It is unquestionable that, nowadays, the access to credit, capital and other financial services is a very important means of financing, developing, and strengthening private sector investment in Mozambique. And it is understanding the crucial role of the securities to be provided in the process of granting credit both locally and in the relationship with foreign entities, that the legislator has introduced significant amendments to the legal regime applicable to rights in rem over movable property contained in the Civil Code, through Law No. 19/2018, of 28 December, which establishes the legal regime for the use of movable things as a security for the fulfilment of obligations and creates the Central for Registry of Movable Securities (Movable Security Law), and Decree No. 7/2020, of 10 March, which approves the Regulations of the Movable Security Law (Regulations).
The various and innovative changes introduced by the new Movable Security Law and the respective Regulation are notorious. However, for the present reflection, we will stick only to the Control Agreement as an instrument of perfection of the pledge of bank accounts and securities and financial assets accounts or intermediated financial assets.
However, due to the relevance of the matter, it is important to note that with the operationalization of the Central of Registry of Movable Securities (CRGM), the great expectation of having a more flexible way of constituting the securities in Mozambique is materialized. The CRGM was created by the Movable Security Law and the respective Regulation, in practice, it is a fully electronic public service that centralizes, for publicity purposes, all registration information on securities provided on movable assets.
Notwithstanding the fact that the registration of securities with the CRGM is not in itself a condition for the effectiveness of the security, in our point of view only the possibility of registering the security on a specific platform managed by an entity with exclusive competences for this purpose, as is the case of CRGM, provides greater legal certainty to the creditor and more transparency to the process of creation of securities, to the extent that the third parties are informed of the existence of the security provided if they wish to acquire the secured asset. It should also be noted that with the entry in operation on 29 December 2021 of the CRGM, new securities constituted over movable assets must be registered with the CRGM as a requirement for perfection of Securities. Existing securities must also be registered with the CRGM within 6 (six) months from 29 December 2021.
Control Agreement as an Instrument of Perfection of the Pledge of Bank Accounts Agreements and securities and financial assets accounts or intermediated financial assets
The new Movable Security Law and the respective Regulation, establish the figure of the “Control Agreement”, in other words the requirement to sign a control agreement when the object of the security is bank accounts and securities and financial assets accounts or intermediated financial assets.
The Control Agreement is objectively an agreement between the parties, whereby the issuer of the security or the depository or intermediary institution (our recent experience shows that in our jurisdiction most of the time it has been a Credit Institution of type Bank) of a bank account, securities and financial assets account or intermediated financial assets agrees to comply with the creditor's instructions regarding the payment of the respective funds without requiring the subsequent consent of the Guarantor.
Now, from the legislator's point of view, the control agreement as an instrument of perfection of pledge of bank accounts and/or securities and financial assets accounts, or intermediated financial assets, is an instrument to safeguard and secure the creditor's interests in the event of non-compliance with the obligations secured by the debtor, in other words this contract aims to grant powers to the creditor to freely operate the bank accounts given as a security for the fulfilment of the obligations and without the need for prior consent of the owner of the accounts in this case the Debtor.
However, despite the fact that the legislation requires a control agreement to be signed as a condition for perfecting the security in relation to the pledge of bank accounts or financial assets, in our point of view the legal implication of this rule has proved rather difficult to achieve, especially in relation to the pledge over bank accounts, to the extent that the rule may collide with some credit institutions' rules, namely the rules to be observed when operating bank accounts.
In practice, the control agreement may prove to be insufficient and notoriously fragile when it comes to enforcing the pledge over bank accounts, at least while the enforceability of the control agreement is not harmonized with the rules and procedures in force regarding the operating of bank accounts.
The control agreement is essentially aimed to ensure that, in the event of non-compliance with the obligations secured by the debtor (owner of the bank accounts), the creditor may operate the bank accounts provided as security and the Bank where these bank accounts are domiciled accepts that the creditor may freely operate the bank accounts. However, the conditions for operating bank accounts depend on instructions contained in company minutes and signature forms or powers of attorney to that effect. The control agreement, being a new instrument, may create a general discomfort within banks, for several reasons, among which it is highlighted the set of rules and regulations that banks, as credit institutions, are obliged to comply with, which result from the account opening agreement, the account opening agreement consists of a written document (printed or with signature form), from which derives the right of deposit, operate and withdrawal of funds by the account owner. Thus, by means of the account opening agreement and on account opening, the applicant appoints the account signatories and informs the bank about the forms and modalities of account operation, and with this the bank only operate the accounts upon instructions from the account signatories, thus raising doubts as to whether the bank can receive and comply with instructions for account operation from a third party strange to the company. This means that enforcement of the pledge over bank accounts may not be so simple and immediate and additional documents may be requested to the creditor to enable it to operate the pledged bank account.
Therefore, to avoid such constraints, it may be necessary that at the time the pledge agreement and the respective control agreement are entered into, the debtor grant a power of attorney to the creditor with powers to operate the bank account (a document with which banks are generally familiar for the purpose of operating bank accounts), which should be delivered to the depositing bank together with the control agreement. This power of attorney may enable the bank to accept the instructions for account movement by the creditor at the time of execution without the need for further proceedings.
Notwithstanding the importance and relevance of the control contract, our recent experience clearly shows that it clashes with some rules and procedures that banks, as credit institutions, are obliged to follow, hence, there is an urgent need to harmonize the legislation in order to also establish the obligation, whenever it refer to the pledge of bank accounts and/or securities and financial assets accounts or intermediated financial assets, in addition to entering into the control agreement, the debtor must grant a power of attorney granting sufficient powers for the creditor to freely operate the bank accounts given as security, failing which the bank of the bank accounts will not accept the instructions for operating the pledged bank account, on the legitimate pretext that it is a stranger element to the company.