Before the passage of the PPSA, banks and other financial intermediaries generally prefer traditional

forms of security (e.g., realty) when processing and granting loan applications. This previous set-up
posed challenges to MSMEs (Micro, small, and medium enterprises). The PPSA remedies this by
introducing key reforms through the introduction of a streamlined process in creating and perfecting
security interests, as well as the establishment of an Electronic Registry by the Land Registration
Authority.

Under the PPSA, a security interest over personal property is created through a security agreement. In
creating a security interest, it is sufficient that the collateral be reasonably identified, whether in a
general or specific manner. Further, the PPSA allows a security agreement to provide a security interest
in future property; provided, that the security interest in such property will be created only when the
grantor acquires rights in it or the power to encumber it.

The PPSA likewise simplified and harmonized the rules on creation, perfection, and enforcement of
security interest over personal property. Prior to the PPSA, there were several key differences in the
creation, perfection, and enforcement of personal properties used in a pledge contract or chattel
mortgage. For example, to bind third persons, a pledge must be in a public instrument containing the
description of the thing pledged, while in a chattel mortgage, registration in the Chattel Mortgage
Registry was required.

In contrast, the PPSA only requires a signed written contract to create a security interest. To further bind
third persons, the security interest may be perfected through any of the following means: (i) the
registration of a notice with the Electronic Registry; (ii) possession of the collateral by the secured
creditor; and (iii) control of investment property and deposit accounts.

In terms of enforcement, the PPSA now allows the secured creditor to sell or dispose the collateral,
either in a public or private sale. Moreover, the debtor is now required by law to satisfy any deficiency
after the proceeds of said sale or disposition have been collected.

As mentioned, the PPSA requires the establishment of the Electronic Registry to reduce the risks
involved in banks accepting personal property as security. It shall provide electronic means for
registration and searching of notices, which refer to registered information relating to a security interest
or lien in personal property such as the (a) identity of the grantor by an identification number and the
secured creditor by name; (b) address of the grantor and the secured creditor; (c) description of the
collateral; and (d) payment (or arrangement) of the prescribed fees. It essentially allows any person to
search and verify the status of personal property, specifically on whether it is already covered by an
existing security agreement.

Finally, the law provides that the implementation of the PPSA is conditioned upon the establishment of
the Electronic Registry, in consonance with the promulgation of the law's implementing rules and
regulations.

The following laws, decrees, and issuances and portions thereof which are inconsistent with the
provisions of R.A. 11057, had been repealed, amended, and modified accordingly:
Sections 1 to 6 The Chattel Mortgage Law;
Articles 2085-2123, 2127, 2140-2141, 2243, and 2246-2247 of the Civil Code of the Philippines;
Section 13 of the Financing Company Act of 1998;
Sections 10, 114-116 of the Property Registration Decree; and
Section 5(e) of the Land Transportation and Traffic Code.

https://www.divinalaw.com/securing-obligations-movable-assets/
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