As part of our initiative to raise financial awareness during the Global Money Week, 2024, we have highlighted the key aspects of the Movable Property Security Rights Act (MPSR), 2017.
The Movable Property Security Rights Act (MPSR), 2017 is considered the most significant statute to impact the use of movable security in Kenya. The objective of the Act is to develop an efficient and global Financial Service Sector.
The Act has created a collateral registry that allows for utilization of securities that are not traditional in their nature. The said e-Collateral registry gives notice to the public on the collateral secured by lenders.
Borrowers can now use their personal property as collateral for credit and this includes both tangible and intangible assets. Tangible assets include motor vehicles, crops, machinery, livestock, business inventory, electronics and furniture. While intangible assets include accounts receivables, accounts savings or deposits, unpaid invoices, electronic securities, shares and intellectual property among others.
The collateral is secured by a Security Agreement which must:
- Be in writing and signed by the borrower
- Identify the Lender
- Describe the Secured obligation (except in the case of an agreement that provides for the outright transfer of a receivable)
- A description is sufficient if it identifies the collateral by specific listing as provided under the Act.
On registration, the registrar enters the information on what is termed an initial notice into the registry records. The Initial Notice which contains the time of registration and registration number is required to be sent to the Borrower within ten days from the date of receipt once the notice is registered. It should be noted that the initial notice is effective for a specified period but shall not exceed ten years. Any extension beyond the 10years may only be sought within a duration of six (6) months prior to expiry. The registration of an initial notice perfects the security right.
In the event the Borrower defaults in his/her obligation, then the Lender is at liberty to either apply to a Court of Law or exercise his/her rights under the Security Agreement without applying to Court.
If the Lender opts not to proceed to Court, then the lender may sue the Borrower for any payment due and owing under the agreement, appoint a receiver for the moveable asset, lease the moveable asset, repossess the moveable asset and/or sell the moveable asset.
However, in the event the Borrower satisfies the obligations under the Security Agreement then the Lender is required to register a Cancellation Notice.
The MSPR registry allows for e-registration security rights which would enable application of Searches, registration of security rights, amendment of security rights and cancellation of security rights.
Should you require any assistance, please do not hesitate to contact info@hms.africa.
Corporate Executive