The New Year has ushered in several changes to the law including the enactment of the Security Interests in Personal Property Act (“SIPP”) which came into effect on January 2nd, 2014. In particular, the registration of charges pursuant to section 93 of the Companies Act has been amended and now registration of these charges, save for a charge on land, must adhere to provisions of the SIPP.
1. The SIPP’s Memorandum of Objects and Reasons of SIPP states simply yet powerfully:
“A decision was taken to enact legislation to facilitate the creation of security interests in personal property, to provide for a simple registration process for the recognition of such interests, and to stipulate the rules which will govern the priority in which such interests are enforceable”.
2. Outlined below is a review of the impact that the SIPP will have on your Company’s charges which are currently registered at the Companies Office of Jamaica (“COJ”).
|1.||How were your Company’s charges previously registered?||• Prior to SIPP, a person would file a Form 16A – Particulars of Charge, together with the original or a certified copy of the stamped instrument creating the charge (the “security agreement”), with the COJ in order to register charges such as debentures, floating charges or a charge on the book debts of company.|
• A charge registered within 21 days of its creation would rank in priority to any charge created after it and, failing registration within this time period, be deemed to have been created on the date of registration.
|2.||What must you do if you have previously registered a charge at the COJ which has not yet been discharged?||• If you have a previously registered at charge at the COJ which has not been discharged, you must register a Notice in the new electronic Register of Security Interests in order to ensure that after the expiration of the 365 day transition period your security continues to have priority over a security interest created, registered or perfected under SIPP.|
|3.||How will Company charges be registered as of January 2nd 2014?||• The SIPP provides for an electronic Register of Security Interests (the “Register”) of all registration notices, amendment notices, and termination notices (www.nsippregistry.gov.jm). The registration notice is registered at the time that a registration number, date and time is assigned to it in the Register.|
• The registration notice must:
1. sufficiently identify the debtor and secured creditor;
2. state the amount of principal indebtedness or other obligations secured by the security interest; and
3. describe the secured property.
• A registration notice can only be registered if the related debtor authorizes its registration, although this authorisation need not be contained in the notice.
• For charges registered at the COJ there is a transitional period of 365 days beginning January 2nd 2014 whereby, charges may be registered in the electronic Register of Security Interests at no cost. If the notice is filed within the transitional period, the interest will have priority over a security interest created, registered, or perfected under the SIPP.
• If the notice is filed after the expiration of the transitional period, the interest will have priority over a security interest created, registered, or perfected after the time of filing.
|4.||Is a copy of the security agreement required for registration?||• A copy of the security agreement is not required for registration.|
|5.||How long does the registration notice last?||• A registration notice will be effective for the earlier of:|
1. the expiration of the term indicated in the registration notice; or
2. the expiration of 10 years commencing on the date on which the notice was registered.
|6.||What should I do if a change is made in the security arrangements – whether the property covered, amount secured, details of debtor etc?||• A registration notice may, with written authorisation signed by any of the related secured creditors, be amended to reflect changes in the security arrangements by registering an amendment notice.|
• Written authorization signed by the debtor is required to add secured property to a registration notice.
• The registration of an amendment notice does not extend the duration of a registration notice.
|7.||What should I do if the debtor defaults?||• We wish to highlight a few things that you should bear in mind, although other provisions of the SIPP may apply particularly depending on the type of asset involved:|
1. If not in possession of the property, you have a right to take possession of same and to dispose of same but shall not cause the person in possession of the premises any greater inconvenience and cost than is necessarily incidental to the disposal; and
2. Prior to disposal you must give the debtor and any other person known to be an owner, subordinated creditor or otherwise with an interest in the property, at least seven days notice of disposition
3. Once disposed of, the proceeds of disposition are to be applied as set out in SIPP.
|8.||What should I do when the security interest comes to an end?||• Register a termination notice which must identify the:|
1. registration notice by registration number; and
2. secured creditor.
• The secured creditor must authorize, in writing, the registration of the termination notice.
|9.||What must you do if you wish to create a new security interest?||• You must register a Notice in the new electronic Register of Security Interests.|
|10.||How do I create a new security interest?||• A non-possessory security interest may only be created by contract in writing.|
• In order to create a possessory security interest, the consent of the debtor to the possession of the security property for the purposes of the creation of a security interest must be evidenced in writing.
|11.||Do I have to wait until the new security interest is created before registering a notice?||• No, a registration notice may be registered before or after a security agreement has been concluded and before or after the security interest has attached.|
|12.||Does registration ensure priority?||• There is no simple answer to this question.|
• First, a right conferred by a security interest will only be enforceable against third parties when the security interest is perfected.
• How is perfection defined? Perfection occurs:
1. when a security interest has attached; and
2. either the:
security interest is registered in accordance with the SIPP; or
secured creditor, or his agent has possession or control of the secured property.
• Second, the SIPP provides various methods of determining priority between security interests in the same secured property, for example:
1. a perfected security interest has priority over an unperfected security interest in the same property;
2. priority between unperfected security interests in the same property is ranked by the order in time at which the security attaches.
• Third, the priority of security interests may be modified by written agreement between the related secured creditors.