The Bill does nothing to provide for what this “certificate” is or how it is issued.
Clause 11, the section that deals with regulations similarly is silent on this issue.
After reading the Bill, one is left with more questions than answers on how the system is to work in practice.
There is a need to (i) simplify the process and (ii) simplify the language of the legislation of the desired outcomes – i.e. creating a user friendly framework for small business to use their movable assets is to be achieved.
Clause 8 of the Bill allows the loan agreement to make a provision for a creditor to seize the movable assets from a debtor before the finalization of court proceedings.
This places the debtor in an extremely weak position as a creditor can descend on the property with no notice and before the rights of the parties have been finally determined.
The potential for disaster ought to be immediately clear in the event that the movable property concerned is livestock which requires strict methods of transportation, storage and upkeep to be observed.
While it is understood that the interests of a creditor must be secured, the Bill as it stands creates the potential for unfair contractual terms to be imposed on a small business or lay person who does not have the bargaining power to protect his or interests.
This would undermine the essence of the legislation which is to empower small businesses to unlock capital. the unlocking of capital must not come with inadequate legal protection against the loss of the collateral asset.
In addition to the traditional reasons attaching to the undesirability of accepting movable assets as collateral, it must be highlighted that the Bill does not do enough to ensure loans given by a creditor are secure.
There is no mechanism in place to ensure that a person who registers a notice on movable property in their name is in fact the owner of the property.
This could lead to disputes around ownership pursuant to a registration.
The Bill does not state how such a dispute would be resolved.
Clause 10 of also Bill exempts the Reserve Bank and the Collateral Registry from liability in the event that a mistake is made.
This could have disastrous consequences in the event that a lender acts on erroneous information provided by the system, albeit bona fide.
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