The Botswana Parliament passed the Moveable Property (Security Interests) Act, 2022 (The Act) on the 25th of February 2022. The Act is a welcome statutory instrument that legislates and governs the creation, perfection and priority of movable security interest. Previously, common law and judicial cases dealt with this.
The Act effectively intends to deal with all aspects of tangible (physical form) and intangible assets (account receivable and IP rights) except those specifically excluded, which are encumbrance of immoveable property, aircrafts, ships and sale of accounts receivable as a sale of business transaction.
Prior to the Act, security over moveable property was effected by written and oral agreements and no public registration of same. The Act prescribes the appointment of a Collateral Registry Office with day-to-day administration of registration of security interests over moveable property through the prescribed statutory notices.
The Act provides statutory requirements to create a valid security interest and the perfection thereof, depending on the type of movable property. Of interest to lenders is that the Act with certainty provides a rank of priority between security interest in the same collateral. It introduces for the first-time the concept of floating and fixed charges, statutory liens and describes how a statutory lien can have priority over a security interest. This is an exciting time for creditors/lenders as there will be a rush to the Collateral Registry Office once the Act is fully operational, particularly with hypothecs.
The resultant effect of the Act is the Hypothecation Act, which was the forum of securing loans, advances and debts by hypothec over moveable assets, becomes irrelevant. Pursuant to this, the Hypothecation (Repeal) Act, 2022 was passed on 11 August 2022. The extant Hypothecation (Repeal) Act, 2022 provides that deeds of hypothecation registered under the Hypothecation Act will be deemed to be deeds of hypothecation registered under the Movable Property (Security Interests) Act. A welcome development with the Movable Property (Security Interests) Act is that a creditor does not need to be an authorised creditor to take first ranking security over movable property as was the case in the Hypothecation Act.
Going forward, we foresee that when the Movable Property (Security Interests) Act commences (and we believe the Act will commence simultaneously with the Hypothecation (Repeal) Act, 2022), all security to be taken by way of a deed of hypothecation will be replaced by security to be taken in terms of the Movable Property (Security Interests) Act.
In the meantime, our advice to client is since no time frame has been set for the Movable Property (Security Interests) Act to be in force, lenders should continue registering security over moveable assets by way of hypothecations in terms of the Hypothecation Act until the Movable Property (Security Interests) Act commences simultaneously with the Hypothecation (Repeal) Act, 2022).