Movable Property Security Rights Act

This Act may be cited as the Movable Property Security Rights Act.

Defines or describes “a movable asset that is subject to a security right; or”.

This section states its object is to promote consistency and certainty in secured financing related to movable assets.

Section 4 defines the scope of application, listing transactions that are covered and specific categories of assets or interests to which the Act does not apply.

Persons must exercise their rights and perform their obligations under this Act diligently and in good faith.

A security right in collateral extends to commingled goods.

Security rights in receivables and in funds credited to deposit accounts are effective despite agreements that limit a grantor's ability to create such security rights.

A secured creditor is entitled to benefit from personal or property rights securing the collateral without a new transfer; if those rights require a new transfer, the grantor must transfer that benefit to the secured creditor.

A security right in a negotiable document also covers the tangible asset the document describes if the issuer has possession of the asset when the security right is created.

A security right in a tangible asset that involves intellectual property does not extend to the intellectual property, and a security right in the intellectual property does not extend to the tangible asset.

A security right is created by a security agreement only if the grantor has rights in the asset or the power to encumber it; the grantor must sign and the agreement must be in writing.

A security right may secure one or more obligations of any type, including present or future, fixed or fluctuating, conditional or unconditional.

Security agreements must describe the assets and the obligations secured in a way that reasonably allows identification; generic descriptions of all movable assets or generic descriptions of obligations are sufficient in the specified cases.

A security right in an asset extends to identifiable proceeds, and special rules apply where proceeds become commingled.

A security right in any movable asset is effective against third parties when a notice about the security right is registered with the Registrar.

A security right in original collateral and in specified types of proceeds is effective against third parties; proceeds remain effective against third parties for ten working days, and beyond ten days only if an amendment notice is registered.

A secured creditor may register an amendment notice to reflect the transfer of a security right (or part of it).

If a security right in a negotiable document is effective against third parties, then the security right over the asset covered by that document is also effective against third parties.

Establishes an Office of Registrar to oversee the Registry and requires the Registry to receive, store and make public information on registered notices concerning security rights and rights of non-consensual creditors.

The Registrar must not, on the Registrar’s own motion, amend or delete registry information; the Registrar must preserve registry information and reconstruct it in the event of loss or damage.

The Registrar must remove information in a registered notice from public records only when the registration's period of effectiveness has expired.

The Registrar or an officer acting under the Registrar's authority is exempt from liability for acts done under this Act when those acts are done in good faith.

The Registrar may charge the prescribed fees.

A registration that adds collateral or a grantor is ineffective unless the grantor authorizes it in writing.

A single registered notice can cover security rights created by the grantor under one or more security agreements with the same secured creditor.

The procedure for registration of notices, public access to information, conduct of searches, and assignment of unique identifiers to grantors and secured creditors is to be as prescribed in the Regulations.

The initial registration notice must include the grantor's identifier and address; the secured creditor's identifier and address (or representative); a collateral description per section 8 or serial number for non-inventory serial-numbered collateral; the registration's period of effectiveness; and any other information for statistical purposes.

Except for the names and addresses of the grantor and the secured creditor or their representatives, the information contained in a notice must be expressed in English.

The Registrar must assign a unique registration number to each registered initial notice, link amendment and cancellation notices that include that number to the initial notice, enter notice information into the Registry without delay and in submission order, and record the date and time when the information is entered.

An initial notice's registration is effective for the period the registrant indicates, but that period cannot exceed ten years; it can be extended only by an amendment notice filed within six months before expiry, and the new period indicated by the amendment also cannot exceed ten years.

The registrant must, within ten working days after receipt of the information under subsection (1), send that copy to the person identified in the registered notice as the grantor.

The secured creditor named in a registered initial notice may register an amendment or cancellation notice in the prescribed manner; such a registration is ineffective unless authorized by the secured creditor named in the registered initial or amendment notice.

Grantors may request registration of an amendment or cancellation notice if specified conditions exist; secured creditors must not charge fees for complying in certain cases and must comply with written requests without charge; if the creditor does not comply within ten working days the grantor may ask the Registrar to seek registration; the Registrar must give notice to the secured creditor before giving effect; appeals lie to a court of competent jurisdiction.

Specifies search criteria items and states that a search certificate issued by the Registrar is proof of its contents.

Errors in certain required information in a registrant's notice can make the registration ineffective in specified ways, while some errors do not affect effectiveness.

If the grantor's identifier changes, a secured creditor who registers an amendment notice indicating the new identifier within sixty days and before the registered notice's effectiveness expires preserves the security right's effectiveness and priority; persons who acquire the collateral after the change but before the amendment registration take free of that security right.

When collateral subject to a security right is transferred, the secured creditor must register an amendment notice adding the transferee as a new grantor within ten working days after learning of the transfer and the transferee's identifier to preserve the security right's effectiveness and priority against third parties.

The Cabinet Secretary may make regulations for matters under this Act to carry out or give effect to the Act, including specific matters relating to the Registry.

Except as otherwise provided in this Part, this Act applies to all security rights within its scope, including prior security rights.

If proceedings or enforcement began before this Act came into force, the prior law governs those proceedings and the enforcement of prior security rights may continue under the prior law.

Prior law decides whether a prior security right existed before this Act, and any such prior security right stays effective between the parties even if it did not meet this Act’s creation requirements.

A written agreement made before this Act comes into force authorizes the grantor to allow registration of a notice for a prior security right; third-party effectiveness of prior rights is governed by timing rules in subsections (1)–(4).

Priority of a prior security right is determined by the time it became effective against third parties.

Priority among competing security rights created by the same grantor in the same collateral is determined by the time of registration.

A security right created by a grantor is subordinate to an earlier security right in the same collateral if the grantor acquired the collateral subject to that earlier security right which was already effective against third parties before the grantor's acquisition.

If a secured creditor knows about another person's security right, that knowledge does not change the secured creditor's priority under the Act.

The priority of a security right extends to all secured obligations (including those incurred after the security right became effective against third parties), subject to the rights of a non-consensual creditor under section 46; and the priority covers all collateral described in a notice registered by the Registrar regardless of when the collateral is acquired or comes into existence.

If a security right in proceeds is effective against third parties as provided in section 16, its priority is determined using the same date used to determine the priority of the security right in the collateral.

If more than one security right extends to commingled goods, a security right that is effective against third parties before the goods become commingled has priority over a security right that is not effective against third parties at the time the collateral becomes commingled goods.

Section 44 establishes that security rights can be created in tangible assets that are attachments to immovable property and that a security right effective against third parties in such an attachment has priority over a competing interest under immovable property law.

Sets when buyers, transferees, lessees or licensees acquire rights in collateral free of, or subject to, pre-existing security rights.

A non-consensual creditor who has registered a notice with the Registrar has priority over a security right; possessory liens held by a person in the ordinary course of business have priority while they remain in possession.

An acquisition security right in consumer goods, equipment, inventory, or intellectual property has priority over a competing non-acquisition security right created by the grantor if a notice for the acquisition security right is registered with the Registrar before the grantor obtains possession of the asset or acquires the intellectual property right.

A seller's or lessor's acquisition security right takes priority over a competing secured creditor's acquisition security right when the competing secured creditor is not a seller or lessor.

If an acquisition secured creditor registered a notice with the Registrar before proceeds were generated, that creditor must notify non-acquisition secured creditors holding security in the same kind of asset as the proceeds.

An acquisition security right in a tangible asset that extends to commingled goods and is effective against third parties has priority over a non-acquisition security right granted by the same grantor in the commingled goods.

A person may at any time subordinate the priority of its rights under this Act in favour of existing or future competing claimants without requiring the beneficiary to be a party.

Section qualifies as a holder in due course under the Bills of Exchange Act (Cap. 27)

A transferee who receives funds from a deposit account by a transfer initiated or authorized by the grantor acquires rights to payment of the credited funds free of any security right, except if the transferee knows the transfer violates the secured creditor's rights under the security agreement.

A transferee who takes possession of money subject to a security right acquires the money free of that security right, unless the transferee knows the transfer violates the secured creditor's rights under the security agreement.

A transferee who takes possession of a certificated security or acquires rights in an electronic security and gives value without knowledge that the transfer violates the secured creditor's rights acquires those rights free of the security right.

A grantor or secured creditor in possession of the collateral must exercise reasonable care to preserve the asset.

When a security right in collateral ends, the secured creditor must register an amendment or cancellation notice as provided in section 33.

A secured creditor has the right to inspect collateral in the possession of the grantor or another person.

A security right in a receivable cannot affect the debtor's rights and obligations, including payment terms, without the debtor's consent (except as provided in section 11).

Specifies when notification of a security right in a receivable is effective and who the debtor may validly pay to discharge the debt; grants the debtor a right to request proof of the security right.

Debtors of receivables keep certain set-off rights against secured creditors, but they cannot use breaches of agreements limiting the grantor's right to create the security right; debtors may agree in writing with the grantor to waive the subsection (1) defences, except they cannot waive defences based on the secured creditor's fraud or the debtor's incapacity.

An agreement concluded before notification of a security right in a receivable that affects the secured creditor’s rights is effective against the secured creditor, and the secured creditor acquires corresponding rights.

If the grantor fails to perform under the contract, the debtor of the receivable is not entitled to recover from the secured creditor sums the debtor paid to the grantor or the secured creditor.

Creating a security right over funds in a deposit account does not change the institution's rights or obligations without the institution's consent and does not require the institution to disclose account information to third parties; the institution's rights of set-off are also unaffected.

Before default, the grantor and any other person owing the secured obligation may not unilaterally waive or vary rights under this Part; if the security right arises from a hire-purchase agreement the secured creditor may only enforce rights in accordance with the Hire Purchase Act (Cap. 507).

A secured creditor may exercise its post-default rights either by applying to a court or in accordance with this Part (without applying to a court).

If a grantor defaults, the secured creditor must serve the grantor a written (or agreed form) notification to pay the money owing or to perform and observe the agreement.

A secured creditor may sue to enforce a security right where one of three conditions in subsection (1) is met; the grantor is personally bound to the secured obligation, the collateral is insufficient despite a reasonable opportunity to provide more security, or the creditor is deprived of the security by the grantor's or debtor's wrongful act or default. The court may postpone such proceedings until other remedies are exhausted and may order alternative dispute resolution despite that postponement.

A person whose rights are affected by enforcement may redeem the collateral by paying or otherwise performing the secured obligation in full, including reasonable enforcement costs.

A secured creditor with a higher-ranking security right is entitled to take over enforcement from another secured or non-consensual creditor.

A secured creditor may render collateral unusable and dispose of it on the grantor's premises without removing it.

After default, the secured creditor is entitled to sell, dispose of, lease or license the collateral; the secured creditor may choose how and when to carry out the sale, including selling items individually, in groups or as a whole.

Specifies who must receive a notification before a secured creditor disposes of collateral and what that notification must include; also sets language and limited exceptions.

Secured creditor entitled to apply proceeds of collateral disposition first to reasonable disposal expenses, then to obligations secured by the primary security right, and then to subordinate claims if a timely demand is received; subordinate holders must furnish proof when requested; enforcing secured creditor may pay surplus to court; debtor liable for any shortfall.

A secured creditor may propose in writing to acquire collateral in full or partial satisfaction of the secured obligation; the secured creditor must include specified information in the proposal; the grantor may request such a proposal and, if the secured creditor accepts, must follow the specified procedures.

Buyers, transferees, lessees and licensees acquire specified rights in collateral when a secured creditor disposes of or grants leases/licenses of the collateral, subject to prior-ranking rights and, where a disposal violates this Part, subject to the buyer's lack of prejudicial knowledge.

A secured creditor with a security right in a receivable, negotiable instrument, deposit account credit or security is entitled to collect payment after the grantor defaults; with the grantor's consent the creditor may collect even before default; the creditor is also entitled to enforce supporting personal or property rights; these rights are subject to sections 59 to 63.

When a receivable is transferred outright, the transferee has the right to collect that receivable.

The law governing the mutual rights and obligations of a grantor and a secured creditor is the law they choose; if they make no choice, the law governing the security agreement applies.

For a security right in a tangible asset, the applicable law is generally the law of the country where the asset is located; for assets ordinarily used in more than one country, the applicable law is the law of the country where the grantor is located.

Rules specifying which country’s law applies to the creation, effectiveness against third parties, priority and enforcement of security rights in various types of intangible assets (depends on location of grantor, financial institution, branch, issuer, or where intellectual property is protected).

Applicable law for enforcing a security right in a tangible asset is the law of the country where the relevant act of enforcement takes place.

The law that governs creation, third-party effectiveness, and priority of a security right in proceeds is the same law that governs those aspects for the original collateral from which the proceeds arose.

The location of the grantor is the country in which the grantor has a place of business, if any.

For creation issues the relevant location is where the collateral is at the time the security right is created; for third-party effectiveness and priority the relevant location is where the collateral or grantor is at the time the issue arises; if all secured creditors’ rights and claimants’ rights are effective before a change in location, references to location for third‑party effectiveness and priority refer to the location prior to the change.

Law applicable to the relationship between the debtor of the receivable, the obligor under the instrument or the issuer of the document and the holder of a security right in the receivable, instrument or document.

When a change makes this Act the applicable law, third-party effectiveness continues either until the time it would have lapsed under the other country's law, or for ten working days after the change (and thereafter only if this Act's third-party effectiveness requirements are met before that time expires); if effectiveness continues under subsection (1), its time is the time it was achieved under the relevant law.