Movable Property Security Rights Act, 2017

• Kenya Gazette Supplement No. 72 (Acts No. 13) contains the Movable Property Security Rights Act, 2017 for the Republic of Kenya.
• The Act was enacted by the Parliament of Kenya.
• It was assented on May 10th, 2017.
• The act will commence by notice.

Purpose

• To facilitate the use of movable property as collateral for credit facilities.
• To establish the office of the Registrar of security rights.
• To provide for the registration of security rights in movable property and for related purposes

Movable Property Security Rights Act, 2017, Part 1 - Preliminary

• This Act may be cited as the Movable Property Security Rights Act, 2017.

• This Act shall come into force on such date as the Cabinet Secretary may, by notice in the Gazette, appoint.

• Defines key terms used throughout the Act:

• Acquisition security right: A security right in a tangible asset or intellectual property, securing the obligation to pay any remaining part of the purchase price.

• Attachment to immovable property: A tangible asset treated as movable property even if physically affixed to immovable property.

• Board: The Board of Directors established under section 5 of the Business Registration Service Act, 2015.

  • Cabinet Secretary: The Cabinet Secretary responsible for the registration of security rights.

• Collateral: A movable asset subject to a security right, or a receivable subject to an outright transfer.

• Commingled assets: Funds credited to a deposit account or mixed with other funds so they cannot be identified.

• Commingled goods: Goods physically united with other goods, losing their individual identity.

• Competing claimant: A creditor or other person with rights in the collateral that may compete with a secured creditor.

• More definitions:

• Consumer goods: Goods primarily used for personal, family, or household purposes.

• Credit purchase transaction: A hire-purchase agreement, conditional sale agreement, chattel leasing agreement, or retention of title agreement.

• Credit sale agreement: An agreement for the sale of goods under which payment of the whole or a part of the purchase price is deferred and a security interest in the goods is created.

• Debtor: A person that owes payment or other performance of a secured obligation, including a secondary obligor such as a guarantor.

• Debtor of the receivable: A person that owes payment of a receivable, including a guarantor.

• Deposit account: An account maintained by a licensed institution under the Banking Act.

• Electronic securities: Securities not represented by a certificate.

• Equipment: Tangible assets, other than inventory or consumer goods, used by the grantor in the operation of its business.

• Even more definitions:

• Financial lease: A lease where the lessee becomes the owner, may acquire ownership for a nominal price, or the asset has minimal residual value at the end of the lease.

• Future asset: A movable asset that doesn't exist or the grantor lacks rights or power to encumber at the time the security agreement is concluded.

• Grantor: A person creating a security right, a buyer/transferee of the collateral, or a transferor in an outright transfer of a receivable

• Intangible asset: Includes receivables, choses in action, deposit accounts, electronic securities, and intellectual property rights.

• Intellectual property: Copyright as defined in the Copyright Act, 2001, Industrial property rights as defined in the Industrial Property Act, 2001, trade mark as defined in the Trade Marks Act, and any other related right.

• Inventory: Tangible assets held by the grantor for sale or lease.

• Money: Bank notes and coins issued by the Central Bank of Kenya or authorized as legal tender by another country.

• Movable asset: Any tangible or intangible asset.

• Last lot defininitions:

• Negotiable document: A document, such as a warehouse receipt or bill of lading, that embodies a right to delivery of tangible assets and meets the requirements for negotiability;

• Negotiable instrument: Defined as a bill of exchange, cheque and promissory note in the Bills of Exchange Act;

• Non-consensual creditor: A creditor obtaining rights in the collateral by law, including execution processes or unpaid taxes;

• Notice: Communication to the Registrar in the prescribed form, giving information of an initial amendment or cancellation notice;

• Notification of a security right in a receivable: A communication by the grantor or secured creditor as required under section 60, informing the debtor of the receivable about the security right;

• Outright transfer of a receivable: Transfer of ownership of the contractual right to receive payment from a third party;

• Possession: the actual possession of a tangible asset by a person or its representative, or by an independent person that acknowledges holding it for that person;

• Proceeds: What is received in respect of the collateral following a sale, lease, licence, insurance claim, or any damages to the collateral;

• Registrant: the person who submits the prescribed registry notice form to the Registrar;

• Registration number: Unique number assigned to a registered initial notice by the Registrar;

• Registrar: the person appointed under section 19 to supervise and administer the operations of the Registry;

• Registry: The registry established under section 19;

• Registry Records: Information consisting of publicly accessible and archived records;

• Securities: Meaning assigned to it under section 2 of the capital markets act (Cap. 485A);

• Security agreement is an agreement denoted as a security agreement, or an agreement that provides for the outright transfer of a receivable;

• Security right means a property right in a movable asset created to secure payment or the right of a transferee in an outright transfer of a receivable;

• Serial number, The serial number located on the chassis or body frame of a vehicle;

• Serial-numbered collateral, a motor vehicle or trailer as defined in section 2 of the Traffic Act;

• Tangible asset: All type of goods including crops, livestock and motor Vehicles, etc

• Trust indenture: Any deed by which a person issues guaranteed debt obligations secured by a security right, where a person is appointed as trustee for the holder of the debt obligation;

• "Trust receipt" An acknowledgment of the grantor in writing to deal with the benefit of a secured creditor;

• Working day any day from Monday to Friday except a public holiday;

Objectives of the Act

• Promote consistency and certainty in secured financing relating to movable assets.
• Enhance the ability of individuals and entities in accessing credit through the use of movable assets.
• Establish an office of the registrar to faciliate the registration of the security of movable assets

Scope of application

• Applies to security rights in movable assets including transactions that secure payments and chattel mortgages, credit purchase and sale agreements.

• Excludes, security rights in book-entry securities under the Central Depositories Act 2000, the creation/lease or transfer of an interest in land, boat and aircrafts ,a lien or any other interest created by law;

• The Act does not apply to security rights in proceeds of collateral governed by another law

• Does not affect rights and obligations conferred on the grantor and secured creditor under the consumer protection Act 2012;

• does not override a provision of any law that limits creation or enforcement of security on an asset

• Party autonomy and standard of conduct:

  • Provisions of this act may be waived by agreement except for sections 5(2), 6, 8, 56, 57, 80-87 provided agreement does not affect rights of anyone not party to the agreement

• Persons shall exercise their rights diligently and in good faith;

Part II—CREATION OF A SECURITY RIGHT

• Generally, a security right is created by a security agreement, if the grantor has rights in the asset to be encumbered. The right in that asset is created on acquisition by the grantor, or if they the power to encumber it; Security agreements must meet the following writing and identity requirements.

• The agreement must:

  • Be in writing
  • Be signed by the grantor
  • Identify the secured creditor and the grantor Describe the secured obligation, unless it is a receivable agreement;
  • Describe the collateral as in Section 8 A security agreement is enforceable and creates a security right, irrespective of other written laws

• A single security right may secure more than one potential present or future obligation, either conditional.unconditional, fixed or fluctuating; ; A security right may encumber:

• Any movable asset tangible or intangible;

• Part of assets and undivided rights in movable assets;

• Generic categories of movable assets and lastly;

• All of a grantor’s movable assets.

• Description of required Collateral:

  • Section 8 stipulates that encumbered assets or those about to be encumbered shall be described in an agreement reasonably allowing identification;
  • A description indicating that the collateral consists of all of the Grantor's moveable assets satisfies the standard in subsection 1;

• Rights extend to identified proceeds Commigled assets:

  • A security right extends to commingled assets
  • The security right in the commingled assists is limited to the amount of proceeds before they became co-mingled;
  • The obligation secured by the security right is limited to the lowest amount between commingling when proceeds were commingled and the time the security right in the proceeds is claimed;

• Collateral security extends to commingled goods;

• Contractual limitations on the creation of a security right:

  • Receivable security rights are affective despite limitations to do so as per agreement between the grantor and and a secured creditor and against debtor of the receivable or any subsequent creditor;

• Doesn't affect obligations of the grantor for breach of that section and the other party may not; Avoid the contract or the security agreement on the sole ground; Raise against the secured creditor any claim the party may have against the grantor as a result of a breach;

• A person who is not party to the agreement referred to in subsection 1 cannot be held liable for any damages resulting from the grantor's breach of the agreement on the ground that it had knowledge of that agreement ;

• Section applies only to receivables from the supply or lease of goods or services other than financial services under; Banking Act. Building Socities Act Microfinance Act, 2006 Sacco Socities Act, 2008

  • This section also applies to the following construction contract a contract for the sale or lease of immovable property a contract for the sale/lease/ licence of intellectual property or of proprietary information;

• A security right in a right to payment of friends credited to a deposit account is affective despite of an agreement between the grantor and financial institution agreement

• A secured creditor with a security right in a receviable or other intangible asset, benefit from any personal or property right that secures or supports payment or other performance of the collateral without a new asset of transfer; (2) Where the right referred to in subsection (1) is transferable only with the new act of transfer; The grantor may obtain to transfer that secured benefit of that asset; A negotiable security asset extends to that security asset covered in that document and the issuer must poses the that asset right. Tangible assets include with respect to individual property is used to not extend and intellectual property, And are you right to use or extend in the tangible property to the

Part III-THIRD-PARTY EFFECTIVENESS OF A SECURITY RIGHT

• Effective against third parties upon notice with the registrars.
• If the security right in the collateral is effective against third parties, and that security right is in type of proceeds subsection 1 states which proceeds are: Effective against third parties or for 10 days
• Any other amendments
• Transfer of security can be made with transfer by secured creditor: (2) a transffere of security right can be effective or not (8) negotiable documents and tangible asset:

Part IV—REGISTRATION OF NOTICES RELATING TO SECURITY RIGHTS

• Registrar office is shall be establish to oversee general registry running

• registry function shall receive and make accessible to the public;

• registry records shall registered and non consensual creditors; Section 13 - appointment The board may appoint (A) Person as registrant (8) Staff registrar: :Registrars shall or own a motion to delete the amendment nor delete Information contained in the registry record Section (2) record preserve Information Contained and registrants records to reconstruct that information in the event of lost it

• Section (1) of the registrant shall only remove public the expiry of the period.

• Section (2): Registrars shall active information (A) 5 year Section (5) Retrievals Any of those shall be hold liable of the Registrar’s authority, if that action is don under the authority of action or faith. There shall be charge of the Registrar The information of notices a single registrants relate more then the

• Initial information: Identifier address of grantior;

• The follow registration information (A the identifier

• There will the Registrars assigns that Registration information (2) registration shall receive and make accessible to the public the effective from that to which time

2 Registration (4) registry registrar shall not record a record which was entered into Section 33-Compulsory Registration (A and B) registration and what was done in writing (5) give an effected registration: Registrars shall the note the security records/credentials Section: Searches (A+B) Registration identification

• There shall be some registration requirements for the identifiers and what the registrar do and see to Errors: Section 5 (1-6) for the errors with registered authority must not be identifier

(2b transfer identifiers of those registrars and with the 30 or 60 says there should be note of that Identifier on the security right .

• The secured transfer (3) 1- (a) (b) what those secured authority (A. B AND C) creditors there in the section if do transfer but the with notice there will be amended of the identification records. Section V: Priority

• • There authority of the part shall see what type of security those identified.

Priority of a security right.

• A secured is the created as subordination to that security Priority of security will see those

• A secured security rights over a transfer Any right of a transfer (1) non consensual

• Part B:

(b) to the debtors then in any order and in a particular (11.) or payment in accounts

• The credit report from is entitled collection Then there shall what in the payment those identified.

• The parties what authority And there by it or is the power of law .

• • Collection of some sort in those collection Part Viii- Application the law If they enter those it can

• Section (8) is they if and it not with in the country so what happens so will see within that To see what applies:

• • Is where their business is or is there home as A ( 1 +5(2) what the time as what comes through the way for the authority Section 258. what of it to make sure what’s what what authority comes to be for certain reasons

Section 48: - General powers What the sectary or general powers

• 36:52 Section with it to all come forth of .The with in their .It and it not with in country so what happens so will see with in that. To see what applies: