Lenders have been advised to register initial notices for pre-existing securities right before February 16th this year, failure to which they will be unable to effect security against third parties competing for similar rights.
This comes after the Movable Property Security Rights Act was assented into law in 2017 requiring the registration of pre-existing security rights over assets to be done within 9 months after the Act’s commencement date of May 2017.
According to Esther Omulele of MMC Africa Law, “under section 92 (1) of the Act, prior security rights created and registered before the commencement of the Act would remain effective against third parties until the earlier of either the time the security right would have ceased to be effective under the prior applicable law or the expiry of 9 months after the new law came into effect.”
She also advises that all financiers holding security rights registered under the now repealed Chattels Transfer Act should register all initial notices through the e-citizen portal to secure their rights.
To effect the registration, a lender is required to provide a copy of their national identity card or passport, certificates of incorporation or registration where possible, KRA pin of both the lender and debtor, postal and email address, phone numbers, description of whether debtors authority has been obtained or not, a copy of security instruments, right obtained through a court order or copy of the decree and an identifier of the secured collateral such as serial number or chassis number.
Miss Omulele also notes that it is possible to file a notice on behalf of another entity or person and lawyers can therefore register initial notices on behalf of their clients.
The Act now allows for the registration of security over a new class of assets such as intellectual property.
Lenders therefore need to move with speed to safeguard their security rights in respect of any facilities that may have been advanced to borrowers before the window period lapses on Friday this week.