One of the most significant statutes to impact the taking of security has recently come into force in Kenya. The Movable Property Security Rights Act, 2017 (the Act) came into force on 16 May 2017 and the Movable Property Security Rights (General) Regulations, 2017 (the Regulations) came into force on 2 June 2017.


22 July 17

The Act is far reaching as it requires many types of existing securities that have already been registered to be re-registered under the Act for the security to be effective against a liquidator, administrator or third parties.

Purpose of the Act
The Act is part of a number of laws that the Government intends to enact as part of Kenya Vision 2030’s objective of developing an efficient and globally competitive financial services sector (the other laws in the pipeline for this sector are the Financial Services Authority Bill, 2016 and the Nairobi International Financial Centre Bill, 2016).

The Act facilitates the use of movable property as collateral for credit facilities by establishing an office of the Registrar and an electronic collateral registry for security rights over movable assets (the Collateral Registry) where security rights in movable assets may be registered.

“Collateral” is defined in the Act as a movable asset that is subject to a security right or a receivable that is subject to an outright transfer.

“Movable assets” are broadly defined in the Act as tangible assets (meaning all types of goods including motor vehicles, crops, machineries and livestock) and intangible assets (including receivables, choses in action, deposit accounts, electronic securities and intellectual property rights).

This Act does not apply to:

(a) a security right in book-entry securities under the Central Depositories Act,2000;

(b) the creation, lease or transfer of an interest in land, excluding a right to payment that arises in connection with an interest in or a lease of land;

(c) a security right in a vessel including a mortgage right subject to the Merchant Shipping Act, 2009;

(d) a security right in an aircraft subject to the Civil Aviation Act, 2013; and

(e) except as otherwise provided by this Act, a lien, charge or other interest created by law.

In addition, the Act does not apply to security rights in proceeds of collateral if the proceeds constitute a type of asset that is governed by another law.

Contents of the Act and the Regulations
The Act and the Regulations set out the nature of security rights and formalities for the creation and registration of security rights in movable assets. A security right is evidenced by way of a written security agreement that meets certain criteria and registration of the security right is achieved by electronically filing a notification of the security agreement at the Collateral Registry in the manner described in the Act. Although not mandatory, registration of a security right is important as it is the only way that a holder of a security right will achieve third party effectiveness over a security right. There is also provision for an electronic platform for undertaking a search at the Collateral Registry.

In addition, the new law provides for the manner of determining the rights, obligations and priorities of third parties, including consensual and non-consensual creditors in security rights over movable assets. Further, the Act and the Regulations contain provisions relating to the governing law applicable to various categories of security rights and the procedure for enforcement of the rights of a security right holder.

The Act repeals the Chattels Transfer Act (Cap. 28) and the Pawnbrokers Act (Cap. 529). It also amends several sections of the Agricultural Finance Corporation Act (Cap. 323), The Stamp Duty Act (Cap. 480), the Hire Purchase Act (Cap. 507), the Business Registration Services Act (Act No. 15 of 2015), the Companies Act, 2015 and the Insolvency Act, 2015 to align the provisions of these statutes with the Act.

Prior Security Rights
A prior security right that was effective against third parties under the prior laws will continue to be effective against third parties until the earlier of

(a) the time it would have ceased to be effective against third parties under the prior law; or

(b) the expiration of 9 months after the coming into force of the Act.

What this means is that banks and others holding securities such as debentures that are already registered will need to register their rights at the Collateral Registry before 15 February 2018.

So What’s Next?
The new laws require the existence of a functional Collateral Registry. As at the date of this publication, the Office of the Attorney-General through the e-citizen portal has provided a platform for the registration of security rights and undertaking a search as envisaged under the Act.

This is accessible at

You can read the Act and the Regulations here and here.

Should you have any queries or need any clarifications with respect to the above, please do not hesitate to contact Sonal Tejpar.