When a debenture is used to create a security interest, the terms of the debenture will typically set out the enforcement procedure and provide for the appointment of a receiver and/or manager to undertake the procedure.
In a charge over shares, a chargee would enforce by using the power of attorney and share transfer form (both granted to it by the chargor upon perfection) to transfer the shares to itself or a nominee. The chargee must then stamp the share transfer form and notify the Companies Registry of its newly acquired interest in the shares. Finally, the company secretary of the company whose shares were transferred must register the chargee in the company’s register of members.
The Land Act (Number 6 of 2012) and the Land Registration Act 2012 govern enforcement of a charge over land. The chargee can commence enforcement proceedings only if the chargor has been in default for a month or more. The chargee must then serve notice upon the chargor to cure the default. If the default has not been remedied within two months (or three months, if there has been a payment default), the chargee may then either:
- Sue for the amount due
- Appoint a receiver of the income from the property
- Lease the land
- Take possession of the land
- Sell the land by private contract or public auction
However, remedies (a) and (d) described herein are not applicable if the land is considered to be customary or community land. Currently, there is a requirement to issue a notice in a prescribed form to carry out the remedies set out in (b) through (e); however, the prescribed form has not yet been determined, and consequently, the ability to enforce charges over land is uncertain at this time.
If the chargee elects to sell the land by private contract, the chargee must give the chargor 40 days’ notice. A sale by auction requires the auctioneer to give the chargor 45 days’ notice and to advertise the sale publicly. In either case, the chargee must obtain a “forced sale valuation” of the land. The chargee is under a legal duty to achieve the best price reasonably obtainable at the time of sale.
