Clause 8: Enforcement of registered notices relating to security interests
The Committees noted that the Bill deals with fears expressed by financial institutions relating to delays that might be experienced when enforcing the security notice. The provisional sentence proceedings are acceptable as these avoid a trial process and according the security notice liquid document status.
Although the Bill affords the financial institutions protection by empowering a secured creditor to seize and take custody of the movable assets pending the grant of the provisional sentence, it is important to consider empowering the Deputy Sheriff or Messenger of Court to carry out such seizures. If this is not possible, requiring the presence of the police during the seizures would prevent any consequential problems.
Prospective borrowers expressed concern over the issue of sale procedures during enforcement of the contract. The Bill should ensure that neither of the parties lose out by factoring in the issues of depreciation of the asset and undervaluing of the assets. Some members of the public proposed that assets be disposed of only after the creditor and debtor have agreed to a reserve price.
Clause 9: Registered Notices and other Entries in Collateral Registry to be conclusive proof of rights and obligations
The clause provides that the registered notice will be conclusive proof of the rights and obligations of the parties. However, it was highlighted that there was need for the notice to have a detailed account of the rights and obligations of the parties in the same way as the security agreement. There was also need to clarify on which of the two takes precedence, i.e. between the notice and the security agreement in terms of the rights and obligations of the parties. Stakeholders also suggested deletion of the word “purporting” in Section 9(2) which is misleading. Documents issued by the Registrar should have a standard format and should follow the prescribed format for it to be admissible in court, as the term “purporting” could be ambiguous.
Clause 11: Regulations
Although the Bill has significant detail on the registration process of security interests, the Regulations to the Bill need to be promulgated immediately after the enactment of the law. It is envisaged that the Regulations will specify the registration costs, the acceptable list of movable assets and the prescribed documents, among other issues to be regulated. The Committees recommends that extensive consultations be done before the Regulations are gazetted.
Clause 17: Period of Effectiveness of Registration of Notice
The clause states that the period of effectiveness of the registration of an initial notice may be extended more than once. Section 17(3) should therefore provide for the maximum number of extensions for the period of effectiveness of the registration of an initial notice.
First Schedule Part III, Clause 10 (4) and 21(2) – Rejection of registration of notice or search request and Search results
The clause provides that if the registration of a notice or a search request is rejected, the Collateral Registry must communicate the reason to the registrant or searcher without delay. Members of the public submitted that there should be a specific time frame for such communication as the word delay is not explicit. The time period within which the Registrar is required to issue an official search certificate indicating the search result should also be specific.
First Schedule, Part III – Clause 22 (1) Errors in required information entered in notice
The clause provides that an error in debtor identifier renders the registered notice ineffective. Stakeholders submitted that the validity of a registered notice should not be affected by any defect, irregularity, omission or error in the registered notice unless the defect, irregularity, omission or error in the registered notice is of a material nature and is seriously misleading.
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