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Commercial Transactions - MPSR

MPSR

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26 views17 pages

Commercial Transactions - MPSR

MPSR

Uploaded by

kerriemelissa5
Copyright
© © All Rights Reserved
We take content rights seriously. If you suspect this is your content, claim it here.
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Download as PDF, TXT or read online on Scribd
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Commercial Transactions

MOVABLE PROPERTY SECURITY


RIGHTS

|Date: 01.02.21 | Time: 7 - 9 pm |Location:Virtual


The MPSR ACT 2017

 This Act came into force on 16 May 2017. The


regulations to the Act were subsequently enacted on
2 June 2017.

 The Act aims at facilitating the use of moveable


property as security by both individuals and
corporates and to provide for the registration of
security rights in moveable property. However, not
all moveable property can be used as security under
the Act.
MPSR ACT 2017

 The Act repeals the Chattels Transfer Act (the CTA)


and the Pawnbrokers Act.
Application of the Act

 The Act essentially provides for the creation of


security rights over movable assets: which is defined
as both tangible and intangible assets.
 It allows for the use as security of all types of tangible
assets (goods (including motor vehicles, crops,
machineries and livestock) and intangible assets
(receivables, choses in action, deposit accounts,
electronic securities, intellectual property rights, etc
Application of the Act cont'

 The Act applies to security rights in movable assets


in all transactions without regard to its form or the
person who owns the collateral, and includes a
chattels mortgage, credit purchase
transaction, credit sale agreement, floating
and fixed charge, pledge, trust indenture, trust
receipt, financial lease, and any other transaction
that secures payment or performance of an
obligation, including an outright transfer of a
receivable.
 The Act does not apply to certain transactions,
including the creation, lease or transfer of an interest
in land, security rights in shipping vessels, aircraft
and liens, charges and other interests, and certain
proceeds.
I. Creation of security right

 A security right is created by a security agreement,


provided that the grantor has rights in the asset to be
encumbered or the power to encumber it.
 The security agreement must be in writing and
signed by the grantor;
 it must also identify the secured creditor and the
grantor,
 except in the case of an agreement that allows for the
outright transfer of a receivable, it should also describe
the secured obligation and the collateral.
II. Registration of Security Rights

• The registration of a notice is ineffective unless authorized by the


grantor in writing; a written security agreement is sufficient
authorization.

 One notice is sufficient for security rights granted by one grantor


under multiple security agreements. Registration shall be
effective when the information is entered in the registry records.

 The registration of an Initial notice shall be effective for not more


than 10 years. The period of effectiveness may be extended (from
its expiry date) by not more than 10 years through the
registration of an amendment notice filed within six months
before the expiry of the initial notice.
III.Third party security rights

 A security right in any moveable asset is effective


against third parties if a notice with respect to the
security right is registered with the Registrar.
 This will make it easier for creditors to enforce their
securities. Creditors will not only be able to sue a
borrower for the debt but also recover their securities
and the proceeds of a secured asset from third
parties who may have subsequently acquired rights
over the secured asset.
IV.Priority

 The rule of thumb in prioritization of security


rights is that the first in time shall prevail. Just as
charges in land, security rights in moveable
property rank in priority in accordance with the
date of registration.

 In certain situations, there may be competing


interests in the same collateral created by different
grantors.
Priority con't

 In such a scenario, the subsequent grantor’s


rights shall be subordinate to the initial
grantor’s rights if the initial grantor acquired
the security right which was effective as against
3rd parties and the subsequent grantor
acquired the collateral subject to the security
right of the initial grantor.
V. Enforcement of security rights

 In case of default regarding any obligation, the


secured creditor shall issue a detailed notification in
writing or as agreed between the parties, to pay or
perform the agreement.
 Failure to comply allows the secured creditor to:
a. sue;
b. appoint a receiver;
c. lease;
d. take possession; or
e. sell the collateral.
Enforcement con't

 However, the court may postpone a suit until all


other available remedies are exhausted, or it may
order parties to resort to alternative dispute
resolution.
Sale of the collateral

 The secured creditor may buy the collateral at a public


auction, or if the property is of the kind customarily
sold on a recognizable market, through a private
treaty.

 The secured creditor shall send a detailed notification


of at least 5 working days to the debtor and grantor
before the sale, lease or licence, etc takes place. Such
notification need not be given if the collateral may
perish before expiry of 10 days after the secured
creditor obtains possession.
Application of the proceeds of Sale

 The priority of payments regarding the proceeds of


disposition of collateral are:
(a) repossession and disposal expenses;
(b) satisfaction of obligations secured by the security
right; and,
(c) conditional satisfaction of obligations secured by
a subordinate security right holder.
The debtor will remain liable if the proceeds are not
enough to
Conclusion

Questions Answers
1. … … … 1. … … …
2. … … … 2. … … …
3. … … … 3. … … …
4. … … … 4. … … …
5. … … … 5. … … …
EMMANUEL Managing Partner
OTIENO OO Centre,
OUMA Centre for Research, Policy &
LLB (Hons) MOI Consultancy
2018
PGD KLS (2019) [email protected]

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