Question & AnswerQ&A (Republic Act No. 11057)
The official title is the "Personal Property Security Act."
The policy is to promote economic activity by increasing access to least cost credit, especially for micro, small, and medium enterprises (MSMEs), through a unified and modern legal framework for securing obligations with personal property.
Security interest is a property right in collateral that secures payment or other performance of an obligation, regardless of the denomination, asset type, grantor or creditor's status, or secured obligation nature; includes buyer of accounts receivable and lessor under lease for not less than one year.
Interests in aircraft subject to Republic Act No. 9497 (Civil Aviation Authority Act of 2008) and interests in ships subject to Presidential Decree No. 1521 (Ship Mortgage Decree of 1978) are excluded.
A security interest is created by a security agreement, which is a written contract signed by the parties, possibly covering future property rights once the grantor acquires them.
Perfection may be by: (a) registration of a notice with the Registry; (b) possession of the collateral by the secured creditor; or (c) control of investment property and deposit accounts.
Perfection by control involves written agreements among grantor, secured creditor, and intermediary allowing the secured creditor to direct payments or value distribution without further grantor consent, applicable to securities, deposit accounts, and commodity contracts.
Once perfected, a security interest becomes effective against third parties, establishing the secured creditor’s rights and priority over others.
Priority among security interests and liens in the same collateral is determined by the time of registration or perfection by other means, regardless of the order of creation.
A PMSI in goods like equipment, consumer goods, inventory, intellectual property, or livestock may have priority if registration and notification requirements are met within specified periods, even over conflicting security interests.
The Registry, established under the Land Registration Authority, provides electronic means for registration and searching of notices related to security interests, serving as a centralized public record.
The notice must identify the grantor by identification number, the secured creditor or agent by name, addresses for both, describe the collateral, and include payment of prescribed fees or arrangements.
If the security agreement stipulates and possession can be taken without breach of the peace, the secured creditor may repossess the collateral without judicial process.
The secured creditor must act in a commercially reasonable manner and notify the grantor and other interested parties at least ten days before disposition unless the collateral is perishable, rapidly declining in value, or commonly sold on a recognized market.
The buyer acquires the grantor’s rights free of any secured creditor or lien holder’s rights, provided the sale was conducted in accordance with the law.
Yes, a grantor can demand amendment or termination if all obligations are performed, there is no future commitment, collateral was released, incorrect collateral is described, no security agreement exists, or the security interest is extinguished.
A person who registers notices or conducts Registry searches with frivolous, malicious, or criminal intent is subject to civil and criminal penalties according to relevant laws.
Security interests in deposit accounts do not affect the rights and obligations of deposit-taking institutions without their consent, nor require these institutions to disclose information to third parties.
The security interest continues in collateral despite sale, lease, license, exchange, or other disposition except as otherwise provided or agreed.
It takes effect 15 days after publication in two newspapers of general circulation and its implementation is conditioned upon the establishment and operation of the Registry.