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Perfection of Security Interest Under Personal Property Security Act

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Perfection of Security Interest Under Personal Property Security Act

 

AT A GLANCE:

Under Sec. 11-12, Chapter 3 of the Personal Property Security Act, a security interest shall be perfected when it has been created and the secured creditor has taken one of the following actions: a) Registration of a notice with the Registry; b) Possession of the collateral by the secured creditor; and c) Control of investment property and deposit account.

When does a security interest become perfected?

 

Republic Act No. 11057 or Personal Property Security Act provides that:

Security interest is a property right in collateral that secures payment or other performance of an obligation, regardless of whether the parties have denominated it as a security interest, and regardless of the type of asset, the status of the grantor or secured creditor, or the nature of the secured obligation; including the right of a buyer of accounts receivable and a lessor under an operating lease for not less than one (1) year.

 

A security interest shall be perfected when it has been created and the secured creditor has taken one of the following actions:

(a) Registration of a notice with the Registry;

(b) Possession of the collateral by the secured creditor; and

(c) Control of investment property and deposit account.

 

On perfection, a security interest becomes effective against third parties.

 

A security interest in any tangible asset may be perfected by registration or possession whereas a security interest in investment property and deposit account may be perfected by registration or control.

 

A security interest in an instrument or negotiable document that is perfected by possession has priority over one that is perfected by registration of a notice in the registry.

 

A security interest shall remain perfected despite a change in the means for achieving perfection: provided, that there was no time when the security interest was not perfected. 

 

If a secured creditor assigns a perfected security interest, an amendment notice may be registered to reflect the assignment. 

 

Related article: What is Personal Property Security Act?

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Alburo Alburo and Associates Law Offices specializes in business law and labor law consulting. For inquiries regarding legal services, you may reach us at info@alburolaw.com, or dial us at (02)7745-4391/ 09175772207/ 09778050020.

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