Modernising the registration of security interest in movable assets |30 April 2021
When a consumer borrows money from a bank to purchase, let's say, a car, the bank uses the car as collateral for the loan to protect itself in the event that the client defaults on payments due.
Accordingly, it will register a security interest in the car. Once the security interest is registered, the bank will be known as the Secured Party. If the consumer fails to make the payments on time, the bank can repossess the car and sell it, applying the proceeds of the sale toward the loan.
Currently, for such registration, the bank submits a hardcopy of the pledge documents to the Office of the Registrar General. Following the calculation of the applicable stamp duty and receipt of payment, the documents are stamped, registered and returned to the relevant parties. This process may take more than a day.
The process is set to change, following the cabinet of ministers' approval on April 14, 2021 of the Secured Transactions (Filing of Notices of Security Interest) Regulations 2021 and approval for the launch of a new system – the Collateral Database Registry.
It was in September 2015 that the National Assembly approved the Secured Transactions Act, 2015, which was subsequently assented, paving the way for the creation of a Collateral Database Registry for the registration of security interests in movable assets.
The project has been undertaken by the Central Bank of Seychelles, Office of the Registrar General and Department of Information Communications Technology (DICT), assisted by the World Bank.
In April this year, DICT completed the development of the Collateral Database Registry, which will be maintained and administered by the Office of the Registrar General.
To go back to the example above, with the Collateral Database Registry, the bank will now have direct access to the system to conduct a search to determine any prior pledge, enter information about the car to register the security interest and pay the relevant fee. This can be completed within a few minutes.
What is a Collateral Database Registry
It is a centralised, electronic public database to primarily register information on security interests in movable assets, used as collaterals to secure credit facilities.
Such a system has been established in many countries.
It also provides a faster and more convenient platform for interested parties to know if there are prior registrations against assets being offered as collaterals for loans.
Who will have access to the Collateral Database Registry?
Secured Parties and the general public will be able to access the system.
Secured Parties can be entities like banks providing credit facilities, as well as entities or individuals wishing to register movable assets for purposes other than providing credit facilities, as provided for under the Secured Transactions Act.
How will the Collateral Database Registry be accessed?
When it goes live on May 3, 2021, the Collateral Database Registry will be accessible via the e-government portal at https://eservice.egov.sc/eGateway/
Secured Parties will require a user account through which they will be able to register security interests in movable assets, file notices of amendment, continuation and termination, at applicable fees.
The general public will be able to conduct searches or file a notice of objection free of charge, without a user account.
The Collateral Database Registry will go live on Monday May 3, 2021, with the coming into force of the Secured Transactions Act.
Contributed by the Central Bank of Seychelles