Security Interest in Movable Property Act, 2019

Section Commencement Section This Act shall come into force on a date appointed by the Minister , by statutory instrument.

Section Interpretation Section In this Act, unless the context otherwise requires— " accession " means a tangible asset that is installed in or is physically attached to, another movable property in such a manner that the identity of the tangible asset is not lost; " accounts receivable " means a payment of a monetary obligation that is not evidenced by a negotiable instrument or an investment security; " bureau " means the Uganda Registration Services Bureau, established by the Uganda Registration Services Bureau Act, Cap. 210 ; " cash proceeds " means money, cheques, bank drafts on deposit accounts in financial institutions derived from lease, sale or other disposition of movable collateral ; " chattel " means personal property that can be completely transferred by delivery or property in respect of which a valid document of title exists; " collateral " means movable property that is subject to a security interest ; " commercial consignment " means a consignment where a consignor reserves an interest in the tangible assets that the consignor delivers to the consignee for the purpose of sale, lease or other disposition and both the consignor and consignee in the ordinary course of...

Section Scope of application Section This Act applies to security rights in movable property where the movable property is— This Act also applies to security interests in movable property where— For the purposes of subsection (1) (a), (b) and (c), "location" is the location— This Act does not apply to— a tangible asset located in Uganda; an intangible asset , where the grantor of the asset is located in Uganda; a tangible or intangible asset which is ordinarily used outside Uganda, where the grantor of the asset is located in Uganda; a movable property attached to immovable property. the collateral is a deposit account maintained in a financial institution that has a place of business in Uganda; the transaction involves a movable property that secures a payment or the performance of an obligation, without regard to the form or ownership of the movable property including a floating charge, a fixed charge, a pledge, a debenture, a warehouse receipt and any other transaction that secures payment or performance of an obligation with movable property ; the security interest is a lien in movable property created by judgment of court; and the security interest is for the sale of accounts...

Section Security interest, tangible asset and intellectual property Section A security interest in a tangible asset does not extend to the intellectual property of the tangible asset, and a security interest in the intellectual property of a tangible asset does not extend to the tangible asset.

Section Tangible assets covered by negotiable documents Section A security interest 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 interest in the document is created.

Section Creation of security interest Section A security interest may be created— An agreement for a security interest becomes enforceable where— the agreement— in any type or combination of movable property ; in a part of or an undivided interest in movable property ; in a generic category of movable property ; or in all of the movable property of the grantor . A security interest is created by a transaction that secures payment or performance of an obligation, without regard to the form of the transaction. the grantor or the owner, has a right in the collateral or has the power to encumber the collateral ; is signed by the grantor ; identifies the secured creditor and the grantor ; is witnessed by a third party; describes the collateral in a manner that reasonably allows its identification, as may be prescribed by regulations made under this Act; describes the secured obligation in a manner that reasonably allows for its identification, whether pre-existing, present or future, determined or determinable, conditional or unconditional, fixed or fluctuating or a line of credit, as may be prescribed by regulations made under this Act; and indicates the maximum amount for which the se...

Section Effectiveness of agreement creating security interest and duty of good faith Section An agreement to create a security interest is effective according to its terms, between the parties to it and is enforceable against a third party. A duty of good faith applies to both the grantor and the secured creditor .

Section Rights and duties where collateral is in possession of secured creditor Section Unless otherwise agreed, where collateral is in the possession of the secured creditor — A secured creditor has a duty to use reasonable care to preserve collateral in his or her possession . In the case of a negotiable instrument or chattel paper, reasonable care referred to in subsection (1) includes taking necessary steps to preserve rights against prior parties, unless otherwise agreed. reasonable expenses, including the cost of any insurance incurred in the custody, preservation, use or operation of the collateral are chargeable to the grantor and are secured by the collateral ; the risk of accidental loss or damage is on the grantor to the extent of any deficiency in any effective insurance cover; and the secured creditor may hold as additional security, any increase or profits from the collateral , except that the profits or money must be remitted to the grantor or must be applied in reduction of the secured obligation ; A secured creditor may use or operate the collateral for the purpose of preserving the collateral or its value or pursuant to a court order or, except in the case of cons...

Section Secured creditor to supply information Section A grantor , debtor , a judgment creditor, a person with interest in the personal property of the grantor or an authorised agent of any of these, may request the secured creditor to update him or her on the— Where the secured creditor fails to comply with subsection (2), a person aggrieved by that decision may apply to court which may make an order— status of the collateral ; or amount of unpaid debt secured by the security interest . The secured creditor shall, not later than ten working days after the day on which the request is received respond to the request. requiring the secured creditor to comply; extending the time for compliance; or requiring any person to take any other steps it considers necessary to ensure compliance. Where, without reasonable excuse, the secured creditor fails to comply with any order made under subsection (3), the court may order that the security interest of the secured creditor in respect of which the request was made is to be treated as unperfected or extinguished and that any related registration be discharged.

Section Continuation of security interest after transfer of collateral Section Once created, a security interest continues in the collateral notwithstanding a sale, lease, license, exchange, or other disposition, of the collateral , except as otherwise provided in this Act or agreed upon by the grantor and the secured creditor . Unless otherwise agreed to by the parties, where a collateral that is the subject of an agreement for security interest is sold, the security interest in the collateral automatically extends to the proceeds of collateral , whether or not the agreement contains a description of the proceeds . Where the proceeds are credited to a deposit account , and are commingled with other funds, the proceeds shall be dealt with as may be prescribed by regulations made under this Act.

Section Security interest in tangible assets continues in commingled goods Section A security interest created in a tangible asset which becomes a commingled good continues in the commingled good, except that the security interest is limited to the value of the collateral immediately before it becomes part of the commingled good.

Section Methods of perfecting security interests in collateral Section A security interest in collateral created under Part II of this Act is perfected where— For the purposes of subsection (1) (c), control of a deposit account exists— a notice of the security interest in the collateral is entered in the register; the secured creditor , or a person acting on behalf of the secured creditor has possession of the collateral ; or the collateral is a deposit account and the secured creditor or a person acting on behalf of the secured creditor has control of the deposit account . For purposes of subsection (1) (b), a secured creditor is not in possession of collateral that is in the actual or apparent possession or control of the grantor or an agent of the grantor . automatically upon the creation of the security interest , if the financial institution that maintains the deposit account is the secured creditor ; and upon the conclusion of an agreement for the control of a deposit account made by the financial institution , the grantor and the secured creditor . The method used to perfect a security interest under subsection (1) may be changed at any time and the security interest shall r...

Section Methods of perfecting proceeds of security interests Section Where collateral is dealt with to give rise to proceeds in form of money, accounts receivable , negotiable instruments or a right to payment of funds to a bank account, the proceeds of the collateral shall be perfected without any further action. Where the proceeds are not of the type described in subsection (1), the secured creditor shall perfect the security interest in the proceeds using any of the methods in section 12 (1) or as may be prescribed by regulations made under this Act.

Section Transfer of security interests Section Where all or part of a security interest that is perfected by the registration of a notice under section 12 (1) (a), is transferred, the transferor shall register an amendment to the notice. Where a security interest that is not perfected by registration is transferred, the notice in which the transferee of the security interest is disclosed as the secured creditor of the security interest shall be registered under section 12 (1) (a). Registration under this section shall be as prescribed by regulations made under this Act.

Section Security interest perfected outside Uganda Section Where a security interest in movable property is perfected against a third party under the law of a state other than Uganda, and the property is relocated or transferred to Uganda, this Act shall apply to the property and the security interest remains perfected. Subsection (1) shall apply where the country in which the collateral was perfected has entered into reciprocal arrangements with Uganda to recognise and continue the perfection of security interests created in Uganda. Nothing shall prevent a person who has perfected a security interest under the laws of a State other than Uganda to perfect the security interest in Uganda where the collateral is relocated or transferred to Uganda.

Section Effect of transfer of collateral outside Uganda Section This Act shall continue to apply to collateral perfected in Uganda and relocated or transferred outside the territorial jurisdiction of Uganda. Where collateral that is perfected in Uganda is transferred beyond the territorial jurisdiction of Uganda, the collateral shall remain perfected against third party claims. Where collateral is transferred or relocated beyond the territorial jurisdiction of Uganda, the secured creditor may in addition to the collateral already perfected, perfect another security interest using any methods in section 12 or as may be prescribed by regulations.

Section Designation of Registrar Section The Registrar General appointed under the Uganda Registration Services Bureau Act, Cap. 210 shall be the registrar of security interest in movable property under this Act. The functions bestowed on the bureau under this Act shall be performed by the Registrar.

Section Register of Security Interest in Movable Property Section The bureau shall establish and maintain a register of security interests in movable property to be known as the "register of Security Interest in Movable Property". The register shall be maintained as an electronic records system and shall specify the nature of the security interest registered and details of the personal property over which the interest is created.

Section Mode of registration of security interest Section An initial notice or amendment notice shall only be registered— A security interest in movable property shall be registered electronically in the register using an initial notice or amendment notice which shall be registered sequentially, in the order in which it is submitted for registration. after the creation of a security interest ; on the payment of the prescribed fees; and upon authorisation by the grantor in writing. Notwithstanding subsection (2), an initial notice or amendment notice may be registered before the creation of a security interest or the conclusion of a security agreement to which the initial notice or amendment notice relates if the registration of the initial notice or amendment notice is authorized by the grantor in writing. The register shall reflect the date and time when the information is entered in the register. Subject to section 25 , an initial notice or amendment notice shall be effective from the date and time when the information in the notice is entered in the register. For purposes of this section, a written security agreement is sufficient to constitute authorization by the grantor for t...

Section One notice sufficient for multiple security interests Section A single notice may be registered for two or more security interests created by the same grantor under two or more security interest agreements with the same secured creditor .

Section Registration of a lien Section A notice of a lien may be registered by the lien holder without the consent of the subject of the lien . A notice of a lien on the property of a judgment debtor may be registered by the judgment creditor after obtaining a court order. A notice of lien on the property of an insolvent company may be registered by the court or a liquidator appointed by the court.

Section Information required in an initial notice Section An initial notice shall contain the following information— the unique identification number and address of the grantor ; the unique identification number and address of the secured creditor or the representative of the secured creditor ; a description of the collateral ; the date and period of perfection of the registration; and any other information as may be prescribed by the Minister , by regulations. Where there is more than one grantor or secured creditor , the required information shall be entered separately for each grantor and each secured creditor .

Section Period of perfection of initial notice Section An initial notice is effective for the period indicated by the secured creditor in the notice. The period of perfection of an initial notice may, within six months before the expiry of the period, be extended by registration of an amendment notice, for the period indicated by the secured creditor in the amendment notice. Where an initial notice lapses without amendment, the security interest that was perfected by the lapsed initial notice shall be discharged. The lapsing of an initial notice shall not preclude the secured creditor , where the grantor has not fulfilled its obligations under the agreement that created the security interest , from perfecting the security interest by any other method.

Section Cancellation of initial or amendment notice Section The secured creditor or grantor may register a cancellation notice where the— Notwithstanding subsection (1), the Registrar may cancel notices filed under this Act where— registration of an initial notice or the amendment notice was done in error or through fraud; registration of the initial notice or amendment notice was not authorised by the grantor ; collateral is no longer subject to the security interest ; or security interest to which the notice relates has been extinguished and the secured creditor has no further commitment to provide value to the grantor . the duration in section 23 lapses without the notice being amended; the transaction creating security interest rights between the grantor and the secured creditor contravenes the provisions of the Tier 4 Microfinance Institutions and Money Lender ’s Act or any other law; there is a mistake or error in the description of the collateral ; there is wrong description of the collateral ; the collateral is destroyed or is no longer in existence; or the registrar is ordered by court to cancel the notice. The bureau shall, before cancelling the registration of the initia...

Section Notice of objection Section A person who believes that a notice is inaccurate or was wrongfully registered, may register a notice of objection to the notice, as may be prescribed by regulations made under this Act. The registration of a notice of objection does not affect the perfection of a notice. Where a notice of objection is registered under subsection (1), and the secured creditor fails to respond, in part or wholly, to the notice, the person who registers the notice shall make an application for cancellation of the initial notice to the registrar .

Section Notice of discharge Section A secured creditor shall, within five working days after the obligation secured by the collateral has been paid or performed in full, discharge a security interest and file a discharge notice. Where the secured creditor does not, within the time prescribed in subsection (1) file a discharge notice, the grantor may apply to the registrar to discharge the initial notice or amendment notice.

Section Search of register Section The register shall be made available to the public for search electronically, at a fee, as may be prescribed. Where requested, the registrar shall issue a certified report of the results of a search of the register, at a fee, as may be prescribed. A certified report issued by the registrar under subsection (2) shall be admissible as evidence in any proceedings without any further or other proof of its authenticity.

Section Integrity and security of register Section The registrar shall upon the expiry of a notice, remove the notice from the register. Except as provided for under this Act, the registrar shall not remove from, or amend any information in the register. The registrar shall archive the notice removed from the register under subsection (1), for ten years.

Section Limitation on liability of the registrar Section The registrar or an officer acting under the authority of the registrar shall not be liable for any action or omission done pursuant to this Act.

Section Priority of security interest in same collateral Section Priority between security interests in the same collateral shall be determined as follows— priority between perfected security interests shall be determined by the order of whichever of the following actions first occurs— a perfected security interest shall have priority over an unperfected security interest ; the registration of an initial notice; the secured creditor , or another person on the secured creditor ’s behalf, taking possession of the collateral ; or the secured creditor , or another person on the secured creditor ’s behalf acquiring control of the collateral ; and priority between unperfected security interests in the same collateral shall be determined by the order of creation of the security interests.

Section Competing security interests created by different grantors Section A security interest created by a grantor is subordinate to an earlier created security interest in the same collateral .

Section Change in means of perfection not to affect priority Section The order of priority of a security interest is not affected by a change in the method of perfecting the security interest where security interest is not at any time unperfected.

Section Priority of security interest in future obligations and property acquired after registration Section The priority of a security interest extends to all obligations secured by the security interest including the obligations that are incurred after the security interest is perfected. The priority of a security interest covers all the collateral described in the register whether the collateral was acquired by the grantor or come into existence before or after the registration of the notice.

Section Priority of security interest in proceeds Section The priority of a security interest in the collateral shall also be the priority with respect to proceeds arising from dealing in the collateral .

Section Priority of security interest in commingled goods Section Where a tangible asset which becomes part of a product or mass, had two or more competing security interests, the order of priority of the competing security interests in the product or mass is the same as the order of priority that the security interests had in the tangible asset immediately before the tangible asset becomes part of the product or mass. Where two or more security interests are perfected in one tangible asset before it becomes part of a product or mass, the competing security interests rank in proportion to the value of the product or mass at the time the tangible asset becomes part of the product or mass. Where more than one security interest extends to commingled goods , a security interest perfected before the goods become commingled has priority over a security interest that is perfected at time the collateral becomes commingled goods . Where more than one security interest in commingled goods is perfected before the security interest become commingled goods , the security interest shall rank equally in proportion to the value of the collateral at the time it became commingled goods .

Section Priority of security interest in accessions Section A security interest in a tangible asset that is perfected before the asset becomes an accession , has priority over a claim to the tangible asset to which the accession is attached.

Section Priority of security interest in fixtures Section A security interest taken in a tangible asset that becomes a fixture , shall continue in the tangible asset after the tangible asset is affixed to the immovable property. A perfected security interest in a tangible asset that becomes a fixture under this Act has priority over a competing interest in immovable property created and perfected under the Land Act, Cap. 227 and the Mortgage Act, 2009.

Section Priority of security interest in crops Section A security interest in growing crops or in crops to be grown, which is perfected and the grantor is in legal possession of the land where the crops are, has priority over the interest of the owner of the land or the mortgagee of the land. A security interest in crops or in the proceeds of the crops, given for value to enable the grantor to produce or harvest the crops, and given while the crops are growing or within a period of six months, before the crops are planted, has priority over any other security interest in the same collateral given by the same grantor . The rights of a judgment creditor who causes land where crops that have an unperfected security interest to be seized in order to enforce a court judgment take priority over an unperfected security interest in the crops.

Section Rights of purchasers and other transferees Section A purchaser, transferee, lessee, and licensee of collateral that is subject to a perfected security interest acquires rights in the collateral which is subject to the security interest , except where— Where collateral is subject to a security interest that is not perfected— For the purposes of this section— the purchaser, transferee, lessee, or licensee, as the case may be, acquires the rights free of the security interest and the secured creditor authorizes the sale or other transfer to be free of the security interest ; the lessee or licensee, as the case may be, acquires the rights free of a security interest and the secured creditor authorizes the lease or license to be free of the security interest ; a purchaser of the collateral , where the collateral is sold in the ordinary course of the business of the seller acquires the right free of the security interest , where at the time of the purchase, the buyer does not have knowledge that the sale violates the rights of the secured creditor under the security agreement; or the rights of a lessee or licensee of collateral where the collateral is leased or licensed in the or...

Section Priority over unperfected security interest Section Where collateral is subject to a security interest that is not perfected, a person who takes possession or control of the collateral without knowledge of the security interest , takes the collateral free of an unperfected security interest .

Section Acquisition security interest Section An acquisition security interest has priority over a competing non-acquisition security interest that is created by the grantor . In this Act, "an acquisition security interest " means a security interest in a tangible asset or in intellectual property or the rights of a licensee under a licence of intellectual property, created by a person who provides credit to the grantor which secures an obligation to pay any unpaid portion of the purchase price of an asset or other credit extended to enable the grantor to acquire a tangible asset or rights in an asset to the extent that the credit is used for that purpose.

Section Security interest in negotiable instruments Section A purchaser of a negotiable instrument has priority over the security interest of a secured creditor in the negotiable instrument where, in the ordinary course of the business of the purchaser— A security interest in a negotiable instrument that is perfected by possession of the negotiable instrument has priority over a security interest in the negotiable instrument that is perfected by registration of a notice in the register. the purchaser gives value; the purchaser takes possession of the negotiable instrument ; and the purchaser does not have knowledge that the sale is in violation of the rights of the secured creditor under the security agreement.

Section Debtor and grantor not to waive rights before default Section A debtor , grantor or any other person that owes a payment or a performance with respect to a secured obligation shall not unilaterally waive any of the rights of a debtor , grantor or that other person under this Part before default .

Section Rights of secured creditor upon default Section Where a grantor defaults to perform a secured obligation , the secured creditor may enforce the security interest by exercising any right— The notification shall state the following matters— Where the debtor does not remedy the default within the time period indicated in the notification, the secured creditor may— Where a debtor defaults on the obligation to pay or where another event of default occurs, the security interest becomes enforceable. under this Act; provided in the security agreement; or provided under any other written law. Where a debtor defaults to perform a secured obligation , the secured creditor shall serve on the grantor a notification, in writing or in other form agreed between the parties, to pay the money owing or perform and observe the agreement as the case may be. the nature and extent of default ; if the default consists of non-payment, the actual amount and the time by the end of which payment must be completed; if the default consists of the failure to perform or observe any covenant, express or implied, in the agreement, the act the grantor must do or desist from doing, so as to rectify the defaul...

Section Right of secured creditor with priority to enforce a security interest Section Where the enforcement of a security interest is commenced by a secured creditor other than the secured creditor whose right has priority over that of the enforcing creditor, the secured creditor shall be entitled to take over the enforcement at any time before the sale of the collateral .

Section Actions permissible without judicial process Section Upon default by an account debtor , where the security interest is in a deposit account — Upon default , a secured creditor with a security interest in accounts receivable may instruct the account debtor to make payment to the secured creditor , and shall apply such payment to the satisfaction of the obligation secured by the security interest after deducting the collection expenses of the secured creditor . Upon default , a secured creditor with a security interest in a document of title that is perfected by possession may proceed in respect of the goods covered by the document of title . where the deposit account is maintained by a financial institution and the security interest is perfected in the deposit account the financial institution may apply the balance of the deposit account to the obligation secured by the deposit account ; and where a secured creditor has a security interest in the deposit account perfected by a control agreement, the secured creditor may instruct the financial institution to pay the balance of the deposit account to the account of the secured creditor . The secured creditor may act under thi...

Section Expedited possession by secured party Section For the purposes of subsection (1), a secured creditor may take possession of a collateral without a court order where— "Breach of the peace" in subsection (2) means— In cases not covered by section 46 , and subject to the rights of a person with priority in the possession of a collateral, including a lessee or licensee, the secured creditor is entitled to take possession of the collateral after default, with or without a court order. the grantor , in writing, consents to the secured creditor taking possession of the collateral without a court order; the secured creditor gives a notice of default and a notice to take possession by the secured creditor , to the grantor or the person in possession of the collateral , where the collateral is not with the grantor ; and possession or control of the collateral can be taken without a breach of the peace. entering the premises of the grantor without permission; or being physically violent or intimidating the grantor . Subsections (1), (2) and (3) shall not apply to a secured transaction with a contractual value not exceeding five hundred currency points. Where the collateral is a fixtur...

Section Sale by secured creditor Section Save as provided for under section 46 , where a debtor is in default, a secured creditor may sell any or all of the collateral in its condition or following any commercially reasonable preparation or processing. The sale of the collateral shall be by auction.

Section Notice of disposition of collateral Section A notice of disposition shall— Subsection (1) shall not apply where— A secured creditor shall, at least ten working days before disposing of a collateral , give notice to grantor , any other secured creditor , owner of the collateral or any other person as it deems fit and file with the registrar , a disposal notice. indicate the grantor and the secured creditor ; describe the collateral ; indicate the amount required to satisfy the secured obligation including the interest due and the expenses incurred; and state the time and place of the public sale. A person may, within five days of receipt of a notice referred to in subsection (1), object to the disposition of the collateral . The objection shall be in the prescribed form and shall state the grounds of objection. The registrar shall upon receipt of the objection, notify the secured creditor and suspend the disposition of the collateral until the objection is withdrawn or lapsed. The objection lodged in subsection (3) shall lapse after forty five days from the date of objection unless the person who objected it has within that time, commenced proceedings in a court of competent...

Section Notice and claim for distribution Section The notice shall include— The persons listed in section 49 (1) shall within five working days from the receipt of the notice provide the secured creditor with— A secured creditor shall at least ten working days before the distribution of the proceeds of sale or disposal, give notice of the proposed distribution to the persons specified in section 49 (1). the earliest date on which the distribution may occur; the date on which persons who are given notice of the proposed distribution as required under subsection (1), may present claims on the proceeds of sale which are to be distributed; the address to which the claims made under paragraph (b) are to be presented; and the type of proof of the claim to be provided. an authenticated claim of the interest: or a notice of claim of interest in the collateral from a lien holder.