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Kenya: Movable Property Security Rights Act Enacted

(May 18, 2017) On May 10, 2017, Kenyan President Uhuru Kenyatta signed into law the Movable Security Rights Bill 2017, legislation aimed at facilitating the use of movable property as collateral for securing a credit line.  (President Kenyatta Signs Movable Property Security Rights Bill into Law, OFFICIAL WEBSITE OF THE PRESIDENT (May 10, 2017).)  It does this mainly by establishing the Office of Registrar of security rights and by providing for the registration of security rights in movable property.  (Id.)  The Act will be implemented once the Cabinet secretary responsible for the registration of security rights issues a notice in the Kenyan Gazette to that effect.  (Movable Property Security Rights Act, 2017, § 1 (May 10, 2017), IKM Advocates website.)

Security Rights and Borrowing

Under the Act, a “security right” is:

(a) a property right in a movable asset that is created by an agreement to secure payment or other performance of an obligation, regardless of whether the parties have denominated it as a security right, and regardless of the type of asset, the status of the grantor or secured creditor, or the nature of the secured obligation; and

(b) the right of the transferee in an outright transfer of a receivable; … .  (Id. § 2.)

The Act makes it easier for persons who do not own real property to secure a credit line by facilitating borrowing against their various types of movable assets.  It states that

(2) A security right may encumber—

(a) any type of movable asset, whether tangible or intangible [including future assets];

(b) parts of assets and undivided rights in movable assets;

(c) generic categories of movable assets; and

(d) all of a grantor’s movable assets.  (Movable Property Security Rights Act, § 7.)

The term intangible asset includes “receivables, choses in action (a right to sue), deposit accounts, electronic securities and intellectual property rights,” whereas tangible asset means “all types of goods and includes motor vehicles, crops, machineries, livestock.”  (Id. § 2.)

Notification of Security Rights and Creditor Rights

The function of the Office of Registrar is “to receive, store and make accessible to the public information on registered notices with respect to security rights and rights of non-consensual creditors” (creditors that obtained the right in the collateral by operation of law).  (Id. §§ 2 & 19.)  An initial notice must include the following content:

  • information about the guarantor and the creditor;
  • a description of the collateral in a manner that makes it possible to identify it;
  • effective dates of the registration; and
  • any other information relevant for statistical purposes.  (Id. §§ 8 & 27.)

Rules on the process for registering a notice and accessing the information collected by the Registrar will be enacted through regulations.  (Id. § 26.)

Application of a security right to a third party requires the registration of the right.  According to the Act, 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.”  (Id. § 15.)