The Movable Property Security Rights- Chattels Mortgage – Secuity Agreements Write Up

Governing Act The Movable Property Security Rights Act, 2017
Application The Act aims at facilitating the use of moveable property as security by both individuals and corporates and to provide for the registration of security rights in moveable property. However, not all moveable property can be used as security under the Act e.g.  Aircrafts, ships, security rights in book entry securities under the Central Depositories Act.
  • “Grantor”- a person that creates a security right to secure either its own obligation or that of another person; a buyer or other transferee, lessee, or licensee of the collateral that acquires its rights subject to a security right; and a transferor in an outright transfer of a receivable.
  • “Lender” an entity that advances a credit facility to a Grantor for a stated period and for a fixed/or variable interest and secured with an asset.
  • “Security” has the meaning assigned to it under section 2 of the Capital Markets Act. In this case, mostly for moveable assets it is usually a Motor Vehicle.
Security Right This is evidenced by way of a written security agreement. A Security Agreement must:

  • Be in writing and signed by the Grantor;
  • Identify the secured creditor and Grantor;
  • Describe the secured obligation; and
  • Describe the collateral in a manner that reasonably allows its identification.
Priority of Security Rights Priority amongst competing security rights created by the same Grantor in the same collateral is determined according to the time in Registration.

Upon Receipt of Instructions from the client:

  • We begin the process by:
    • Conducting a search at NTSA to confirm the ownership of the motor vehicle; and
    • Conducting a search at the Registry of movable property security rights to ascertain whether the vehicle is encumbered.
  • Once we confirm that the vehicle is not encumbered and ownership of the motor vehicle we proceed to prepare the requisite documentation.
  • In a situation where the Grantor is a COMPANY, we require the following documents;
    • The Loan Application Document;
    • The Company’s MEMARTS;
    • The Directors Resolution approving the resolve to borrow certain credit facilities;
    • Certificate of Incorporation of the Company;
    • PIN Certificate of the Company;
    • The copy of logbook of the collateral; and
    • ID copies and PIN Certificates for the Directors of the Company.

Once we obtain the requisite documents and after thoroughly confirming the authenticity of the information, we prepare;

  • The Chattels Mortgage (Security Agreement)
  • Directors deed of personal guarantee and indemnity

If the Grantor is an INDIVIDUAL, we require the following documents;

  • The Loan Application Document;
  • Copy of ID and PIN of the Grantor; and
  • The copy of logbook of the Collateral.

Once we obtain the documents we proceed to prepare the Security Agreement (Chattels Mortgage).

  • Upon finalization of the preparation of the Security Documents, we inform the Client to come to our offices to execute the said documents. We normally require full settlement of our legal fees at the time of execution.
  • When the security documents are properly executed we proceed to ensure that they are assessed and stamped with duty. Thereafter, we commence the Registration process on E-Citizen platform, which is an electronic collateral registry for security rights over moveable assets and where securities are registered.
  • Log in to the E-citizen platform. Go to the Business Registration Service. Proceed to the Collateral Registry (MPSR). Click on the Initial Notice. Fill in the particulars of the Grantor and Creditor. On the Collateral, fill in the type, description, serial number of the Collateral. Finally, input the secured loan details and register the same.
  • Once the process is concluded, we forward all the executed documents together with the registered notification of the security to the client. Upon receipt of the documents, the Loan Amount is released to the Grantor.

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