The origins of the project
The Secured Transaction Law Reform Project was established under the Executive Directorship of Professor Sir Roy Goode in order to involve interested parties from the professions and the relevant sectors of finance, commerce and industry as participants in the work of considering the effectiveness of the current law, and the ways in which it can be improved. It is guided by a Steering Committee originally chaired by the late Lord Bingham of Cornhill, and now by Lord Saville of Newdigate. Professor Goode has now retired as Executive Director and has been succeeded by Professor Louise Gullifer.
Why the project exists
Given the status of London as one of the world’s leading financial centres, and of English law as one of the leading systems of transactional law, it is particularly important that we should have a modern personal property security law which is responsive to the needs of the commercial and financial community. The current law of secured transactions has clear strengths but, in comparison to that in many leading economies around the world, it is out-of-date and cumbersome. It is difficult to access, complex and, in many respects, unclear. It is true that practitioners and financiers have developed ways of working around the most egregious problems, and of limiting uncertainty by the use of contractual devices. However, this has the effect of increasing the cost and availability of credit and means that we do not have the most efficient system we could have. The project therefore exists to examine how the current position could be improved.
Why reform is needed
A document has been prepared by the project setting out in detail the case for reform. Business is entitled to expect certain features of a secured transaction law: that it is cheap, easy and safe to take security over any future or existing assets, that those taking security can find out about other interests in assets and can protect their own interest by giving effective public notice, can be certain about their priority position and can enforce their interest effectively. The case for reform points out certain shortcomings of current English law, in particular the drawbacks that come from registration not being a priority point, and the fact that the register does not include all interests which perform similar functions to security interests. The complexity of the law is highlighted, particularly in relation to priority, enforcement and insolvency, as well as the lack of accessibility, particularly to those from other jurisdictions, of law which is found in a mixture of case law and statutes. Finally, the difficulties of specific legislation concerning financial collateral and security interests granted by businesses which are not companies is pointed out. The case for reform makes clear the benefits of a system similar to that adopted by the US, Canada, Australia, New Zealand and Jersey, and set out in the Law Commission Consultative report No. 176: the PPSA regime.
The PPSA regime
The key feature of such a regime are that there would be a single type of security interest, to which the same rules of registration, priority and enforcement applied. Perfection, whereby the interest is made valid against other creditors and in the debtor’s insolvency, would be either by registration, possession or control. Registration could be in advance of creation and priority would be by date of perfection, subject to an exception for purchase money security interests. Structures which had the same function as security, such as hire purchase agreements, finance leases and outright assignments of receivables would also be registrable and would fall under the same priority rules. While the floating charge would no longer be a distinct type of security interest, a security agreement could provide that the debtor could dispose of assets, and the scheme would provide that purchasers of cash and goods which the debtor usually sold would automatically take free of any security interest. The position on insolvency were the floating charge to cease to be a distinct type of security interest is being considered by one of the working groups of the project.
The work of the project: working groups
Four working groups are currently examining four specific areas:
- The creation and perfection of security interests
- Enforcement and insolvency
- Financial collateral
The working groups have taken the Law Commission’s Report no. 176 as a starting point for discussion. They are reviewing the problems with the current law in a particular area and considering whether the Law Commission’s proposals are the best way forward. Discussion and research papers produced by the working groups are available on this website. We welcome comments on any aspect of the work of the working groups, and any interested party is welcome to join.
The work of the project: seminars and conferences
The project organises seminars and conferences about reform of secured transaction law. Details of past and future events, including resources, can be found on our News and Events page.
The work of the project: resources
Reform of the law of secured transactions is a subject of debate and interest all over the world. Many jurisdictions are in the process of reforming their law, or have already enacted widescale reform. We include resources in the pages dedicated to reform in other jurisdictions.
The project benefits from research funded by the University of Oxford’s ESRC Impact Acceleration Account (pilot)