Chattels Securities Act, 2014

The Act comes into force on a date to be appointed by the Minister by statutory instrument.

Provides definitions of terms used in the Act (e.g. "accessions", "cash proceeds", "chattel", "chattel paper", "collateral", "consumer goods", "court", "crops", "currency point", "debtor", "document of title", "executed", "financing change statement", "financing statement", "fungible", "future advance", "goods", "grantee", "instrument", "lease", "liquidator", "machinery", "Minister", "negotiable instrument", "prior security interest", "proceeds", "public trustee", "purchase money security interest", "receivables", "register", "registrar", "secured party", "security", "security document", "security interest", "stock", "tangibles", and "uncertificated security").

An agreement (other than a mining lease) that grants a power of distress by way of security for present, future or contingent debt or advance, and where rent is reserved or paid to provide interest or for security only, is an instrument covering chattels seized or taken under that power of distress.

A reservation of title by a secured party or a seller of goods, even after shipment or delivery, only has effect as a reservation of a security interest.

A secured party does not have possession of collateral when the collateral is in the actual or apparent possession or control of a debtor or the debtor's agent.

Defines when 'a person' is taken to know a fact for a particular transaction: actual knowledge, receipt of actual or constructive notice, imputation from an agent or employee, and public constructive notice of a registered security interest.

Demands, notices or documents under this Act must be in writing; rules specify delivery addresses and alternative methods (agent, personal representative, court-directed manner) when persons are absent, deceased, or unlocatable, and list exceptions for court proceedings and contractual notice procedures.

The validity and perfection (or non‑perfection) of a security interest is governed by the law of Uganda where: the collateral is situated in Uganda at the time the security interest attaches; the collateral is situated outside Uganda but the secured party knows it is intended to be moved to Uganda; or the security agreement provides that the law of Uganda will be applied.

A duty of good faith applies to both the debtor and the secured party.

A security interest in the nature of a floating charge attaches to collateral when it becomes enforceable against a debtor if the parties agree to create the security interest, value is given by the secured party, and the debtor has rights in the collateral.

A security interest in property acquired after the agreement does not attach to consumer goods unless the security interest is a purchase money security interest, the consumer good is an accession, or the security interest is in collateral obtained by the debtor as a replacement for collateral that is the subject of the agreement.

An agreement to create a security interest may provide for future advances.

Where collateral is in the secured party’s possession, the secured party must use reasonable care to preserve it; expenses for custody and insurance are chargeable to the debtor and secured by the collateral; the secured party must keep collateral identifiable; money received from the collateral must be applied to reduce the secured obligation unless remitted to the debtor; the secured party may hold increases or profits as additional security and may repledge or operate the collateral subject to limits.

A secured party must respond in writing to a request to approve or correct a signed statement, generally within ten working days; the court may order compliance and the debtor is entitled to one free reply every six months.

Enforcement against third parties depends on the debtor signing a security document that identifies the collateral and shows the agreement’s purpose was to create security, unless the collateral is already possessed by the secured party or another on their behalf and the interest is perfected.

A security interest is created by a transaction that in substance secures payment or performance of an obligation; a security interest taken by a debtor to a creditor is for the sole purpose of creating security and does not operate as a transfer of property, and several specified interests are excluded from being security interests.

A security interest is perfected when it is attached and all steps required for perfection under this Act are completed, regardless of the order of attachment and those steps.

A financing statement must be registered to perfect all security interests, subject to specified exceptions.

Possession of collateral by a secured party (or on its behalf) perfects a security interest in specified collateral; special rules treat uncertificated securities as possessed when transferred and treat a secured party as possessing bailee-held collateral upon bailee notification.

A perfected security interest remains temporarily perfected for the first ten days after the secured party delivers or makes the collateral available to the debtor for specified purposes.

If the secured party enforces both collateral and proceeds, the secured amount is limited to the collateral's market value at the dealing date; the secured party may expressly or impliedly authorise dealings that cause proceeds.

If a security interest is first perfected by one method and later by another without any gap of being unperfected, it is treated as continuously perfected; if the secured party is a transferee, the security interest keeps the same priority it had at transfer.

Purchasers of goods can take goods free of a perfected security interest in specified circumstances (consumer purchasers who buy without knowledge, ordinary-course purchasers even if aware, certain purchasers of motor vehicles who give new value), with other timing and scope rules included.

Certain purchasers and holders (including purchasers of chattel paper or negotiable instruments who give new value and take possession in the ordinary course) have priority over perfected security interests in specified circumstances.

Priority among security interests in the same collateral is determined: (1) among perfected interests by the order of registration, possession, and temporary perfection under section 20; (2) a perfected security interest has priority over an unperfected one; (3) among unperfected interests by order of attachment; (4) continuous perfection remains by the original method; (5) subject to section 21, registration/possession/perfection in original collateral is the same time for its proceeds; and (6) the same priority applies to all advances, including future advances.

A purchase money security interest in collateral is entitled to priority over other security interests in that collateral or its proceeds if it is perfected when the debtor receives possession, or if it is perfected within ten working days after the debtor receives possession.

A competing perfected security interest has priority over a registered security interest to the extent it secures advances made or contracted for when registration ceases to be effective due to specified causes.

A perfected security interest in a negotiable document of title has priority over security interests in the goods perfected by other methods after the issue of the document.

A lien for materials or services supplied in the ordinary course of business has priority over a perfected security interest in the same goods, unless an instrument expressly states the lien does not have priority.

A secured party who may remove goods fixed to land must give at least ten working days' notice before removal and must exercise the right without causing unnecessary damage or inconvenience; certain fixtures remain goods and may be removed by a secured party entitled to possession under a security agreement.

Lessor or mortgagee rights in growing crops are not prejudicially affected by a security interest in crops unless the lessor or mortgagee consents in writing.

A secured party who may remove an accession must do so without causing greater damage or inconvenience; certain persons with interests in the goods are entitled to compensation for damage from removal, but are not entitled to compensation for diminution in value; such persons may refuse removal until adequate security is given.

A perfected security interest in goods that later become part of a product or bulk continues in that product or bulk when the goods lose identity in the product or when the financing statement also covers the product.

A secured party may postpone the priority of his or her security interest in favor of another interest.

The Registrar General appointed under the Uganda Registration Services Bureau Act, Cap. 210 is designated as the registrar of chattels securities under this Act.

The registrar must have an official seal; its form, use and custody are to be prescribed by regulations.

The registrar must establish and maintain a register of security interests in personal property (the register of chattels securities), and the register must specify the nature of each registered security interest and the chattels covered.

The registrar must transmit instruments to the respective area within three days after registration, number and mark registered instruments, and keep an index of grantors and grantees; the register may be electronic; persons may access abstracts on payment of a prescribed fee.

Registration of an instrument happens when the prescribed fee is paid and the instrument, its schedules, annexes, references and a statutory declaration are submitted to the Registrar.

Registration of a financing statement more than twenty one working days after the agreement to create the security interest does not perfect the security interest.

Registration lasts for the period stated in the instrument or financing statement; it may be renewed by filing a financing change statement before the original registration ends, upon payment of the prescribed fee.

A person may, upon payment of a prescribed fee, request searches of the register or copies of registered financing statements or other registered documents; a certified copy is admissible as evidence as a true copy of the original.

A person may obtain a certified copy of a registered instrument or financing statement if they pay the prescribed fee.

A person who wants to register an instrument or request a search of the register must pay the prescribed fee.

The covenants in the Second Schedule are implied in every instrument and have the same effect as if they were expressly written in the instrument.

Covenants in an instrument may be enforced severally or jointly.

Covenants in an instrument must bind and must operate for the benefit of the executors, administrators and assignees described in the provision.

The parties to the instrument may expressly vary any of the covenants specified in the Second Schedule.

An instrument must be attested by at least one witness, who must add his or her signature, address and occupation to the instrument.

An instrument that is not duly attested or registered is void (except against the grantor) for chattels in the instrument.

A chattel that has been duly registered under this Act is not to be regarded as in the possession or disposition of the grantor.

When two or more instruments are registered for the same chattel, their priority is determined by the time of their registration.

An instrument made under this Act must be in the prescribed form.

An instrument is taken to be made on the day it is executed but only takes effect from the time it is registered.

An instrument must include an inventory or description of the chattels sufficient to identify them; an instrument gives good title only to chattels described and is void for unspecified chattels except against the grantor.

An instrument is void, except as against the grantor, in respect of chattels specifically described in the instrument if the grantor was not the true owner at the time of execution.

If an instrument is made subject to a condition or declaration of trust that is not contained in the instrument, that condition or declaration is taken to form part of the instrument and must be written on the instrument; such a condition or declaration is void as against the chattels in the instrument except against the grantor; but if the condition requires payment of money, it need not be written on the instrument if date, parties and nature of the security are set out in the schedule.

An instrument that secures a current account continues in full force even if the grantor has a credit balance on that account.

A grantee has a right in all stock comprised in the instrument or its schedule; an instrument comprising stock includes listed categories of stock and the natural increase.

A grantee of an instrument is entitled to the crops described in that instrument while they are growing and after they are cut or separated from the soil, including when stored or processed.

Parties to an instrument may expressly allow the grantor to acquire substitute chattels for all or any chattels listed in the instrument's schedule.

A transferee (or the transferee's executor, administrator or assignee) has the same rights, powers and remedies and is subject to the same obligations in respect of the transferred instrument as the transferor.

A transfer of an instrument may be registered at any time after its execution, in accordance with section 39.

A financing statement may relate to one or more agreements creating a security interest.

A secured party named in a financing statement must give the debtor a copy of the financing statement within ten working days after registration unless the debtor waives that right in writing; the registrar may process and record financing statement information subject to regulations.

Financing change statement for transferred security interest

Debtors or interested persons may make a written demand to a secured party; secured parties must act within specified timeframes; the registrar must renew registrations in certain circumstances; debtors may request registrar notice and may sue for damages under section 96.

If a debtor transfers their interest in collateral (or changes name) and the secured party knows the relevant information or consents, the secured party’s security interest in that collateral is postponed in priority to certain subsequently perfected interests during specified time windows.

A person who suffers loss or damage under section 66 is entitled to compensation from the State.

Compensation is payable where the registrar fails to register, correctly record, renew, change, or improperly removes or renews particulars of a financing statement or security interest.

Compensation payable to a secured party must not exceed the outstanding amount of the debt, pecuniary obligation or value of the secured obligation at the time payment is made.

The court may reduce compensation if loss was caused by someone other than the registrar; the court must not order compensation unless satisfied certain show-cause circumstances apply; a secured party must show cause within ten days of a registrar's notice.

Proceedings generally cannot be brought against the State, the registrar, or persons administering the Act for actions or omissions under the Act unless the person acted in bad faith; this does not apply to applications for judicial review and is subject to section 65.

If compensation is paid to an applicant, the State is subrogated to the applicant's rights against the debtor; if the applicant is under-compensated, the applicant may still recover the shortfall in priority to the State.

If a debtor defaults under a security agreement, a secured party may sue the debtor on the claim or realise the collateral; if the collateral is a document of title the secured party may proceed to the document of title or the goods covered by it.

If an agreement creates a security interest over both real and personal property and the debtor defaults, the secured party may either proceed under this Part in relation to the personal property or proceed with respect to both real and personal property using the secured party's rights in relation to the real property, in which case the provisions of this Part do not apply.

If a debtor defaults, a secured party may realise collateral by appointing a receiver, taking possession, sale, foreclosure, or collection.

If a debtor defaults, a receiver may be appointed by the secured party (if the security document allows) or by the court; the secured party must serve notice on the debtor and must wait fifteen working days after service before making the appointment.

When a debtor defaults, a secured party has the right to take possession of the collateral without a court order if this can be done without a breach of the peace; without removing the collateral the secured party may render equipment unusable and dispose of collateral on the debtor's premises (see section 76).

A secured party must apply sale proceeds in a specified order (expenses, secured indebtedness, subordinate interests, then residue to debtor or owner) and may sell collateral when the debtor defaults; application to certain transactions is conditional on the security agreement.

A debtor (not the owner where the owner is not the debtor) is liable for deficiencies arising after sale proceeds are applied or from failure to comply with section 78; when the transaction is a sale of receivables or a lease the debtor is liable for any deficiency specified in the security agreement.

Sale of collateral may be by public auction, private sale or by contract; the time, place and terms must be commercially reasonable; the mere fact that a better price might have been obtained by a different time or method does not alone prove the sale was not commercially reasonable.

When the collateral is not perishable, the secured party must give twenty days notice of sale of the collateral.

When collateral is sold to a purchaser for value, the sale transfers to that purchaser the debtor's rights in the collateral and discharges the secured interest and any subordinate liens, provided the purchaser is a purchaser for value and (for public auctions) lacks knowledge of defects and is not colluding, or otherwise acts in good faith; this applies even if the secured party failed to comply with the Part's requirements.

Before a secured party sells or contracts to sell collateral, the debtor, the owner (if different), or the secured party may redeem the collateral by fulfilling secured obligations and paying the sale-preparation costs, subject to section 82 and unless otherwise agreed in writing after default.

A secured party may apply to court for an order to foreclose a debtor's right to redeem the collateral.

Secured parties must notify persons who owe payment or must take control of proceeds; where the security agreement secures indebtedness the secured party must account for any surplus to the debtor or owner of the collateral, and the debtor (not the owner) may be liable for any deficiency if the agreement provides.

If a secured party does not comply with this Part, a debtor or a person entitled to notification may ask the court to restrain a sale, require the sale follow agreed terms, or award damages for reasonably foreseeable loss.

An instrument must not prejudicially affect the rights of a landlord or mortgagee of land with growing crops, unless the landlord or mortgagee consents in writing; and a duly registered instrument is protected from being prejudicially affected by later sale, lease, mortgage or other encumbrance of the described land.

A chattel, or part of one, may be sold either together with or separately from mortgaged land.

If an instrument gives a grantee power to sell chattels without applying to court, the grantee must sell by public auction unless the grantor and subsequent encumbracers consent to a private treaty sale.

When a debt or charge over a chattel is discharged, the grantee's interest in the chattel vests in the person entitled to the equity of redemption; that interest must be recorded in a memorandum of satisfaction stating how much of the debt or charge was discharged, subject to any lien or equity on the chattels.

If a court orders execution against a judgment-debtor's chattels that are covered by an instrument, the executing officer may sell the debtor's interest in the chattels; the purchaser must notify the grantee, who may take possession and must hold the chattels in trust and pay any surplus to the purchaser; the purchaser may sue if the grantee fails to pay the surplus.

An execution creditor may test the validity of an instrument by interpleader process, notwithstanding section 43 and any other provision of this Act.

A grantor of an instrument who, by sale or delivery without the consent of the grantee of chattels comprised in the instrument, defrauds or attempts to defraud, or invalidates or impairs the grantee's security, commits an offence and is liable on conviction to up to two years' imprisonment or a fine not exceeding one hundred currency points, or both.

If someone fails to perform a duty under this Act, the person owed the duty and anyone reasonably expected to rely on performance is entitled to recover damages for reasonably foreseeable loss or damage.

The Minister may, by statutory instrument, make regulations to give effect to this Act, including prescribing forms, fees and penalties.

The Minister may amend the First Schedule (with Cabinet approval) and may amend the Second Schedule; both amendments are by statutory instrument.

The Chattels Transfer Act, Cap. 70 is repealed, but instruments registered under it remain valid for up to ninety days from this Act's commencement; instruments executed but not registered before commencement may be registered within twenty-one days.