Movable Property Security Rights Act

Section 1. Short title Section This Act may be cited as the Movable Property Security Rights Act.

Section 2. Interpretation Section a movable asset that is subject to a security right; or

Section 3. Objects Section promote consistency and certainty in secured financing relating to movable assets;

Section 4. Scope of application Section 4(1)(a) every transaction that secures payment or performance of an obligation, without regard to its form and without regard to the person who owns the collateral; Section 4(1)(b) without limiting the generality of paragraph (a), a chattel 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; and Section 4(1)(c) with the exception of Part VII, an outright transfer of a receivable. Section 4(2)(a) a security right in book-entry securities under the Central Depositories Act (Cap. 485C); Section 4(2)(b) the creation, lease or transfer of an interest in land, excluding a right to payment that arises in connection with an interest in or a lease of land; Section 4(2)(c) a security right in a vessel including a mortgage right subject to the Merchant Shipping Act (Cap. 389); Section 4(2)(d) a security right in an aircraft subject to the Civil Aviation Act (Cap. 394); and Section 4(2)(e) except as otherwise provided in this Act, a lien, charge or other interest created by law. Secti...

Section 5. Party autonomy and standard of conduct Section 5(1) Except for sections 5 (2) 6 , 8 , 56 , 57 and 80 to 87, the provisions of this Act may be derogated from or varied by agreement, provided that the agreement does not affect the rights or obligations of any person that is not a party to the agreement. Section 5(2) A person shall exercise the rights and perform the obligations under this Act diligently and in good faith.

Section 6. Creation by execution of a security agreement Section 6(1) 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. Section 6(2) A security agreement may provide for the creation of a security right in a future asset, but the security right in that asset is created only at the time when the grantor acquires rights in it or the power to encumber it. Section 6(3)(a) be in writing and signed by the grantor; Section 6(3)(b) identify the secured creditor and the grantor; Section 6(3)(c) except in the case of an agreement that provides for the outright transfer of a receivable, describe the secured obligation; and Section 6(3)(d) describe the collateral as provided in section 8 . Section 6(4) A security agreement entered into in accordance with this section is enforceable and creates a security right, irrespective of the satisfaction of the requirements that may be imposed by any other written law.

Section 7. Obligations that may be secured and assets that may be encumbered Section 7(1) A security right may secure one or more obligations of any type, present or future, determined or determinable, conditional or unconditional, fixed or fluctuating. Section 7(2)(a) any type of movable asset, whether tangible or intangible; Section 7(2)(b) parts of assets and undivided rights in movable assets; Section 7(2)(c) generic categories of movable assets; and Section 7(2)(d) all of a grantor's movable assets.

Section 8. Description of collateral Section 8(1) The assets encumbered or to be encumbered shall be described in the security agreement in a manner that reasonably allows their identification. Section 8(2) A description that indicates that the collateral consists of all of the grantor's movable assets, or of all of the grantor's movable assets within a generic category, satisfies the standard of subsection (1). Section 8(3)(a) specific listing; Section 8(3)(b) category; Section 8(3)(c) a type of collateral defined in this Act; or Section 8(3)(d) quantity. Section 8(4) The obligations secured or to be secured shall be described in the security agreement in a manner that reasonably allows their identification. Section 8(5) A generic description of the secured obligations satisfies the standard of subsection (4).

Section 9. Right to proceeds Section 9(1) A security right in an asset extends to its identifiable proceeds. Section 9(2)(a) the security right extends to the commingled assets; Section 9(2)(b) the security right in the commingled assets is limited to the amount of the proceeds immediately before they became commingled assets; and Section 9(2)(c) if at any time after the commingling, the balance credited to the deposit account or amount of money is less than the amount of the proceeds immediately before they became commingled assets, the obligation secured by the security right that is enforceable against the commingled assets is limited to the lowest amount between the time when the proceeds were commingled and the time the security right in the proceeds is claimed.

Section 10. Tangible assets commingled in a mass or product Section A security right in collateral extends to commingled goods.

Section 11. Contractual limitations on the creation of a security right Section 11(1) A security right in a receivable is effective as between the grantor and the secured creditor and as against the debtor of the receivable despite an agreement limiting the grantor's right to create a security right entered into between the grantor and the debtor of the receivable or any subsequent secured creditor. Section 11(2)(a) avoid the contract giving rise to the receivable or the security agreement on the sole ground of the breach of that agreement; or Section 11(2)(b) raise against the secured creditor any claim the party may have against the grantor as a result of that breach. Section 11(3) A person who is not a 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 sole ground that it had knowledge of the agreement. Section 11(4)(a) a contract for the supply or lease of goods or services other than financial services under the Banking Act ( Cap. 488 ) the Building Societies Act ( Cap. 489 ), Microfinance Act (Cap. 493C) or the Sacco Societies Act (Cap. 490B); Section 11(4)(b) a construction co...

Section 12. Personal or property rights securing or supporting payment or other performance Section 12(1) A secured creditor with a security right in a receivable or other intangible asset, or in a negotiable instrument has the benefit of any personal or property right that secures or supports payment or other performance of the collateral without a new act of transfer. Section 12(2) Where the right referred to in subsection (1) is transferable only with a new act of transfer, the grantor is obligated to transfer the benefit of that right to the secured creditor.

Section 13. Tangible assets covered by negotiable documents Section A security right in a negotiable document extends to the tangible asset covered by the document, provided that the issuer of the document is in possession of the asset at the time the security right in the document is created.

Section 14. Tangible assets with respect to which intellectual property is used Section A security right in a tangible asset with respect to which intellectual property is used does not extend to the intellectual property and a security right in the intellectual property does not extend to the tangible asset.

Section 15. Method for achieving third-party effectiveness Section A security right in any movable asset is effective against third parties if a notice with respect to the security right is registered with the Registrar.

Section 16. Proceeds Section 16(1)(a) the security right in the original collateral is effective against third parties; and Section 16(1)(b) the proceeds are in the form of money, receivables, negotiable instruments or rights to payment of funds credited to a deposit account. Section 16(2)(a) is effective against third parties for ten working days after the proceeds arise; and Section 16(2)(b) continues to be effective after the expiration of the ten days, if the security right in the proceeds is made effective against third parties by registration of an amendment notice.

Section 17. Transfer of a security right Section 17(1) If the secured creditor transfers a security right or a part of it, the secured creditor may register an amendment notice to reflect the transfer. Section 17(2) A transfer of a security right is effective whether or not an amendment notice has been registered.

Section 18. Negotiable documents and tangible assets covered by negotiable documents Section If a security right in a negotiable document is effective against third parties, the security right that extends to the asset covered by the document is also effective against third parties.

Section 19. Establishment of the Office of the Registrar and the Registry Section 19(1) There is established the Office of Registrar who shall oversee the general running of the Registry. Section 19(2) The function of the Registry shall be to receive, store and make accessible to the public information on registered notices with respect to security rights and rights of non-consensual creditors. Section 19(3)(a) a suitable person as the Registrar; Section 19(3)(b) other staff of the Registry.

Section 20. Integrity of information in the Registry Section 20(1) The Registrar shall not, on the Registrar’s own motion, amend or delete information contained in the registry records. Section 20(2) The Registrar shall preserve information contained in the registry records and reconstruct the information in the event of loss or damage.

Section 21. Removal of information from the Registry and archival Section 21(1) The Registrar shall remove information in a registered notice from its public records only upon the expiry of the period of effectiveness of the registration of a notice. Section 21(2)(a) for five years; and Section 21(2)(b) in a manner that enables the information to be retrieved by the Registrar in accordance with section 34 .

Section 22. Limitation of liability of the Registrar Section The Registrar or an officer acting under the authority of the Registrar cannot be held liable for anything done under the authority of this Act if that action or matter is done in good faith.

Section 23. Registry fees Section The Registrar may charge the prescribed fees.

Section 24. Grantor’s authorization for registration Section 24(1) Registration of an initial notice or an amendment notice that either adds collateral not included in the security agreement or adds a grantor is ineffective unless authorized by the grantor in writing. Section 24(2) A notice may be registered before the creation of a security right or the conclusion of a security agreement to which the notice relates as long as there is evidence of the authorization in writing. Section 24(3) A written security agreement is sufficient to constitute authorization by the grantor for the registration of a notice.

Section 25. One notice sufficient for security rights under multiple security agreements Section The registration of a single notice may relate to security rights created by the grantor under one or more security agreements with the same secured creditor.

Section 26. Procedure for registration of notice etc. Section The procedure for registration of notice, access to information by the public, conduct of search and assigning of unique identifiers to grantors and secured creditors shall be as prescribed in the Regulations.

Section 27. Information required in an initial notice Section 27(1)(a) the identifier and address of the grantor; Section 27(1)(b) the identifier and address of the secured creditor or its representative; Section 27(1)(c) a description of the collateral in accordance with section 8 or by a serial number for the serial-numbered collateral only that is not held as inventory; Section 27(1)(d) the period of effectiveness of the registration; and Section 27(1)(e) any other information for statistical purposes only. Section 27(2) If there is more than one grantor or secured creditor, the required information shall be entered separately for each grantor or secured creditor.

Section 28. Language of information in a notice Section With the exception of the names and addresses of the grantor and the secured creditor or their representatives, the information contained in a notice shall be expressed in English.

Section 29. Time of effectiveness of the registration of a notice Section 29(1) The Registrar shall assign a unique registration number to a registered initial notice and associate all registered amendment and cancellation notices that contain that number with the registered initial notice. Section 29(2) The registration of an initial, amendment and cancellation notice is effective from the date and time when the information in the notice is entered into the records in the Registry. Section 29(3) The Registrar shall enter information in a notice into the records in the Registry without delay after the notice is submitted and in the order in which each notice was submitted. Section 29(4) The Registrar shall record the date and time when the information in a notice is entered into the records in the Registry.

Section 30. Period of effectiveness of the registration of a notice Section 30(1) The registration of an initial notice is effective for the period of time indicated by the registrant in the designated field of the notice, but shall not in any event, exceed ten years. Section 30(2) The period of effectiveness of the registration of an initial notice may be extended only within six months before its expiry by the registration of an amendment notice that indicates in the designated field a new period, in any event not exceeding ten years. Section 30(3) The registration of an amendment notice extends the period of effectiveness for the period indicated in the amendment notice beginning from the time the current period would have expired if the amendment notice had not been registered.

Section 31. Obligation to send a copy of a registered notice Section 31(1)(a) the date and time when the registration became effective; and Section 31(1)(b) the registration number. Section 31(2) Within ten working days after receipt by registrant of a copy of the information in accordance with subsection (1), the registrant shall send it to the person identified in the registered notice as the grantor. Section 31(3) A registrant who fails to comply with subsection (2) commits an offence and is liable, on conviction, to a fine not exceeding five thousand shillings.

Section 32. Right to register an amendment or cancellation notice Section 32(1) The person identified in a registered initial notice as the secured creditor may, in the prescribed manner, register an amendment or cancellation notice relating to that registered notice. Section 32(2) The registration of an amendment or cancellation notice is ineffective unless authorized by the person identified in the registered initial or amendment notice as the secured creditor.

Section 33. Compulsory registration of an amendment or cancellation notice Section 33(1)(a) the registered notice to which it relates contains information that exceeds the scope of the grantor's authorization; or Section 33(1)(b) the security agreement to which the registered notice relates has been revised to delete some collateral. Section 33(2)(a) the registration of an initial notice was not authorized by the grantor; Section 33(2)(b) the registration of an initial notice was authorized by the grantor but the authorization has been withdrawn and no security agreement has been concluded; or Section 33(2)(c) the security right to which the notice relates has been extinguished and the secured creditor has no further commitment to provide value to the grantor. Section 33(3) In cases described in subsections (1) (a) and (2) (a), the secured creditor shall not charge or accept any fee or expense for complying with its obligation. Section 33(4) If any of the conditions set out in subsections (1) and (2) is met, the grantor may, in writing request the secured creditor to register an amendment or cancellation notice and the secured creditor shall not charge for complying with the granto...

Section 34. Search criteria and results Section 34(1)(a) the identifier of the grantor; or Section 34(1)(b) the serial number of the collateral. Section 34(2)(a) the date and time when the search was performed; Section 34(2)(b) all information matching the search requirements criterion exactly; or Section 34(2)(c) an indication that no registered notice contains information matching the search criterion exactly. Section 34(3) A search certificate issued by the Registrar is proof of its contents.

Section 35. Errors in required information by the registrant entered in a notice Section 35(1) An error in the grantor identifier entered by the registrant in a notice renders the registration of the notice ineffective. Section 35(2) An error in the grantor identifier does not render the registration of the notice ineffective with respect to other grantors correctly identified in the notice. Section 35(3) An error in required information other than the grantor's identifier does not render the registration ineffective unless the error would seriously mislead a reasonable searcher. Section 35(4) Any error in the statistical information prescribed by the Regulations does not affect the effectiveness of the registration. Section 35(5) An error in the description of the collateral does not render the registration of the notice ineffective with respect to other collateral sufficiently described. Section 35(6) An error in the serial number of the serial-numbered collateral renders the registration ineffective as against a buyer or lessee of that asset.

Section 36. Post-registration change of grantor identifier Section 36(1) If the grantor's identifier changes after a notice is registered and the secured creditor registers an amendment notice indicating the new identifier of the grantor within sixty days after the change but before the expiry of the period of effectiveness of the registered notice, the security right to which the notice relates remains effective against third parties and retains the priority it had over the rights of competing claimants before the change. Section 36(2)(a) a security right with respect to which a notice is registered after the change in the grantor's identifier but before the registration of the amendment notice has priority over the security right to which the amendment notice relates; and Section 36(2)(b) a person that buys, leases or licenses the collateral after the change in the grantor's identifier but before the registration of the amendment notice acquires the collateral rights free of the security right to which the amendment notice relates.

Section 37. Post-registration transfer of the collateral Section 37(1) If a security right has been made effective against third parties and the collateral is transferred to a transferee that acquires the collateral rights subject to the security right, the security right remains effective against third parties and retains the priority it had over the rights of competing claimants before the transfer, provided that the secured creditor registers an amendment notice adding the transferee as a new grantor within ten working days after the secured creditor acquires knowledge of the transfer and the transferee's identifier. Section 37(2)(a) a security right created by the transferee with respect to which a notice is registered after the transfer but before the registration of the amendment notice has priority over the security right to which the amendment notice relates; and Section 37(2)(b) a person who buys, leases or licenses the collateral after its transfer but before the registration of the amendment notice acquires the collateral rights free of the security right to which the amendment notice relates. Section 37(3) In the case of successive transfers of the collateral, subsectio...

Section 88. Cabinet Secretary to make regulations for purposes of this Act Section 88(1) The Cabinet Secretary may make regulations with respect to any matter under this Act that is necessary or convenient to be prescribed by regulations for carrying out or giving effect to this Act. Section 88(2)(a) the conduct of the business of the Registry; Section 88(2)(b) the format of notices to be registered in the Registry; Section 88(2)(c) the payment of fees in respect of any matter under Part IV; Section 88(2)(d) the provision of copies of any notices registered in the Registry and the certification of the copies; or Section 88(2)(e) any matter in relation to the Registry.

Section 89. Transitional application of this Act Section 89(1) For the purposes of this Part— "prior law" means the law governing security rights that was in force immediately before the coming into force of this Act; "prior security right" means a right covered by a security agreement entered into before the coming into force of this Act that is a security right within the meaning of this Act and to which this Act would have applied if it had been in force at the time when the security right was created. Section 89(2) Except as otherwise provided in this Part, this Act applies to all security rights within its scope, including prior security rights.

Section 90. Inapplicability of this Act to actions commenced before its coming into force Section 90(1) The prior law applies to a matter that is the subject of proceedings before a court or arbitral tribunal commenced before the coming into force of this Act. Section 90(2) If the enforcement of a prior security right commenced before the coming into force of this Act, the enforcement may continue under the prior law.

Section 91. Creation of a prior security right Section 91(1) The prior law determines whether a prior security right was created before the coming into force of this Act. Section 91(2) A prior security right remains effective between the parties despite the fact that its creation did not comply with the creation requirements of this Act.

Section 92. Third-party effectiveness of a prior security right Section 92(1)(a) the time it would have ceased to be effective against third parties under the prior law; and Section 92(1)(b) the expiration of nine months after the coming into force of this Act. Section 92(2) A written agreement between the grantor and the secured creditor creating a prior security right and entered into before the coming into force of this Act is sufficient to constitute authorization by the grantor for the registration of a notice relating to that security right after the coming into force of this Act. Section 92(3) If the third-party effectiveness requirements of this Act are satisfied before the third-party effectiveness of a prior security right ceases in accordance with subsection (1), the security right continues to be effective against third parties under this Act from the time when it was made effective against third parties under the prior law. Section 92(4) If the third-party effectiveness requirements of this Act are not satisfied before the third-party effectiveness of a prior security right ceases in accordance with subsection (1), the prior security right is effective against third pa...

Section 93. Priority of a prior security right Section 93(1) The time to be used for determining priority of a prior security right is the time it became effective against third parties. Section 93(2)(a) the security right and the rights of all competing claimants arose before the coming into force of this Act; and Section 93(2)(b) the priority status of none of these rights has changed since the coming into force of this Act. Section 93(3)(a) it was effective against third parties at the time when this Act came into force and ceased to be effective against third parties as provided in section 92 (1)(a); or Section 93(3)(b) it was not effective against third parties under the prior law at the time when this Act came into force, and became effective against third parties under this Act.

Section 38. Competing security rights created by the same grantor Section Subject to the other provisions of this Part, priority among competing security rights created by the same grantor in the same collateral is determined according to the time of registration.

Section 39. Competing security rights created by different grantors Section A security right created by a grantor is subordinate to a security right in the same collateral created by another person if the grantor acquired the collateral subject to the security right created by the other person and made effective against third parties before the grantor acquired the collateral.

Section 40. Irrelevance of knowledge of the existence of a security right Section Knowledge of the existence of a security right in favour of another person on the part of a secured creditor does not affect its priority under this Act.

Section 41. Future advances and future collateral Section 41(1) Subject to the rights of a non-consensual creditor under section 46 , the priority of a security right extends to all secured obligations, including obligations incurred after the security right became effective against third parties. Section 41(2) The priority of a security right covers all collateral described in a notice registered by the Registrar, irrespective of whether they are acquired by the grantor or come into existence before or after the time of registration.

Section 42. Priority of a security right in proceeds Section If a security right in proceeds of the collateral is effective against third parties as provided in section 16 , the priority of the security right in the proceeds is determined using the same date used to determine the priority of the security right in the collateral.

Section 43. Priority of security rights in tangible assets commingled in a mass or product Section 43(1) If more than one security right extends to commingled goods, a security right that is effective against third parties before the goods become commingled has priority over a security right that is not effective against third parties at the time the collateral becomes commingled goods. Section 43(2) If more than one security right in commingled goods is effective against third parties, the security rights rank equally in proportion to the value of the collateral at the time it became commingled goods.

Section 44. Priority of security rights in attachments to immovable property Section 44(1) A security right may be created in tangible assets that are attachments to immovable property or may continue in tangible assets that become attachments to immovable property. Section 44(2) A security right made effective against third parties in an attachment to immovable property under this Act has priority over a competing interest created and made effective against third parties under immovable property law.