The government is considering changes to laws governing security rights over movable property with the introduction of the Movable Property Security Rights (Amendment) Bill, 2024.
This proposed legislation seeks to unify and update existing rules, particularly impacting the Movable Property Security Rights Act (MPSRA) and the Companies Act.One of the major shifts is the proposed repeal of the outdated Hire Purchase Act, which has long been viewed as a hindrance to businesses due to its complex and archaic provisions.The 2017 MPSRA was initially introduced to streamline the use of movable assets as collateral, but it faced criticism for overlapping with other regulations, especially the Companies Act and the Hire Purchase Act.The new Bill aims to simplify these frameworks by redefining hire purchase agreements. This will now include transactions where the purchase price is financed either by the seller or by a third party, a move expected to provide clarity for businesses and consumers alike.
One significant change concerns interest rates for hire purchase agreements, with the Central Bank of Kenya (CBK) gaining the authority to set these rates. This measure could complicate the hire purchase landscape and potentially make these deals less attractive. Additionally, the Bill simplifies the repossession process. Unlike the Hire Purchase Act, which requires a court order for repossession if over two-thirds of the purchase price has been paid, the new Bill removes this restriction, streamlining the process for lenders.
Further reforms include clarifications on registration requirements for charges created by companies. The Bill excludes book debts from needing registration under the Companies Act, addressing a common source of confusion. It also introduces a provision allowing borrowers to request the cancellation of security registration notices when the security right is no longer valid, aiming to resolve administrative delays caused by secured creditors’ failure to cancel such notices. The Bill is currently under review by the parliamentary committee on finance and is set for debate in the coming months.
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