Moveable property security bill will make credit access easier -AG tells bar association workshop
The Guyana Bar Association on Saturday spearheaded a workshop on the proposed Moveable Property Security Bill 2018 and according to Attorney General and Ministry of Legal Affairs Basil Williams SC, this piece of legislation will make access to credit much easier.
He said that when passed, it will promote access to finance for a broader spectrum of borrowers, especially small and medium-sized enterprises, facilitate infrastructure development and offshore investment in the country and prepare the way for the impending expansion of the oil and gas industry.
Williams at the time was delivering introductory remarks at the workshop which was held to facilitate a more indepth examination of the proposed piece of legislation. The Ministry in collaboration with the Inter-American Development Bank (IDB) was invited to participate in the discourse which was held at Cara Lodge.
The AG in highlighting numerous issues associated with this subject said that the laws governing secured transactions in movable property in Guyana are scattered amongst a dozen or more statutes, some of which have long been forgotten and have fallen into disuse.
He said that in some instances secured transactions are publicized in the Official Gazette and registered in the Commercial Registry. The registration process, he pointed out is manual or a combination of manual and electronic, thereby creating delays and uncertainty and increasing the possibility of error.
According to Williams, the laws governing secured transactions rely on “complex” legal and equitable rules for determining priority amongst claimants competing for the same asset when a debtor defaults. These rules, he pointed out increase uncertainty for lenders.
He said too that recourse to the courts for enforcement, even for collateral of small value, “clogs up the Courts and causes unnecessary delays,” during which time the collateral depreciates, to the detriment of debtor and creditor alike.
“By far the most numerous secured transactions- hire purchase agreements and finance leases - are not even publicized,” he said adding that receivables have lost their usefulness as collateral, as a result of provisions in the Companies Act.
He informed that farmers and miners have difficulty using their livestock and minerals as collateral and said that uncertainty and high risk means that small businesses suffer from lack of access to credit.
“In sum, the existing system increases the risk for financial institutions, deters foreign direct investment, and impedes access to finance for small and mediumsized businesses,” he said.
According to Williams, the solution to the issues he outlined lies in the Bill.
Integrated framework
“The Moveable Property Security Bill 2018 provides for a comprehensive, integrated framework for secured transactions in movable property. In this framework all movable property assets qualify as collateral, regardless of item or type,” he said.
He added that with a few exceptions, the policies embodied in the Bill are not major policy changes as they have been part of Guyana’s law and practice for many years, in one form of security device or other.
The principles and policies underlying this new framework, he informed “mirrors” the United Nations Commission on International Trade Law (UNCITRAL)’s, Model Law on Secured Transactions, now implemented in many jurisdictions in the world.
Williams told participants that this legislative framework introduces a “modern centralized electronic registry system,” in which authorized registrants will have direct access to the registry database, for the purpose of entering their record of a secured transaction. The record will be immediately searchable, he said adding that the system, which will be built on a newly designed platform for company records, will operate in real time.
He assured that together with the newly introduced credit information system and legislation, this piece of legislation will enhance risk assessment, management and mitigation for lenders.
This Bill is part of the Ministry of Business’ efforts to create a stress-free business climate in Guyana.
According to detailed explanatory notes posted on the Ministry of Business’ website, the proposed legal and institutional framework will provide Guyana with the Caribbean’s most modern legislation dealing with secured transactions.
It states that with the passage of the Bill a modern, integrated legal structure for the regulation of secured loan and credit transactions in Guyana will be created.
Further it states that although the legislation will not bring dramatic change to the forms of secured financing, it should make the process “more efficient and less risky than at present.” It will facilitate the creation of a single, centralized electronic database for security interests, with information entered and retrieved directly by secured creditors and other interested parties, without reliance upon Government agencies or registry staff for input and dissemination of security interests.
The notes can be accessed at http://www.business.gov.gy/wpcontent/uploads/2018/03/DetailedExplanatory-Notes-February-21-2018.pdf
A copy of the Bill can be accessed at http://www.business.gov.gy/wpcontent/uploads/2018/07/Draft-MPSAFeb-21-2018.pdf
In a column published in the Stabroek Business in April, the Ministry of Business explained that the legislation will assist persons who do not own real estate (immovable property) to secure credit by facilitating borrowing against various types of movable assets, tangible and intangible, including future assets (moveable assets which do not exist or which the grantor does not have rights in or power to encumber at the time the security agreement is made); parts of, and undivided rights in, movable assets; generic categories of movable assets; all of a grantor’s movable assets; and accounts receivable.
Tangible assets include all types of goods such as motor vehicles, crops, machinery and livestock whereas intangible assets include receivables, deposit accounts, electronic securities and intellectual property rights.
It said that while the legislation does not compel the lender to accept movable assets as collateral, it nevertheless establishes an inclusive set of rules governing priorities among all types of security interests and making it easier for lenders to act against defaulting borrowers.
The Ministry said that in a nutshell the Act provides for a lender to give notice of his/her security interest in a movable asset or in movable assets assigned by the borrower using an electronic (online) register of assets that is available for public inspection. The priority of lenders who have registered security interests from the same borrower and are claiming the same assets, is generally determined on a “first to publicize” basis.
It was noted that the creation of a secured transaction framework will strengthen the degree to which collateral laws protect the rights of borrowers and lenders and thus enhance the facilitation of lending.