Introduction
The government plans to enact very soon a new law governing the creation of security interests in personal property (i.e. all property that is not land). This new secured interests legislation is only one of several new Bills being fast tracked by Parliament in order to satisfy structural benchmarks set by the International Monetary Fund (IMF) as conditional to its four-year Extended Fund Facility (EFF) approved on May 1, 2013. The EFF is intended to provide financial support for Jamaica’s comprehensive economic reform agenda. In Jamaica’s “Letter of Intent” to the IMF dated April 17, 2013, one of its many commitments is to “Establish a Secured Transactions Framework to facilitate improved access to credit through the inclusion of movable property as allowable forms of collateral” including to:
- Table the Secured Obligations Bill in Parliament by August 2013; and
- Establish and operate the Central Collateral Registry by December 2013
The Status Quo
Despite the wording included in the Letter of Intent, under current Jamaican law, movable property is already an allowable form of collateral, with security being granted on a regular basis over chattel such as motor vehicles, equipment, machinery, and even household furniture and electrical appliances. However, there is no central registry for such security, and registration procedures are diverse. Security over personal chattel is usually given in a document called a “Bill of Sale”, which must be recorded at the Island Records Office within 30 days. The Records Office does maintain a paper record of the documents recorded, however searching its books is a prohibitively onerous and time consuming task unless one has some idea of both the borrower and the creditor and the time period in which the Bill of Sale was recorded. Additionally, if the security is given by a company registered in Jamaica or with an established place of business in Jamaica, it must be registered at Companies Office of Jamaica. Liens over motor vehicles are also registered with Tax Administration Jamaica’s motor vehicle department. Security over registered trademarks must be registered with the Jamaica Intellectual Property Office.
Likely Changes
Various Acts, including the Bills of Sale Act, Companies Act, Trade Marks Act, and Hire-Purchase Act, are likely to be amended by the new Act. There are plans to establish a simple, central, and internet-based system of filing and searching for security interests in all non-land assets, so that potential lenders can easily find out if potential borrowers have already charged assets over which security is being granted. The government has also stated that it hopes to broaden the set of assets that can be pledged as collateral. It will be interesting to see how this will be achieved, because even now there is theoretically no limit to the assets that can be charged as security, however there is a limit to the types of collateral that lenders find acceptable to mitigate credit risk. Perhaps an uncomplicated system for registering and ranking security over assets that are not traditionally given as security, e.g. crops and animals, will provoke a change in creditors’ outlook.
Conclusion
The government’s objective, expressed in the press on various occasions over the past two years, is that the new secured interests legislation will improve the climate for doing business in Jamaica, leading to higher levels of investment and economic growth. It is hoped that improving the certainty and simplicity of taking collateral will increase the flow of credit in the economy, especially to micro, small and medium-sized enterprises. In order for this objective to be achieved, the legislation ultimately passed will need to be compatible with Jamaica’s current legal framework and concepts and the realities of Jamaican creditors and borrowers, even as it attempts to bring revolutionary simplicity to the relevant procedures.
Contributor: Narda Graham
Attorney-at-Law
DunnCox
48 Duke Street
Kingston
narda.graham@dunncox.com