Overview of the Movable Property Security Rights Act, 2017


The Movable Property Security Rights Act, 2017 (“the Act”) was assented into law on 10th May, 2017. The Act aims at facilitating the use of movable property as security for credit facilities and enhancing the ability of individuals and entities to access credit using moveable assets. To this end, the Act creates the office of the Registrar of Security Rights and sets out provisions in respect of the registration of security rights in movable property, the realization process and related matters.

The Act has repealed the Chattels Transfer Act (Cap. 28) and the Pawnbrokers Act (Cap. 529.It has amended several sections of the Agricultural Finance Corporation Act (Cap. 323), the Stamp Duty Act (Cap. 480), the Hire Purchase Act (Cap. 507),), the Business Registration Services Act (Act No. 15 of 2015), the Companies Act, 2015 and the Insolvency Act, 2015.

To operationalize the Act, the Movable Property Security Rights (General) Regulations, 2017 (the Regulations) came into force on 2 June 2017.

Purpose of the Act

The Act is part of a number of laws that the Government intends to enact as part of Kenya Vision 2030’s objective of developing an efficient and globally competitive financial services sector.

The Act facilitates the use of movable property as collateral for credit facilities by establishing an office of the Registrar and an electronic collateral registry for security rights over movable assets (the Collateral Registry) where security rights in movable assets may be registered.

“Collateral” is defined in the Act as a movable asset that is subject to a security right or a receivable that is subject to an outright transfer.

“Movable assets” are broadly defined in the Act as tangible assets (meaning all types of goods including motor vehicles, crops, machineries and livestock) and intangible assets (including receivables, choses in action, deposit accounts, electronic securities and intellectual property rights).

Significant Provisions of the Act

  1. Creation of a Security Right

A security right under the Act is created by a security agreement and provides that the grantor has rights in the asset to be encumbered or the power to encumber it. The security agreement must be in writing and signed by the grantor; it must also identify the secured creditor and the grantor, except in the case of an agreement that allows for the outright transfer of a receivable, it should also describe the secured obligation and the collateral.

  1. Types of Securities Created

The Act assists persons who do not own real (immovable) property to secure credit by facilitating borrowing against their various types of movable assets.  The Act provides that a security right can encumber the following: –

  1.  any type of movable asset, whether tangible or intangible, including future assets (a moveable asset which does not exist or which the grantor does not have rights in or power to encumber at the time the security agreement is made;
  2. parts of assets and undivided rights in movable assets;
  3. generic categories of movable assets;
  4. all of a grantor’s movable assets; and
  5. choses in action.

This Act does not apply to:

(a) a security right in book-entry securities under the Central Depositories Act,2000;

(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;

(c) a security right in a vessel including a mortgage right subject to the Merchant Shipping Act, 2009;

(d) a security right in an aircraft subject to the Civil Aviation Act, 2013; and

(e) except as otherwise provided by this Act, a lien, charge or other interest created by law.

In addition, the Act does not apply to security rights in proceeds of collateral if the proceeds constitute a type of asset that is governed by another law.

Although not mandatory, registration of a security right is important as it is the only way that a holder of a security right will achieve third party effectiveness over a security right. There is also provision for an electronic platform for undertaking a search at the Collateral Registry.

  1. Registration of Notices Relating to Security Rights

The Act establishes the Office of the Registrar for purposes of receiving, storing and making accessible to the public information on registered notices with respect to security rights and the general running of the registry. The Registrar will be appointed by the Cabinet Secretary for National Treasury.

Section 20 of the Act has further adopted a regime of notice filing, under which a single initial notice can be registered, and under which many individual transactions will fall. The initial notice should contain; the identifier and address of the grantor, the identifier and notice of secured creditor, a description of the collateral and the period of effectiveness of the registration.

Section 30 provides that a public registry will be established, permitting searches both by the identifier of the grantor of security, and by the serial number of the collateral. Priority will be determined by the time of lodging the security for registration.

  1. Enforcement of a Security Right

In the event that there is failure to pay or perform the secured obligation, the grantor or secured creditor will exercise any right under the security agreement or that which is provided under any other law.

If there is default with respect to an obligation, the secured creditor should notify the grantor in writing to pay money owing or perform and observe the agreement. If the grantor does not comply within the period indicated in the notification after date of service of the said notification, the secured creditor will have the right to:-

  1. Sue for any money due  or owing under the agreement;
  2. Appoint a receiver of the income  of the moveable asset;
  3. Lease the moveable asset; or
  4. Take possession of the moveable asset

Prior Security Rights

A prior security right that was effective against third parties under the prior laws will continue to be effective against third parties until the earlier of

(a) the time it would have ceased to be effective against third parties under the prior law; or

(b) the expiration of 9 months after the coming into force of the Act.

What this means is that banks and others holding securities such as debentures that are already registered will need to register their rights at the Collateral Registry before 15 February 2018.


From the foregoing, the Act has introduced numerous advantages by enhancing access to credit facilities using moveable property as collateral which will benefit small and medium-sized enterprises. The Act, however, does not provide any mechanism to verify that a person who registers a notice on movable property in their name is the owner of the property. This could eventually lead to disputes around ownership pursuant to registration.

Further, the Act does not compel any banking institution or other lender to accept movable assets as collateral. The decision on whether to accept movable assets as collateral will remain within the bank or lender’s discretion pursuant to a full risk assessment and depending on the availability of funds for this purpose.

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