announcement reads in part as follows –
“A document that was heavily affected by the Personal Property Securities Act 2009 (Cth) (the PPSA) was the traditional fixed and floating charge….The replacement for the fixed and floating charge is now usually called a General Security Agreement (or Deed) (the GSA)…
The PPSA model clauses…represent a distillation of the [five] firms’ thinking on several important issues and are consensus positions. They are not biased towards either grantors’ or secured parties’ interests…The footnotes that accompany the clauses explain the PPSA thinking behind the decisions made in settling the [clauses]. They help understand the intended operation of these provisions. However, they do not constitute advice to any person.
These clauses have been adopted into the firms’ precedent GSAs. The firms have no objection to them being used by any other person in the market if they consider them appropriate for their precedents or a particular transaction….”