Did You Know?

You can now register a security right over your movable property online using your e-Citizen account! The Movable Property Security Rights Act, 2017 (MPSRA), which became law in May 2017, makes this possible. The Act was introduced to make it easier for individuals and businesses to access credit by allowing them to use movable property as collateral.

The MPSRA replaced the old Chattels Transfer Act and also made changes to several other laws, including:

• The Agricultural Finance Corporation Act
• The Stamp Duty Act
• The Hire Purchase Act
• The Pawnbrokers Act
• The Business Registration Services Act
• The Companies Act, 2015
• The Insolvency Act, 2015

The law is implemented through the Movable Property Security Rights (General) Regulations, 2017.

Purpose of the Act

The Act was created to:

1. Allow movable assets to be used as collateral for loans.
2. Provide clear and consistent rules on how security rights over movable property should be handled.
3. Make it easier for businesses and individuals to access credit using movable assets.
4. Establish a registry where security rights over movable assets can be recorded.
5. Create the Registrar of Security Rights, who manages the system.

How a Security Right is Created

A Security Right is a legal claim over a movable asset that is used to secure the payment of a loan or the performance of an obligation. This means that if the borrower (grantor) fails to pay, the lender (secured creditor) can take possession of the asset or sell it to recover the loan amount.

A Security Right is created through a written agreement between:

• The Grantor (the borrower who is offering their asset as collateral).
• The Secured Creditor (the lender providing the loan).

To be valid, the grantor must have ownership rights over the asset or the legal power to use it as collateral.

A security agreement can also cover future assets (property that the borrower does not own yet). However, the security right only takes effect when the borrower actually acquires the asset.

For the agreement to be legally valid, it must:

• Be written and signed by the grantor.
• Clearly identify the secured creditor and the grantor.
• Describe the secured obligation (except in cases where the agreement involves the outright transfer of a receivable).
• Provide enough details about the collateral so that it can be identified.

The Securities Registry

The Movable Property Security Rights Registry is an online system that allows lenders (secured creditors) to:

• Check if a movable asset already has a security right registered against it.
• Register their security rights over movable assets to protect their interests.

How to Register a Security Right

Once the borrower (grantor) and lender (secured creditor) have signed their security agreement, they must register a notice in the registry.

Why Register?

• Registration makes the security agreement legally enforceable.
• It protects the lender’s rights over the collateral.
• It notifies other potential lenders that the asset is already being used as collateral.

Good news! Registration is currently free.

Steps to Register Online via e-Citizen

1. Go to www.ecitizen.go.ke and log in to your account.
2. Select "Business Registry Services."
3. Click on "Collateral Registry (MPRS)."
4. Open the application form and enter the grantor’s details.
5. Enter the secured creditor’s details.
6. Provide details about the collateral (the movable asset being used as security).
7. Enter details about the secured loan.
8. Review the application and submit it.

How to Conduct a Search in the Registry

Once a security notice is registered, you can search the registry to check if a particular movable asset has an existing security right.

How to Search

1. Use either the grantor’s identification details or the serial number of the asset.
2. Pay a search fee of Kshs. 500.
3. The system will generate a search certificate, which:
   • Shows the date and time of the search.
   • Displays all matching records or confirms that there are no security rights registered.
4. The search certificate serves as official proof of the search results.

Amendment and Cancellation of a Security Notice

After a security right has been registered, the lender (secured creditor) can either:

• Amend the notice if there is an error or if the security agreement has been changed.
• Cancel the notice if the loan has been repaid or if the security agreement is no longer valid.

Reasons for Cancellation

A registered security notice can be canceled if:

1. The grantor never authorized the initial registration.
2. The grantor withdrew their authorization and no security agreement was signed.
3. The loan has been fully repaid, and the lender no longer has any rights over the collateral.

Who Takes Care of the Movable Asset?

• The movable asset may remain with the borrower (grantor) or be held by the lender (secured creditor).
• The party in possession of the asset must take care of it and ensure it remains in good condition.
• The lender has the right to inspect the asset to confirm its condition.

Read more blog posts here! https://wjmaxwell.co.ke/blog/0/0

Disclaimer: This is not legal advice and should not be relied upon as such.

Contact us for further details.

Email info@wjmaxwell.co.ke || or call/text/WhatsApp 0733 61 09 61

W.J. Maxwell & Associates Advocates

Leaders in Law: Reshaping the Practice of Law