Borrowers and Lenders Act, 2014 (No. 13 of 2014)

34 No. 13 The Borrowers and Lenders Act 2014 (2) The priority of a security interest shall be determined by the prior law if the security interest and any competing claims to the collateral arose before the effective date of this Act. SIGNED this 22nd day of December, 2014. (3) The priority between prior security interests and competing claims shall be determined by the prior law during the transitional period. DR. ERNEST BAI KOROMA, President. Regulation. 54. The Governor may, by statutory instrument, make Regulations as he considers necessary or expedient for giving effect LS to the provisions of this Act. Passed in Parliament this 18th day of November, in the year of our Lord two thousand and fourteen. No. 13 2014 IBRAHIM S. SESAY, Clerk of Parliament. Sierra Leone THIS PRINTED IMPRESSION has been carefully compared by me with the Bill which has passed Parliament and found by me to be a true and correct printed copy of the said Bill. The Borrowers and Lenders Act, 2014. Short title. IBRAHIM S. SESAY, Being an Act to provide the legal framework for credit Clerk of Parliament. agreements, to improve standards of disclosure of information in credit agreements, to prohibit certain practices, and promote consistency in the enforcement of credit agreements and to provide for other related matters. [ ] Date of com- mencement. PRINTED AND PUBLISHED BY THE GOVERNMENT PRINTING DEPARTMENT, SIERRA LEONE. ENACTED by the President and Members of Parliament in this GAZETTE EXTRAORDINARY NO. 72 OF 30TH DECEMBER, 2014. present Parliament assembled.

2 No. 13 The Borrowers and Lenders Act 2014 No. 13 The Borrowers and Lenders Act 2014 3 PART I–PRELIMINARY “deposited security” includes a security standing to the credit of a security account which is transferable Interpretation. 1. In this Act, unless the context otherwise requires– by way of book-entry in the record of depositors and a security in a securities account that is in “Bank” means the Bank of Sierra Leone ; enacted under suspense; section 4 of the Bank of Sierra Leone Act 2011 (Act No. 15 of 2011) “Governor” means the Governor of the Bank of Sierra “borrower” means a person who is a party to a credit Leone; agreement and who has concluded a credit agreement with a lender and provided some property as “inventory “means goods that are– collateral to secure obligations specified in the credit agreement and includes– (a) held by a person for sale or lease; (a) a person who buys goods on credit; (b) to be provided under a contract for services; (b) a person who receives services on (d) raw materials or work in progress ; or credit; and (d) materials used or consumed in a business; (c) a financial lessee; “lender” means a commercial bank or other financial “cash proceeds” includes money, cheques and deposit institution licensed by the Bank of Sierra Leone and accounts; who, as part of business enters into a credit agreement by advancing loans and other credit “credit agreement” means an agreement in the nature facilities including – of a credit facility, a credit transaction, a secured credit guarantee, any combination of these or any (a) micro credit facilities; other agreement that relates to a transaction, regardless of its form that creates a security interest (b) selling goods on credit; in movable property to secure all types of obligations, present or future, determined or (c) providing services on credit; and determinable; (d) a financial lessor; “collateral” means movable property that is subject to a security interest; “lien by operation of law” include interests in property created by orders, decrees, judgments and other

4 No. 13 The Borrowers and Lenders Act 2014 No. 13 The Borrowers and Lenders Act 2014 5 statutory liens in respect to, movable property; “receiver” means a person appointed as receiver in accordance with this Act; “Minister” means the Minister responsible for finance; “Registrar” means the Registrar of the Collateral “person” includes an individual, a company, a Registry appointed under this Act; partnership, an association and any other group of persons acting in concert, whether incorporated or “Registry” means the Collateral Registry established not; under section 15; “proceeds” means identifiable or traceable property “security interest” includes fixed and floating charge, received as a result of sale or other disposition, chattel mortgage, lien, pledge, outright or security collection, lease or license of collateral, including assignment of receivables, reservation of title, proceeds of proceeds, civil and natural fruits, finance lease, trust, or any other encumbrance of dividends, distributions, insurance proceeds and any nature created by an agreement other than liens claims arising from defects in, damage to or loss of arising by operation of law; collateral; “significant shareholding” means a direct or indirect “property” includes movable property and choses in holding in a non-bank financial institution which - action; (a) represents ten per cent or more of the capital “purchase money security interest” means- or of the voting right, or; (a) a security interest in collateral retained by a (b) makes it possible to exercise a significant seller that secures the obligation to pay any influence over the management of the unpaid portion of the purchase price of the institution in which a holding subsists; collateral; “value” means consideration that is sufficient to (b) a security interest taken by a person who support a simple contract, and includes an gives value for the purpose of enabling a antecedent debt or liability, and a binding debtor to acquire rights in the collateral, to commitment to provide future value; the extent that the value is applied to acquire Application those rights; or 2. (1) This Act shall apply to – of Act . (c) an interest of a financial lessor; but does not include a transaction of sale and lease back (a) security interests – to the seller;

6 No. 13 The Borrowers and Lenders Act 2014 No. 13 The Borrowers and Lenders Act 2014 7 (i) in movable property created by a credit (b) a loan to a shareholder, or other credit agreement, regardless of the form of the agreement between a corporate body, as transaction, the type of movable lender, and a person who has a controlling property or the nature of the secured interest in that corporate body, as borrower; obligation; (c) a credit agreement between persons who are (ii) against third parties in tangible property in a familial relationship; or if the property is located in Sierra Leone; (d) any other arrangement that is of a type that (iii) in intangible property if the borrower is has been held in law to be between parties located in Sierra Leone; who are not dealing at arm’s length. (iv) in a deposit account, if a bank or other financial institution that maintains the 3. (1) This Act shall not apply to security interest in– Non- application relevant deposit account has a place of of Act. business in Sierra Leone; and (a) ships and aircrafts; (vi) in proceeds of the original collateral; (b) payment rights arising under or from financial and contracts; (b) issues relating to the enforcement of a (c) assignment of wages, pension, health and security interest in tangible property if – similar benefits as provided in the National Social Security and Insurance Trust Act, 2001 (i) the enforcement takes place in Sierra and other applicable legislation; Leone; and (d) contracts of annuity or life policy of (ii) the borrower is located in Sierra Leone. insurance; and (2) Nothing in this Act shall prevent a court from invalidating, as fraudulent, a credit agreement where parties are not (e) transfers of right to damages in tort not dealing at arm’s length and intend to defraud a third party including– related to commercial activity. (a) a shareholder loan or other credit agreement (2) This Act shall not apply to any matter that is the subject between a corporate body as borrower and a of a court, administrative or alternative dispute resolution proceedings person acting as a lender who has a that had commenced before the coming into operation of this Act. significant shareholding in that corporate body;

8 No. 13 The Borrowers and Lenders Act 2014 No. 13 The Borrowers and Lenders Act 2014 9 PART II–SUPERVISION AND ENFORCEMENT (i) report to the Minister annually on the volume and cost of different types of credit products, Functions of 4. (1) For the purposes of this Act, the Bank shall– market practices relating to those the Bank. products, and their implications for (a) promote the development of a fair, borrowers’ choice and competition in the transparent, competitive and accessible credit credit market throughout Sierra Leone; market throughout Sierra Leone; (j) advise the Minister on matters of national (b) monitor the credit market throughout Sierra policy related to the credit market in Sierra Leone in order to detect and prevent any Leone; and conduct prohibited by this Act; (k) adopt any other measures necessary for the promotion and development of the credit (c) receive complaints in writing about alleged market in Sierra Leone. contraventions of this Act; (2) In the performance of its functions under subsection (d) conduct investigations in order to ensure (1), the Bank shall take cognizance of international best practice in compliance with this Act; the field of credit and financing. (e) take such enforcement measures in 5. (1) Where the Bank suspects that a person has committed Investigation. accordance with section 46 of the Banking an offence under this Act the Bank may conduct investigations, as it Act, 2011 (Act No.14 of 2011) as may be considers necessary, in order to establish his liability or otherwise. appropriate; (2) For the purposes of carrying out an investigation (f) promote public awareness on matters relating under subsection (1), the Bank shall have power to, examine, make to the credit market throughout Sierra Leone; copies or take possession of books of accounts, other documents and transactions of a lender and a lender shall give the Bank access (g) design and disseminate information, for the to and shall produce books of accounts, documents and information purposes of public education, on matters that may be required by the bank in the conduct of the investigation. relating to the credit market throughout Sierra Leone; (3) Any person who fails, without reasonable cause, to furnish the Bank with information requested by the Bank under (h) establish standards for protection of the subsection (2) or impedes the Bank in the conduct of an investigation rights of borrowers and lenders under this under this section commits an offence and shall, on conviction, be Act; liable to a fine of Le.50,000,000.00 or to a term of imprisonment not exceeding one year.

10 No. 13 The Borrowers and Lenders Act 2014 No. 13 The Borrowers and Lenders Act 2014 11 Confidentiality 6. Information obtained by the Bank pursuant to section 5, (c) examine any article or document that is on or shall be confidential and shall not be disclosed to a third party without in the premises that has a bearing on the the consent in writing, of the person who has custody or control of investigation; the books or other documents unless the disclosure is required for the purposes of criminal proceedings or other action under this Act. (d) request information about any article or Order for document from the owner of, or person in 7. (1) Where the Bank has reasonable grounds to suspect search of control of the premises or from a person who premises. that– has control of the article or document, or from (a) an action prohibited by this Act has taken any other person who may have the place, is taking place or is likely to take place information; on or in any premises; (e) take extracts from, or make copies of, any book (b) information connected with an investigation or document that has a bearing on the into any conduct prohibited under this Act, investigation that is on or in the premises; is in the possession of, or under the control of, a person who is on or in any premises; or; (f) use any computer system on the premises, or require assistance of person on the (c) information which have been requested by premises to use that computer system, to- the Bank, in accordance with subsection (2) of section 5, and has not been produced but (i) access any data contained in or is in the possession or under the control of a available to that computer system; person who is on or in any premises; (ii) reproduce any record from that data; the Bank may apply to the court for the issue of a warrant authorizing the person named in the warrant to enter and search the premises. (iii) seize an output from that computer for (2) A person authorised to enter and search premises examination and copying; and under subsection (1), may– (iv) attach, and if necessary, remove from (a) search the premises; the premises for examination and safekeeping, any item that has a bearing (b) search any person on the premises if there on the investigation. are reasonable grounds to believe that the person has personal possession of any article (3) In this section “premises” includes any structure, or document that has a bearing on the building, place, aircraft, vehicle and vessel. investigation;

12 No. 13 The Borrowers and Lenders Act 2014 No. 13 The Borrowers and Lenders Act 2014 13 Annual 8. (1) The Bank shall, within six months after the expiration (2) For the purposes of subsection (1), a description such report . of each financial year submit to the Minister an annual report on the as “all inventory” or “all movable property” of the borrower shall be administration of this Act. sufficient. (3) After a security interest is created and becomes (2) The annual report referred to in subsection (1) shall effective between a lender and borrower, it shall automatically extend include– to any identifiable proceeds of the collateral whether or not the credit agreement contains a description of the proceeds. (a) a record of violations and remedial actions taken; 12. Except as otherwise provided in this Act, a security interest Achieving third-party shall be effective against third parties when it is created in accordance effectiveness. (b) volumes of different types of credit products, with section 9 and registered in accordance with section 10. and 13. A security interest shall continue to be effective against Continuity of third-party third parties for the purposes of this Act, if the security interest has effectiveness. (c) proposals for ongoing improvement for the been registered and has not been discharged or lapsed. effective administration of this Act. 14. (1) Except as otherwise provided in this Act, a security Third-pa rty PART III–EFFECTIVENESS OF SECURITY INTERESTS effectiveness interest collateral that is dealt with or gives rise to proceeds shall in proceeds. extend to the proceeds. Execution of 9. (1) A credit agreement shall be executed in writing or credit (2) If the lender enforces the security interest against agreement electronically, and it may consist of one or more writings or electronic records that, taken together, establish the intent of the parties to both the collateral and the proceeds, its recovery from the collateral create a security interest in some property. and proceeds shall be limited to the value of the collateral at the date of the disposition that gave rise to the proceeds. (2) Non-payment of stamp duty or any other tax shall not invalidate a credit agreement. (3) A security interest shall remain effective against third parties with respect to proceeds if – Registration 10. (1) A lender shall register a security interest with the of security (a) the security interest in the original collateral interests. Registry in order to render the security interest effective against has been made effective against third parties third parties. by registration that contains a description of (2) Where a security interest is created by a lender, the the original collateral; registration of the security interest with the Registry shall be (b) the proceeds are– sufficient to render the security interest effective against third parties. (i) of a kind that is within the description Description 11. (1) A credit agreement shall contain a specific description of the collateral: or of collateral. of the collateral. (ii) cash proceeds;

14 No. 13 The Borrowers and Lenders Act 2014 No. 13 The Borrowers and Lenders Act 2014 15 (4) A security interest in proceeds shall temporarily remain (c) the maximum amount secured by the security effective against third parties until the expiration of ten (10) working interest; days after the proceeds arose, if the proceeds– (d) a description of the collateral; and (a) are not cash proceeds; and (e) any other information required by the (b) are not within the description of a collateral Registrar. in the registration under subsection (3). (3) The Registrar shall prepare and keep an index of (5) The security interest shall not continue in the registered security interests. proceeds if the lender fails to render it effective against third parties within ten (10) working days after the proceeds arose. (4) The Registrar shall issue a certificate of the registration which shall be evidence of registration in any court proceedings. Collateral 15. (1) The Bank shall establish and maintain a Collateral Registry. Registry as a unit or department within the Bank which shall be (5) The Registrar shall, upon request and payment of the responsible for the registration of security interests on movable prescribed fee, issue a printed search result in the form of a certificate property. which shall be irrefutable evidence of the existence of information in the Registry as of the date and time of its issuance. (2) The Bank shall appoint a Registrar on terms and conditions specified in the letter of appointment and who shall be 17. (1) A security interest shall be effective against third Effectiveness of registra- responsible for the management of the Registry. party interests after it has been registered and a number, date and tion. time assigned to it by the Registrar. (3) The records of the Registry shall be public records. (2) The effectiveness of a registration of a security Registration 16. (1) A lender shall register a security interest covering interest shall not be affected by any defect, irregularity, omission or of security interest collateral created by the borrower in favour of a lender. error, unless the defect, irregularity, omission or error is misleading. (2) A registration of a security interest under subsection (1) (3) A registration of a security interest shall be shall contain– ineffective if there is a defect, irregularity, omission or error in- (a) the identity of the borrower; (a) the identity of a borrower; or (b) the identity of the lender; (b) the serial number of a collateral if the collateral is of a kind that is required by the Registry to be described by a serial number.

16 No. 13 The Borrowers and Lenders Act 2014 No. 13 The Borrowers and Lenders Act 2014 17 Refusal of 18. The Registrar shall not register a security interest if– (b) the lender has agreed to release part of the register collateral described in the registration; (a) it is not submitted in such form as may be prescribed by the Registrar; (c) the collateral described in the registration includes an item or kind of property that is (b) the prescribed fee has not been paid. not collateral under a credit agreement Voluntary between the lender and borrower; 19. (1) An amendment to a registration that adds a new amendment of re- collateral, a new borrower or that modifies the maximum amount gistration. secured by the security interest shall be effective and have priority (d) no credit agreement exists between the to the– parties; and (a) added collateral; (e) the security interest has been extinguished in accordance with this Act. (b) added borrower (c) new maximum amount, (3) If the lender fails to comply with the demand within fifteen (15) working days after its receipt, a person making the demand from the date when the amendment was registered. under subsection (2) may apply to the Court to order registration of satisfaction of obligation or an amendment of the registration as (2) Unless a registration modifies the maximum appropriate. amount secured by the security interest, it may relate to one or more credit agreements that cover the collateral described in the PART IV- GENERAL PRIORITY RULES registration. Compulsory 21. Priority between security interests in the same collateral Priority 20. (1) A lender shall register satisfaction of a secured between amendment shall be determined by the order of possession of that collateral or security and re- obligation within fifteen (15) working days after receipt of demand interests. registration of the security interests whichever occurred earlier. gistration from the borrower, when all obligations under a credit agreement of satis- creating a security interest have been performed faction of obligation. 22. Priority of a security interest in an original collateral shall Priority of a security in- (2) A borrower shall give a written demand to a lender to be the priority with respect to its proceeds. terest in amend or discharge the registration if– proceeds (a) all of the obligations under the credit 23. (1) A lender may stipulate in an agreement to subordinate Subordination agreement to which the registration relates of priority. its priority to any other lender, have been performed and there is no commitment to make future advances;

18 No. 13 The Borrowers and Lenders Act 2014 No. 13 The Borrowers and Lenders Act 2014 19 (2) An agreement referred to in subsection (1) shall not (3) If more than one security interest is effective against adversely affect rights of a person who is not a party to the agreement. third parties in the goods before they become part of a product or mass, the security interests rank equally in proportion to the value of Priority of 24. A security interest shall have the same priority in respect the goods at the time they became part of the product or mass. future advances. of all extensions of credit that a lender makes in the future up to the maximum amount secured by the security interest indicated in the 27. (1) The rights of a borrower in the collateral shall be Priority with respect to registration. transferred despite a provision in a credit agreement prohibiting transferred transfer or declaring a transfer to be a default. collateral Priority of 25. (1) A purchase money security interest in collateral or its purchase (2) If a borrower transfers an interest in collateral, that is mon ey proceed other than inventor, shall have priority over a non-purchase subject to security interest effective against third parties, that security security money security interest in the same collateral created by the same interest. interest shall have priority over any other security interest granted borrower if the purchase money security interest in the collateral or by the transferee. its proceed is made effective against third parties by registration not later than ten (10) working days after the day on which the borrower PART V–PRIORITY OF TRANSFEREES OF MONEY, ETC. Priority of obtained possession of the collateral. transferees 28. (1) A transferee of money shall take the money free from of money. (2) A purchase money security interest in inventory or a security interest, unless the transferee acts in collusion with a its proceeds shall have priority over a previously registered non- borrower in violation of the rights of a lender. purchase money security interest in the same collateral, given by the (2) A creditor who receives payment of a debt owing by same borrower, if the purchase money security interest in the inventory a borrower through any payments system shall receive the payment or its proceeds is made effective against third parties by registration free from security interest, whether or not the creditor had knowledge and the lender receives a notification at the time the borrower obtains of the security interest at the time of the payment. possession of the collateral. (3) A purchaser of a negotiable instrument, document of Priority of 26. (1) A security interest in goods that is made effective title, chattel paper or security certificate shall have priority over a security security interest effective against third parties in the negotiable interest in- against third parties before the goods become an accession, shall accessions and have priority over a claim to the goods as an accession made by a instrument, the document of title, the chattel paper or the security commingled person with an interest in the goods. certificate if the purchaser– goods. (2) A security interest in goods that is made effective (a) gave value; against third parties that subsequently become part of a product or (b) acquired the negotiable instrument, the mass and their identity is lost shall continue in the product or mass. document of title, the chattel paper or the security certificate without knowledge that the transaction is in breach of a credit agreement to which the security interest relates; and

20 No. 13 The Borrowers and Lenders Act 2014 No. 13 The Borrowers and Lenders Act 2014 21 (c) took possession of the negotiable 31. (1) The interest of a judgment creditor in any collateral Judgment liens instrument, the document of title, the chattel shall have priority over any security interest in the same collateral if paper or the security certificate. the security interest is not made effective against third parties at the time of execution. Priority of 29. (1) A buyer or lessee of a movable property collateral buyers. who acquires it for value, shall take the collateral free from a security (2) In this section, “time of execution” means – interest that has not been made effective against third parties. (a) the time of seizure, if movable property is (2) A buyer of goods sold in the ordinary course of seized by or on behalf of an execution business of a seller, and a lessee of goods leased in the ordinary creditor; course of business of a lessor, shall take the goods free from a security interest created by the seller or lessor, unless the buyer or the lessee (b) the time when a judicial order is served on a person who is holding movable property for knows that the sale or the lease constitutes a breach of a credit or on behalf of a borrower; or agreement under which the security interest was created. (c) the time when a judgment or order with Possessory 30. A possessory lien given to a person who provided materials lien arising by respect to movable property is registered in operation of or services for movable property that are subject to a security interest the Registry. law with in the same property shall have priority over that security interest if respect to movable – PART VI–BORROWERS RIGHTS, OBLIGATIONS AND property DISCLOSURE OF INFORMATION (a) the materials or services relating to the lien were provided in the ordinary course of 32. (1) A lender shall not discriminate against a person on Protection business; grounds of race, gender, ethnicity, political affiliation or religion but against discrimination. may refuse to enter into a credit agreement with a prospective (b) the lien has not arisen under an Act that borrower on reasonable commercial grounds consistent with t h e provides that the lien does not have the priority lender’s customary risk management and underwriting practices including– (c) the person who provided the materials or services did not, at the time the person (a) the ability of a prospective borrower to meet provided those materials or services, know the obligations of a proposed credit that a credit agreement relating to the goods agreement; contained a provision prohibiting the creation of a lien by the borrower. (b) the cost of a credit agreement to the borrower; (c) the terms and conditions of a credit agreement;

22 No. 13 The Borrowers and Lenders Act 2014 No. 13 The Borrowers and Lenders Act 2014 23 (d) compliance by the prospective borrower with (c) take an action to accelerate, enforce suspend the terms of the credit agreement; or terminate a credit agreement with the borrower. (e) the exercise of any right of the lender under a credit agreement, this Act or any other law (2) Where a credit agreement or the provision of a credit relating to credit; or agreement is declared unlawful, or severed from the agreement, the lender in that agreement shall not, in response to that decision, (2) A prospective borrower who alleges discrimination by a lender may make a complaint to the Bank for redress. (a) alter the terms or conditions of another credit agreement that is a party to the impugned Delivery of 33. For the purposes of a credit agreement under this Act, agreement, except to the extent necessary to documents delivery of documents shall be– correct a similarly unlawful provision; or (a) in person; (b) take an action to accelerate, enforce, suspend or terminate another credit agreement with (b) by ordinary mail; another party to the impugned agreement. (c) by facsimile; 35. A lender or a person who acts on behalf of a lender shall Confidentiality. not disclose information obtained from a borrower unless the (d) by electronic-mail; information is required under any other law or by a court of competent jurisdiction. (e) by printable web-page; or 36. (1) A lender shall not conclude a credit agreement with a Pre-agree (f) by any other means agreed between the prospective borrower unless the lender prepares a pre- agreement m en t disclosure. lender and the borrower. statement specifying– (a) the principal amount; Protection of 34. (1) A lender shall not in response to a borrower’s exercise borrower credit right of a right under this Act- (b) the proposed disbursement schedule of the principal debt; (a) penalise the borrower; (c) the interest rate; (b) alter, or propose to alter the terms or conditions of a credit agreement with the (d) other credit costs; borrower to the detriment of the borrower; or

24 No. 13 The Borrowers and Lenders Act 2014 No. 13 The Borrowers and Lenders Act 2014 25 (e) the total amount involved in the proposed (2) A person who makes an oral solicitation to induce a agreement; person to apply for or obtain credit shall provide a written statement containing the information set out in subsection (1). (f) the proposed repayment schedule; and 38. (1) A borrower or guarantor shall settle the credit amount Borrower’s or guarantor’s (g) the basis of any cost that may be assessed if at any time subject to notice requirements as the conditions provided obligations the borrower breaches the contract. for in a credit agreement. (2) A lender who contravenes this section is liable (2) A credit agreement shall provide for the terms and to such enforcement measures, as may be imposed by the Bank, in conditions of any prepayment and the order in which advance accordance with section 46 of the Banking Act, 2011 (Act No.14 of payments are to be applied. 2011) as may be appropriate (3) Unless otherwise agreed by the parties, the amount (3) A borrower may sue a lender for damages or loss required to settle a debt agreement is the total of– suffered as a result of contravening subsection (1). (a) the principal amount; Marketing 37. (1) A written solicitation to induce a person to apply for information. or obtain credit shall include– (b) the accrued interest charges; (a) the name and business address of the lender; (c) a prepayment charge, if any, agreed between the borrower and the lender; (b) the nature of the proposed credit agreement; (d) the other fees and charges payable by the (c) the lender’s current annual interest rate and borrower to the lender up to the date for other costs of credit; settlement. (4) Subject to notice requirements provided in a credit (d) whether deposit or security is required; agreement, a lender shall accept any payment under a credit agreement when it is tendered, even if that is before the date on which the (e) whether residual payment will be required; payment is due. (f) whether other restrictions apply; and (5) A lender shall credit each payment made under a credit agreement to the borrower as of the date of receipt of the payment. (g) any other information determined by the Bank. (6) This Part shall apply to all security interests with the exception of–

26 No. 13 The Borrowers and Lenders Act 2014 No. 13 The Borrowers and Lenders Act 2014 27 (a) an outright assignment of an account (b) by courier service or registered mail, it shall receivable; and take effect on the day it is officially recorded as delivered by return receipt or its equivalent; (b) an operating lease that does not secure or payment or performance of an obligation. (c) by other means, it shall take effect on the (7) Where there is a conflict between this Act and other day as provided in the credit agreement. law in relation to the enforcement of a lender’s rights, this Act shall prevail. (4) If a borrower fails to pay or make satisfactory arrangements to pay the amount outstanding to the lender within PART VII–ENFORCEMENT thirty days or the time period stipulated in the notice, the lender may enforce the rights provided for under this Act. Default in 39. (1) Where a borrower fails to make payment on the due payment. date for a payment or contravenes the credit agreement, the lender 40. Where a borrower defaults and the lender delivers a notice Remedies of lender shall give notice of default to borrower in writing and request the of default under section 39 the lender may– on default borrower to pay the amount due within the time period indicated in the notice. (a) sue the borrower on any covenant to perform the credit agreement; or (2) A lender may deliver a notice under subsection (1) by – (b) realise the security interest in the collateral. (a) hand; 41. (1) In the exercise of a right of possession of property Lender’s right that is subject to a security interest under a credit agreement, a to posse- ssion. (b) courier service; lender shall not be compelled to initiate proceedings in court to enforce the right of possession. (c) registered mail; or (2) Where a lender is unable to enforce a right of (d) other means agreed upon by the lender and possession in a peaceable manner, the lender may use the services of the borrower in the credit agreement. the police or bailiffs to evict the borrower pursuant to a warrant issued by a Court. (3) Where the notice is delivered- 42. (1) A lender with priority over other lenders may collect Application (a) by hand, it shall take effect on the date it is and apply an account receivable, security, money or a negotiable of collateral in satis- received by or on behalf of the borrower; and instrument taken as collateral to the satisfaction of the obligation faction of secured by the security interest if the borrower is in default. obligation

28 No. 13 The Borrowers and Lenders Act 2014 No. 13 The Borrowers and Lenders Act 2014 29 (2) Unless otherwise agreed, the lender may notify the (d) the collateral consists of inventory; account debtor and collect payment even prior to default. (e) after the lender repossesses the collateral, Disposition 43. (1) A lender may sell the collateral by auction, public every person entitled to receive notice under of collateral subsection (2) shall consent in writing to the after default tender private sale, or any other method provided for in the credit by sale. agreement after default immediate sale of the collateral; or (f) a court may grant leave to the lender to sell (2) A lender who intends to sell collateral under this collateral without complying with subsection section shall; at least 10 working days before selling the collateral, (2). give notice to the following persons- 44. Where a collateral is sold under section 43, all security Discharge of (a) the borrower; interests in the collateral and its proceeds that are subordinate to the security security interest of the lender who sold the collateral shall be interests. (b) any person who has registered a registration extinguished on the sale of the collateral. form in respect of the collateral that became effective before the lender repossessed the collateral; and 45. Where a collateral is sold under section 43, the lender shall Accounting within ten (10) working days after the sale of the collateral, give the of sale. persons referred to in subsection 2 of section 43 a written statement (c) any other person that has given the lender of account showing - notice that that person claims an interest in the collateral. (a) the amount of the gross proceeds of sale; (3) Subsection (2) shall not apply if– (b) the amount of the costs and expenses of the sale; and (a) the collateral may perish within 10 working days of the repossession; (c) the balance owing by the lender to the borrower or by the borrower to the lender, as (b) the lender believes on reasonable grounds the case may be. that the collateral will decline substantially in value if it is not disposed of immediately; 46. (1) Where a lender has sold a collateral under section 43 Distribution he shall, before applying the net proceeds of the sale towards the of proceeds of sale. satisfaction of the debt or other obligation secured by the security (c) the cost of care and storage of the collateral interest of the lender, apply the net proceeds of the sale towards the is disproportionately large in relation to its reasonable costs and expenses of the sale incurred by the lender, and value; to the extent provided for in a credit agreement, and reasonable legal expenses.

30 No. 13 The Borrowers and Lenders Act 2014 No. 13 The Borrowers and Lenders Act 2014 31 (2) The lender shall pay the following persons the amount 48. (1) If no notice is received, the lender shall, at the Retention of collateral. of any surplus in the following order– expiration of ten (10) days period referred to in subsection (3) of section 43, be deemed to have been irrevocably elected to retain the (a) any person who has a subordinate security collateral in satisfaction of the obligation secured by it, and shall be interest in the order of their priority; entitled to hold or dispose of the collateral free from all rights and interests of the debtor and of any person entitled to receive notice (b) any other person who has given the lender notice that that person claims an interest in under subsection (2) of section 43. the collateral; and (2) If subsection (1) applies, all security interests in the (c) the borrower. collateral that are subordinate to the security interest of the lender that retained the collateral under subsection (1) shall be extinguished. (3) The lender shall pay the surplus into court if there is 49. (1) At any time before a lender sells a collateral or is Debt settle- a question as to whom or in which order is entitled to receive deemed to have retained the collateral in satisfaction of the obligation ment and re- distribution. demption of secured by it, a person who is entitled to receive a notice under collateral. Retention subsection (2) may, unless the person otherwise agrees in writing 47. (1) A lender with priority over other lenders may, after collateral after default settle the debt and redeem the collateral by tendering– after default . default propose to retain the collateral in satisfaction of the obligation secured by it. (a) the principal owed amount; (2) The lender shall give notice of the proposal to the (b) the accrued interest; persons outlined in paragraphs (a) (b) and (c) of subsection (2) of section 43. (c) any fee for the prepayment of an obligation, if agreed between the borrower and the (3) The lender shall sell the collateral under subsection lender; (1) of section 43 if a person who is entitled to a notice under paragraphs (a), (b) and (c) of subsection 2 of section 43 and whose (d) the other fees payable by the borrower to the interest in the collateral would be adversely affected by the lender’s lender up to the date for settlement; and proposal to retain collateral gives to the lender a notice of objection within ten (10) working days after receiving the notice referred to in (e) a sum equal to the reasonable expenses of subsection (2) of section 43. seizing, repossessing, holding, repairing, processing and preparing the collateral for sale, if those expenses have actually been incurred by the secured party, and any other reasonable expenses incurred by the secured party.

32 No. 13 The Borrowers and Lenders Act 2014 No. 13 The Borrowers and Lenders Act 2014 33 (2) The borrower’s right to redeem the collateral shall PART VIII–MISCELLANEOUS have priority over any other person’s right to redeem the collateral. 51. Security interest registered in another registry other than Security interest in (3) Upon full settlement of the debt, the borrower shall the Registry established under this Act shall not render security other Re- redeem the collateral and the lender shall release the security interest interest effective against third parties gistries. and discharge the relevant registration. 52. (1) A prior security interest that was perfected or effective Transitional provision. against third parties shall continue to be enforceable against third Appointment 50. (1) A lender in whose favour a security interest is created parties under this Act during the transitional period. of receiver or manager. may upon default of a borrower– (2) A prior security interest remains effective against third (a) appoint a receiver or manager or; parties and shall be deemed to be perfected under this Act until the earlier of– (b) apply to court for the appointment of a manager to– (a) the time it would have ceased to be effective or perfected under prior law; or (i) take possession of and protect the property; (b) the expiration of a period of 6 months after the effective date of this Act. (ii) collect the rents and profits derived from the property; and (3) If the lender satisfies the requirements of this Act for perfection of security interests before the effectiveness or perfection (iii) enforce the security interest on behalf would have ceased under subsection 2, the perfection shall be of the lender, continuous. within ten (10) days after the date of the appointment, order or entry. (4) A prior security interest that is not perfected under this Act within the transitional period shall be deemed to be an (2) A lender who appoints a receiver or manager under unperfected security interest thereafter. subsection (1) shall submit notice of that appointment to the Registrar. 53. (1) The priority of a prior security interest shall be Priority calculated from the date it was perfected or made effective. rules for prior security interests.