Secured Transactions Amendment Act 2024 - Sri Lanka

PARLIAMENT OF THE DEMOCRATIC
SOCIALIST REPUBLIC OF
SRI LANKA
SECURED TRANSACTIONS (AMENDMENT)

ACT, No. 17 OF 2024
[Certified on 01st of April, 2024]
Printed on the Order of Government
Published as a Supplement to Part II of the Gazette of the Democratic

Socialist Republic of Sri Lanka of April 05, 2024
PRINTED AT THE DEPARTMENT OF GOVERNMENT PRINTING, SRI LANKA

TO BE PURCHASED AT THE GOVERNMENT PUBLICATIONS BUREAU, COLOMBO 5
Price : Rs. 96.00 Postage : Rs. 150.00
This Act can be downloaded from www.documents.gov.lk

Secured Transactions Act, No. 17 of 2024 1
[Certified on 01st of April, 2024]
L. D. - O. 47/2015
AN ACT TO PROVIDE FOR AN INSTITUTIONAL

FRAMEWORK FOR THE REGULATION OF SECURED
TRANSACTIONS IN MOVABLE PROPERTY BY THE
ESTABLISHMENT OF THE SECURED TRANSACTIONS
REGISTRATION AUTHORITY; TO SET OUT
THE POWERS , DUTIES AND FUNCTIONS OF SUCH
AUTHORITY; TO PROVIDE FOR THE DETERMINING
OF PRIORITIES AMONGST CREDITORS HAVING
COMPETING SECURITY RIGHTS IN THE MOVABLE
PROPERTY OF THEIR DEBTORS; TO SET OUT THE
RIGHTS AND DUTIES OF PARTIES TO
SECURITY AGREEMENTS; TO PROVIDE FOR THE
ESTABLISHMENT AND MAINTENANCE OF
A REGISTER OF SECURITY RIGHTS IN MOVABLE
PROPERTY; TO REPEAL THE SECURED
TRANSACTIONS ACT, NO.49 OF 2009; AND
FOR MATTERS CONNECTED THEREWITH OR
INCIDENTAL THERETO.
BE it enacted by the Parliament of the Democratic Socialist

Republic of Sri Lanka as follows: -
1. (1) This Act may be cited as the Secured Transactions Short title and
Act, No. 17 of 2024. date of
operation
(2) The provisions of this Act, other than the provisions
of this section, shall come into operation on such date as the
Minister may appoint by Order published in the Gazette (in
this Act referred to as the “appointed date”).
(3) The provisions of this section shall come into operation
on the date on which the Bill becomes an Act of Parliament.
2 Secured Transactions Act, No. 17 of 2024
PART I
PRELIMINARY
Application of 2. Subject to the provisions of section 3, the provisions of
the Act this Act shall apply-
(a) in respect of every transaction that in

substance creates a security right,
irrespective of its form and without having
regard to the type of asset or the person
who has the title to the collateral that is
the subject of such security right,
including but without limiting to,-
(i) chattel mortgage, conditional sale,
debenture, fixed charge, floating
charge, pledge, trust indenture or trust
receipt; and
(ii) an assignment, consignment, lease or

transfer of chattel paper, where
payment or performance of an
obligation is secured;
(b) to a transfer of an account or chattel paper,

even where such transfer may not secure
payment or performance of an obligation;
and
(c) to a lease for a term over one year, even
where such lease may not secure payment
or performance of an obligation.
Exemption from 3. (1) Unless otherwise provided for in this Act, the
the application
provisions of this Act shall not apply to-
of the Act
(a) any lien granted by or under any law
unless otherwise provided, and to any non-
consensual lien that is recognized by
courts;
(b) the transfer of an interest or claim in or under a

contract of annuity or a policy of insurance, other
than the transfer of a right to money or other value
payable under a policy of insurance as indemnity
or compensation, for loss or damage caused to a
collateral;
(c) the assignment or transfer of an interest in the

present or future wages, salary, emolument or
commission or any other form of payment for any
work undertaken or services rendered, the
assignment or transfer of which is prohibited by
law;
(d) the transfer of an unearned right to a payment

under a contract, to a transferee who is to perform
the transferor’s obligations under the contract;
(e) the creation or the transfer of an interest in any

immovable property, including a mortgage, charge
or lease of any such property, other than-
(i) an interest in a fixture; or
(ii) an assignment of a right to payment under a

mortgage, charge or lease, where the
assignment does not convey or transfer the
assignor’s interest in the immovable property;
(f) the sale of accounts, chattel papers or goods as

part of a sale of the business out of which they
arose, except where the seller remains in control of
the business after the sale;
(g) the transfer of accounts made solely for

the purpose of facilitating the collection of
accounts for the transferor;
(h) intermediated securities;
(i) a transaction that is subject to the

Pawnbrokers Ordinance (Chapter 90);
(j) the payments arising from or under

financial contracts governed by any
agreement pertaining to the settlement of
such payment, other than any receivables
owed on the termination of all outstanding
transactions; and
(k) the transfer of an interest in goods held by
a debtor where the goods are registered
under the Motor Traffic Act (Chapter 203),
the Sri Lanka Ports Authority Act, No. 51
of 1979, the Merchant Shipping Act, No.
52 of 1971 and the Civil Aviation Authority
of Sri Lanka Act, No. 34 of 2002.
(2) For the purpose of paragraph (h) of subsection (1),

“intermediated securities” means securities credited to a
securities account and rights or interests in securities
resulting from the credit of securities to a securities account.
Attaining 4. A security right shall be considered to have been
perfection perfected, when-
(a) it has been validly created in terms of Part
III of this Act; and
(b) all measures required to attain perfection

as provided for by this Act, have been
completed.
Subordination of 5. (1) An unperfected security right in collateral, shall

unperfected
security rights
be subordinate to-
(a) the interest of a perfected security right;

(b) the interest of a creditor who has registered
a notice of judgment with the Registrar,
where such right was unperfected at the
time such notice was registered; and
(c) the right of any person under any law,

whether statutory or otherwise, to
participate in a distribution of movable
property, subject to the interest of a creditor
referred to in paragraph (b).
(2) An unperfected security right in-
(a) collateral, shall not be effective against-

(i) an assignee in any insolvency
proceedings, if the security right is
unperfected at the time of the
bankruptcy; or
(ii) a liquidator appointed under the

Companies Act, No. 07 of 2007, if
the security interest is unperfected
when the winding up order is made;
(b) chattel paper, documents of title or goods

shall not be effective against a transferee
thereof, if the transferee-
(i) acquires the interest in the collateral
under a transaction that does not
secure payment or performance of
an obligation;
(ii) gives value; and
(iii) receives delivery of the collateral

without knowledge of the security
right; and
(c) tangibles other than accounts shall not be

effective against a transferee thereof, if the
transferee-
(i) acquires the interest in the collateral

under a transaction that does not
secure payment or performance of an
obligation; and
(ii) gives value without knowledge of the

security right.
PART II
ESTABLISHMENT OF THE SECURED

TRANSACTIONS REGISTRATION AUTHORITY
Establishment 6. (1) There shall be established an authority called the

of the Secured Secured Transactions Registration Authority (in this Act
Transactions
Registration referred to as the “Authority”).
Authority
(2) The Authority shall, by the name assigned to it by

subsection (1), be a body corporate and shall have perpetual
succession and a common seal and may sue and be sued in
its corporate name.
Object of the 7. The object of the Authority shall be to promote the

Authority
interests of the national economy by facilitating and
participating in the regulation of secured transactions in
movable property, in compliance with the provisions of this
Act.
8. The duties and functions of the Authority shall be- Duties

and functions
(a) to register security rights of movable of the
Authority
property under Part VI of this Act;
(b) to register the rights of judgment creditors;
(c) to determine the policies related to the

registration system maintained by the
Bureau;
(d) subject to the provisions of this Act, to
determine the fees or any other charges to
be levied for services rendered by the
Authority; and
(e) to perform and discharge such duties and

functions that are specifically assigned to
the Authority by or under this Act.
9. The Authority shall exercise such powers as may become Powers

necessary or appropriate in order to achieve its object and for of the
Authority
the effective performance and discharge of the duties and
functions assigned to it by section 8 of this Act.
10. (1) The administration and management of the affairs of Board
the Authority shall be vested in a Board of Directors (in this of Directors
of the
Act referred to as the “Board”), consisting of the following Authority
members:-
(a) the Governor of the Central Bank of Sri

Lanka, or a person nominated by him as his
representative, who shall be the Chairperson
of the Board;
(b) the Secretary to the Treasury or a person

nominated by him as his representative;
(c) the Chairman and a Director of the Bureau

or persons nominated by them as their
representatives; and
(d) the Registrar of the Authority appointed
under section 16 of this Act.
(2) The Board shall, for the purpose of administering
and managing the affairs of the Authority, exercise, perform
and discharge the powers, duties and functions conferred
on, assigned to or imposed on, the Authority by this Act.
(3) The Registrar of the Authority shall be the Secretary
to the Board and shall be responsible for maintaining a record
of the minutes of all meetings of the Board.
Meetings of the 11. (1) The Board shall meet at least once in every quarter
Board and the Chairman shall preside at all meetings of the Board.
In the absence of the Chairman from any meeting of the Board,
the members present shall elect a member from among
themselves, to preside at such meeting.
(2) The quorum for any meeting of the Board shall be
three members and the Board shall regulate the procedure for
the conduct of its meetings and the transaction of business
at such meetings.
(3) All questions for decision at any meeting of the
Board shall be decided by the majority vote of the members
present at such meeting. In the case of an equality of votes,
the Chairman or the member presiding at the meeting, shall, in
addition to his vote, have a casting vote.
(4) Any act, proceeding or decision of the Board shall
not be invalidated by reason only of the existence of any
vacancy among its membership or any defect in the
nomination of any person who is nominated to represent a
member of the Board.
Seal of the 12. (1) The seal of the Authority shall be as determined by
Authority the Board and may be altered in such manner as may be
determined by it.
(2) The seal of the Authority shall be in the custody of

the Secretary to the Board.
(3) The seal of the Authority shall not be affixed to any
instrument or document, except with the sanction of the Board
and in the presence of the Chairman and one other member of
the Board, who shall sign such instrument or document in
token of their presence.
(4) The Secretary to the Board shall maintain a register
of all the instruments and documents to which the seal of the
Authority has been affixed.
13. (1) The Authority shall have its own Fund. Fund
of the
(2) There shall be credited to the Fund of the Authority- Authority
(a) all such sums of money as may be voted

from time to time by Parliament for the use
of the Authority;
(b) all such sums of money received as fees or

charges imposed in respect of services
rendered by the Authority; and
(c) all such sums of money as may be received

by the Authority by way of loans,
donations, gifts and grants from any
source whatsoever.
(3) There shall be paid out of the Fund of the Authority

all such sums of money required to defray the expenditure
incurred by the Authority in the exercise, performance and
discharge of its powers, duties and functions under this Act.
14. (1) The financial year of the Authority shall be the Financial year
calendar year. and the audit of
accounts
(2) The Board shall cause proper books of accounts to
be kept of the income and expenditure, assets and liabilities
and all other financial transactions of the Authority.
(3) The provisions of Article 154 of the Constitution

relating to the audit of accounts of public corporations, shall
apply to and in respect of the audit of accounts of the
Authority.
Application of 15. The provisions of Part II of the Finance Act, No. 38 of
Part II of the
Finance Act, No.
1971 shall, mutatis mutandis, apply to and in respect of the
38 of 1971 financial control and maintenance of accounts of the
Authority.
The Registrar 16. (1) The Minister shall appoint a person having such
qualifications as may be prescribed, to be the Registrar of the
Authority for the purposes of this Act (in this Act referred to
as the “Registrar”), who shall be the Chief Executive Officer
of the Authority.
(2) The Registrar shall be responsible for the general

supervision of all matters connected with the registrations
required to be carried out under this Act and for the execrcise,
performance and discharge of all the powers, duties and
functions assigned to him by and under this Act. He shall
also be responsible for the administrative control of the officers
and employees of the Authority.
(3) The Registrar shall not be liable for anything done
by him in good faith, in the exercise, performance or discharge
of any power, duty or function assigned to him by or under
this Act.
(4) The Minister may, for reasons assigned therefor, remove

from office the Registrar appointed under subsection (1).
(5) The Registrar may, with the written approval of the

Board and whenever he considers it necessary to do so,
delegate in writing to any officer of the Authority, any power,
duty or function assigned to him by or under this Act and
such officer shall exercise, perform or discharge such power,
duty or function, subject to the general or special direction
and control of the Registrar.
17. (1) The Authority may appoint such officers and Staff
employees as it considers necessary for the efficient exercise, of the
performance and discharge of its powers, duties and functions Authority
as may be assigned by or under this Act.
(2) At the request of the Authority, any officer in the
public service may, with the consent of that officer and the
Secretary to the Ministry under which that officer is employed
and the Public Service Commission, be temporarily appointed
to the staff of the Authority for such period as may be
determined by the Authority, or with like consent, be
permanently appointed to such staff.
(3) Where any officer in the public service is temporarily

appointed to the staff of the Authority, the provisions of
section 14(2) of the National Transport Commission Act, No.
37 of 1991 shall, mutatis mutandis, apply to and in relation to
such officer.
(4) Where any officer in the public service is

permanently appointed to the staff of the Authority, the
provisions of section 14(3) of the National Transport
Commission Act, No. 37 of 1991 shall, mutatis mutandis, apply
to and in relation to such officer.
(5) Where the Authority employs any person who has
entered into a contract with the Government by which he has
agreed to serve the Government for a specified period, any
period of service with the Authority by that person shall be
regarded as service to the Government for the purpose of
discharging the obligations of such contract.
(6) At the request of the Authority, any officer of

Provincial Public Service may, with the consent of that officer
and the relevant Provincial Public Service Commission, be
temporarily appointed to the staff of the Authority for such
period as may be determined by the Authority, or with like
consent, be permanently appointed to such staff.
Remunerations 18. The Registrar and all other officers and employees of
to be paid
to the Registrar the Authority shall be paid such remuneration and other
and officers allowances, in such manner and at such rates as may be
and employees
of the determined by the Minister with the concurrence of the
Authority Minister assigned the subject of Finance and shall be subject
to such terms and conditions of service, as may be determined
by the Board, by rules made in that behalf.
PART III
CREATION OF SECURITY RIGHTS AND RIGHTS OF

PARTIES
Freedom 19. (1) Except as otherwise provided for in this Act or in

of contract any other law, a security agreement shall be effective
according to its terms between the parties to the agreement
and against a third party.
(2) A perfected security right in proceeds shall be

enforceable against a third party, irrespective of whether or
not the security agreement contains a description of the
proceeds.
(3) Where a security agreement is in writing, the secured

party shall deliver a copy of the written agreement to the
debtor within ten days of its execution and if the secured
party fails to deliver a copy after a request is made by the
debtor, a Magistrate's Court shall have the power, upon an
application made in that behalf by the debtor, to make an
order for the delivery of such copy to the debtor.
Creation 20. (1) A security right including a security right in the
of a security nature of a floating charge,attaches when-
right
(a) the value is given;
(b) the debtor has rights in the collateral or the

power to transfer rights in the collateral to
a third party; and
(c) (i) the debtor has signed an agreement that

contains a description of the collateral
sufficient to enable it to be identified;
or
(ii) the collateral is in the possession of

the secured party or any other person
on behalf of the secured party.
(2) Notwithstanding the provisions of subsection (1),

where the parties to the security agreement have specifically
agreed to postpone the time of creation, the security right
shall attach at the agreed time.
(3) A security right shall not be enforceable against a
third party, unless it has attached in the manner provided for
in subsection (1).
21. (1) Subject to the provisions of subsection (2), a security Security right
in
agreement may cover any property acquired after entering movable
into such agreement: property
acquired after
the agreement
Provided that a security right in property acquired after
entering into an agreement shall not become an enforceable
security right, until the debtor acquires a right to such
property.
(2) A security right shall not be created under a clause
in a security agreement covering any property acquired after
entering into such agreement-
(a) in respect of crops that become such crops

more than one year after the security
agreement has been entered into, except
that a security right in crops that is given
in conjunction with a lease, purchase or
mortgage of immovable property may be
created, if so agreed, in crops grown in the
property concerned during the term of such
lease, purchase or mortgage, as the case
may be; or
(b) in respect of consumer goods other than

accessions, unless-
(i) the debtor acquires rights in them
within ten days of the secured party
giving value; or
(ii) the debtor grants a security right in his

personal assets to secure a personal
guarantee, for a non-consumer
transaction.
Future advances 22. A security agreement may contain a provision to secure

future advances, provided that a maximum amount of money
that may be so advanced is specified in the security
agreement.
Agreement not to 23. An agreement by a debtor not to assert against an
assert defence assignee any claim or defence that such debtor has against
against an assignee
the debtor’s seller or lessor, shall be enforceable by the
assignee who takes such assignment for value in good faith
and without notice, except as to any defences that may be
asserted against the holder in due course of a negotible
instrument under the Bills of Exchange Ordinance
(Chapter 82).
Application of 24. Where a seller retains an acquisition security right in
the Sale of Goods
any goods sold-
Ordinance
(a) the law relating to contracts of sale
including the Sale of Goods Ordinance
(Chapter 84) shall govern the sale and any
disclaimer, limitation or modification of the
seller’s conditions and warranties; and
(b) except as provided for in section 23, the
conditions and warranties in a sale
agreement shall not be affected by any
security agreement.
25. Where a security agreement provides for a secured Acceleration

party to accelerate payment or performance in the event that clauses
the secured party considers that the collateral is in jeopardy
or that the secured party is insecure, the security agreement
shall be construed to mean that the secured party has the
right to do so, only in the event that the secured party in
good faith believes and has reasonable grounds to believe,
that the prospect of payment or performance is or is about to
be impaired or that the collateral is or is about to be placed in
jeopardy.
26. (1) A secured party shall exercise reasonable care in the Custody and
custody and preservation of any collateral in the secured preservation of
collateral by a
party’s possession and unless otherwise agreed upon, in the secured party
case of a chattel paper or an instrument, reasonable care shall
include taking necessary steps to preserve the rights against
prior parties.
(2) Unless otherwise agreed upon, if a collateral is in

the possession of a secured party-
(a) reasonable expenses, including the cost of

insurance and payment of taxes or other
charges incurred in obtaining and
maintaining possession of the collateral
and its preservation, shall be chargeable
to the debtor and shall be secured by the
collateral;
(b) any risk, loss or damage, except if caused
due to the negligence of the secured party,
shall be on the debtor, to the extent of any
deficiency in any insurance coverage;
(c) the secured party may hold as additional

security any increase or profits, except
money received from the collateral, and any
money so received unless remitted to the
debtor, shall be applied forthwith in the
reduction of the obligation secured; and
(d) the secured party shall keep the collateral

in a manner that it can be identifiable,
however, fungible collateral may be co-
mingled.
(3) A secured party shall be liable for any loss or

damage caused by such party’s –
(a) failure to meet any obligation imposed by

subsection (1) or subsection (2), but shall
not lose the security right in the collateral;
and
(b) use of the collateral otherwise than as

authorized by subsection (4).
(4) A secured party may use the collateral-
(a) in the manner and to the extent provided

for in the security agreement;
(b) for the purpose of preserving the collateral

or its value; or
(c) in accordance with any order made by
a court.
Obtaining 27. (1) The debtor or an authorized representative of the
information debtor may, by notice in writing given to the secured party,
about the
security require such secured party to furnish to such person-
agreement
(a) a statement in writing of the amount of the
indebtedness and the terms of payment
thereof, as of the date specified in the
notice;
(b) a statement in writing approving or
correcting as of the date specified in the
notice, a statement of the collateral or part
thereof as specified in a list attached to
such notice;
(c) a statement in writing approving or

correcting as of the date specified in the
notice, a statement of the amount of
indebtedness and of the terms of payment
thereof; or
(d) a true copy of the security agreement.
(2) The provisions of subsection (1) shall not apply

where the secured party is the trustee under a trust indenture.
(3) If the secured party claims a security right in all of

the collateral or in all of a particular type of collateral owned
by the debtor, the secured party may indicate such fact, in
lieu of approving or correcting the list of such collateral
required to be attached to the notice under paragraph (b) of
subsection (1).
(4) Subject to the payment of any fee required under
subsection (6), the secured party shall respond to a notice
issued under subsection (1) within fifteen days of receiving
the same, and if the secured party without a reasonable
excuse-
(a) fails to respond within the fifteen days

period, the secured party shall be liable for
any loss or damage caused thereby to any
person who is entitled to receive
information under that subsection; or
(b) gives any response which is incomplete

or incorrect, the secured party shall be liable
for any loss or damage caused thereby to
any person who may reasonably be
expected to rely on such response.
(5) Where a person who receives a notice under sub-

section (1) no longer has an interest in the obligation or prop-
erty of the debtor that is the subject matter of the notice, such
person shall, within fifteen days of the receipt of such notice,
disclose the name and address of the immediate successor in

such interest, and if known, the latest successor to such inter-
est. If such person fails to make such disclosure without a
reasonable excuse, the person making the request shall, in
addition to any other remedy that may be provided for by this
Act, be entitled to apply to court under section 28, for an
order to comply with the request.
(6) A person to whom a request is made under this

section, may require the payment of a prescribed fee in ad-
vance, for each request made, however, a debtor shall be
entitled to a reply free of charge, once in every six months.
Power of court to 28. (1) On an application made in that behalf, a Magistrate's

issue an order of Court having jurisdiction shall have the power to make an
compliance
order-
(a) requiring the secured party or the person

receiving a notice under subsection (1) of
section 27, to comply with the request made
by such notice;
(b) exempting the secured party either wholly

or partly from complying with the notice
given under subsection (1) of section 27;
(c) extending the time granted for complying
with the notice issued under paragraph (a)
of subsection (1) of section 27; or
(d) as it considers just in the circumstances.
(2) Any person who fails to comply with an order

made by a Magistrate under subsection (1) commits an offence
under this Act and shall on conviction be liable to a fine not
exceeding rupees five hundred thousand or to imprisonment
for a period not exceeding one year or to both such fine and
imprisonment.
PART IV
PERFECTION
29. (1) Subject to the provisions of section 4 of this Act, Perfection of a
possession of the collateral by the secured party or by any security right
other person on behalf of the secured party, shall perfect a
security right in-
(a) a chattel paper;

(b) goods;
(c) an instrument;
(d) a certified security; and

(e) money.
(2) The registration of a security right under Part VI of

this Act, shall perfect any type of collateral.
(3) For the purposes of subsection (1), the collateral

shall be actually delivered into the possession and custody
of the secured party or his authorized representative, and
continue to remain actually, ostensibly and bona fide in such
possession, until such time as the secured party seeks to
enforce its rights in respect of such collateral.
30. (1) A security right which is perfected by possession Temporary
in- perfection
(a) an instrument or a certificate that a secured

party delivers to the debtor, for the purpose
of-
(i) a sale or an exchange;

(ii) presentation, collection or renewal;
or
(iii) registration of a transfer; or
(b) a negotiable document of title or goods held

by a bailee that is not covered by a
negotiable document of title, which

document of title or goods the secured
party makes available to the debtor, for the
purpose of-
(i) a sale or an exchange;

(ii) loading, unloading, storing,
shipping or trans-shipping; or
(iii) manufacturing, processing,

packaging or dealing with goods in
any other manner, prior to their sale
or exchange,
shall remain perfected, during the first ten days after the
collateral comes under the control of the debtor.
(2) On the expiry of the period of ten days referred to
in subsection (1), the security right concerned shall become
subject to the provisions of this Act that provide for the
perfecting of a security right.
Perfection as to 31. (1) Where dealing with a collateral gives rise to

proceeds proceeds, the security right in such collateral-
(a) continues, unless the secured party

expressly or impliedly authorizes the
dealing with the collateral free of the
security right; and
(b) extends automatically to the proceeds,
even though it may not be covered by the
security agreement.
(2) If a secured party enforces a security right against

both the collateral and the proceeds, the amount secured by
the security right in the collateral and the proceeds shall be
limited to the market value of the collateral at the date of the
dealing.
(3) A security right in proceeds shall be a continuously
perfected security right, if the interest in the collateral was
perfected when the proceeds arose.
(4) Where a security right in the original collateral is

perfected otherwise than by registration, the security right in
the proceeds becomes unperfected ten days after the debtor
acquires an interest in the proceeds, unless the security right
in the proceeds is perfected under this Act.
32. (1) Subject to the provisions of section 4 of this Act, a Perfection
security right in goods in the possession of a bailee who has where the
goods are held
issued a negotiable document of title covering it, is perfected by a bailee
by perfecting a security right in the document, and any security
right in such goods otherwise perfected while they are so
covered, shall become subject to the perfected security right
in such negotiable document of title.
(2) A security right in collateral in the possession of a

person other than the debtor, the debtor’s agent or a bailee
referred to in subsection (1), may be perfected by-
(a) the issuance of a document of title in the

name of the secured party;
(b) the possession on behalf of the secured
party; or
(c) registration.
33. (1) Where a debtor sells or leases goods that are subject Perfection and
to a security right, the security right reattaches to the goods, priority of
returned, seized
if- or repossessed
goods
(a) the buyer or lessee has taken the goods
free of the security right, under paragraph
(a) of subsection (1) of section 31or
subsection (1) or (2) of section 34; and
(b) the obligation secured remains unpaid or

unperformed.
(2) Where a security right in goods reattaches in the

circumstances referred to in subsection (1), any question as
to-
(a) whether or not the security right in the

goods is perfected; and
(b) the time of its perfection or registration,

shall be determined as if the goods had not been sold or
leased.
(3) Where a sale or lease of goods creates an account

or chattel paper and the account or chattel paper is transferred
to a secured party and the goods are returned or repossessed
by the seller or the lessor, the transferee of the account or the
chattel paper shall have a security right in such goods.
(4) A security right in goods arising under subsection

(3) is perfected if the security right in the account or the
chattel paper was also perfected, but becomes unperfected
on the expiry of ten days after the return or repossession of
the goods, unless the transferee registers a financing
statement in respect of the security right or takes possession
of the goods, before the expiry of that period.
(5) If a transferee of an account obtains a perfected
security right in goods under subsections (3) and (4), for the
purpose of determining the transferee’s priority as to the
goods, the transferee shall be deemed to have perfected a
security right in the goods at the time the transferee’s security
right in the account was perfected.
(6) Where a transferee of chattel paper obtains a

perfected security right in goods under subsections (3) and
(4), then as between-
(a) the transferee and the holder of a perfected

security right that attached under
subsection (1), the person who had priority
to the chattel paper shall also have priority
to the goods; and
(b) the transferee and a person other than the

holder of a perfected security right that
attached under subsection (1), for the

purpose of determining the transferee’s
priority as to the goods, the transferee shall
be deemed to have perfected a security
right in the goods at the time the
transferee’s security right in the chattel
paper was perfected.
34. (1) A buyer of goods from a seller who sells the goods Transactions in
in the ordinary course of business, takes them free of any the ordinary
security right therein given by the seller, even though it is course of
business
perfected and the buyer knows of it, unless the buyer was
also aware that the sale constituted a breach of the security
agreement.
(2) The provisions of subsection (1) shall become

applicable, whether or not-
(a) the buyer took possession of the goods;
(b) the seller was in possession of the goods

at any time;
(c) the title to the goods passed to the buyer;
or
(d) the seller took a security right in the goods.
(3) In a lease of goods by a lessor who leases goods

in the ordinary course of business, the lessee holds the goods
to the extent of the lessee’s rights under the lease free from
any security right therein given by the lessor, unless the
lessee was also aware that the lease constituted a breach of
the security agreement.
(4) The provisions of subsection (3) applies, whether
or not-
(a) the lessee took possession of the goods;

or
(b) the lessor was in possession of the goods

at any time.
(5) A purchaser of chattel paper who takes possession
of it in the ordinary course of business and gives new value,
has priority over any security right in it that-
(a) was perfected by registration, if the

purchaser was not aware at the time of
taking possession that the chattel paper
was subject to a security right; or
(b) has attached to proceeds of an inventory

under section 31, whatever the extent of
the purchaser’s awareness.
(6) A purchaser of collateral that is an instrument or

negotiable document of title, has priority over any security
right therein perfected by registration or temporarily perfected
under section 31 or 32, if the purchaser-
(a) gave value for the collateral purchased;
(b) purchased the collateral without

knowledge that it was subject to a security
right; and
(c) has taken possession of the collateral.

Negotiable 35. The rights of a person who is –
instruments, &c
(a) a holder in due course of a bill, note or
cheque within the meaning of the Bills of
Exchange Ordinance (Chapter 82); or
(b) a transferee from the debtor of money,
shall not be affected by any provisions of this Act.

PART V
PRIORITIES
36. (1) The following general rules of priority shall apply General rules
governing
to security rights in the same collateral:-
priority
(a) priority between security rights perfected
by registration shall be determined by the
date of registration, regardless of the date
of perfection;
(b) priority between a security right perfected
by registration and a security right
perfected by possession shall be
determined by whether the financing
statement was registered before
possession; and
(c) priority between unperfected security

rights shall be determined by the date of
the creation of such security rights.
(2) For the purpose of subsection (1)-

(a) a continuously perfected security right
shall be treated at all times as if perfected
by the method by which it was originally
perfected; and
(b) the time of registration, possession or

perfection of a security right in the original
collateral, shall be the time of such
registration, possession or perfection of the
security right in its proceeds.
(3) The transferee of a security right shall acquire the

same priority with respect to the security right as the transferor
had, at the time of the transfer.
(4) Subject to the provisions of subsection (5), the
priority which a security right has under subsection (1) shall
also apply to all future advances.
(5) A perfected security right has priority over the

interest of a judgment creditor referred to in paragraph (b) of
subsection (1) of section 5, only to the extent of-
(a) advances made before the judgment
creditor registers the notice of judgment
referred to in that paragraph;
(b) advances made before the secured party

has knowledge of the registration of the
notice of judgment referred to in that
paragraph;
(c) advances made in accordance with a

statutory requirement or a legally binding
obligation owing to a person other than
the debtor, entered into by the secured
party before acquiring the knowledge
referred to in paragraph (b); and
(d) reasonable costs and expenses incurred by

the secured party for the protection,
preservation, maintenance or repair of the
collateral.
Priority of 37. (1) An acquisition security right in inventory or its
acquisition proceeds shall have priority over any other security right in
security rights
the same collateral given by the same debtor, if -
(a) the acquisition security right was perfected

at the time the debtor obtained possession
of the inventory or a third party at the
request of the debtor obtained or held
possession of the inventory;
(b) before the debtor receives the possession

of the inventory, the secured party of the
acquisition security right gives notice in
writing to every other secured party who
has, before the date of registration by the
secured party of the acquisition security
right, registered a financing statement that

describes the collateral as or as including-
(i) items or types of inventory, all or

some of which are the same as the
items or types of inventory that will
be subject to the acquisition security
right;
(ii) inventory; or
(iii) accounts; and
(c) the notice referred to in paragraph (b) states

that the person giving it has or expects to
acquire an acquisition security right in
inventory of the debtor, describing such
inventory by item or type.
(2) Except where the collateral or its proceeds is either
inventory or its proceeds, an acquisition security right in
collateral or its proceeds shall have priority over any other
security right in the same collateral given by the same debtor,
if the acquisition security right-
(a) in the case of a collateral other than an

intangible collateral, was perfected before
or within ten days after the debtor obtained
possession of the collateral as the debtor,
or a third party at the request of the debtor
obtained or held possession of the
collateral, whichever occurs earlier; or
(b) in the case of an intangible collateral, was

perfected before or within ten days after
the creation of the acquisition security
right in the intangible collateral.
(3) If more than one acquisition security right is given

priority due to the application of the provisions of
subsections (1) and (2), the acquisition security right, if any,
of the seller, shall have priority over any other acquisition

security right given by the same debtor.
Priority of items 38. A lien on goods that arises as a result of providing in
for materials and
the ordinary course of business, materials or services in
services
respect of the goods, shall have priority over a perfected or
unperfected security right in such goods, unless the lien
arises under any law which provides that it shall not have
such priority.
Security right in 39. (1) A perfected security right in crops or their proceeds
crops given not more than six months prior to such crops becoming
growing crops by planting or otherwise in order to enable
the debtor to produce the crops during the production season,
shall have priority over an earlier perfected security right in
the same collateral, to the extent that the earlier interest
secures obligations that were due more than six months prior
to the crops becoming growing crops by planting or
otherwise, even though the person giving value had notice
of the earlier security right.
(2) Where more than one perfected security right is

given priority due to the application of subsection (1), each
shall rank equally according to the ratio that the amount
advanced with respect to each bears to the total amount
advanced.
Security right in 40. (1) A security right in goods that attached-

fixtures
(a) before the goods became a fixture, shall
have priority as to such fixture, over the
claim of any person who has an interest in
the immovable property; or
(b) after the goods became a fixture, shall have

priority as to the fixture over the claim of
any person who subsequently acquired an
interest in the immovable property, but not
over any person who had a registered
interest in the immovable property at the
time the security right in the goods attached

and who has not consented in writing to
the security right or disclaimed an interest
in the fixture.
(2) A security right referred to in subsection (1), shall

be subordinate to the interest of-
(a) a subsequent purchaser for value of an
interest in the immovable property; or
(b) a creditor with a prior encumbrance of

record on the immovable property, to the
extent that the creditor makes subsequent
advances,
if the subsequent purchase or the subsequent advance under

a prior encumbrance of record is made or contracted without
the knowledge of the security right and prior notice of it being
registered in accordance with Chapter III of the Registration
of Documents Ordinance (Chapter 117).
(3) Where a secured party has an interest in a fixture
that has priority over the claim of a person having an interest
in the immovable property, the secured party may, on default
and subject to the provisions of this Act relating to default,
remove the fixture from the immovable property if, unless
otherwise agreed, the secured party reimburses any person
having an encumbrance or the owner of the immovable
property who is not the debtor, for the cost of repairing any
physical injury, excluding diminution in value of the
immovable property, caused by the absence of the fixture or
by the necessity for replacement.
(4) A person who is entitled to any reimbursement

under subsection (3) may refuse permission for the removal
of the fixture, until the secured party has given adequate
security for the reimbursement.
(5) A secured party who has the right to remove a

fixture from an immovable property shall serve on each person
whose name appears in the records maintained by the relevant
Land Registry Office as having an interest in such immovable

property, a notice in writing of the secured party’s intention
to remove the fixture. Such notice shall contain the following
information:-
(a) the name and address of the secured party;
(b) a description of the fixture to be removed,

which is sufficient to enable it to be
identified;
(c) the amount required to satisfy the

obligation secured by the security right of
the secured party;
(d) a description of the immovable property to

which the fixture is affixed, which is
sufficient to enable the immovable property
to be identified; and
(e) a statement of the intention to remove the

fixture unless the amount secured is paid
on or before a date specified in the notice,
which date shall be not less than ten days
after the service of the notice.
(6) The notice referred to in subsection (5) shall be

served, by sending the same by registered post, to the address
of the person to be notified as it appears in the records of the
appropriate Registry, or in the case of a company, at its
registered office or to the address of an attorney authorized
to accept any notice on its behalf.
(7) A person having an interest in any immovable

property that is subject to a security right in a fixture may,
before such fixture has been removed from such property by
the secured party in accordance with the provisions of
subsection (3), retain the fixture, upon payment to the secured
party of the amount owing in respect of the security right
having priority over such person’s interest.
41. (1) Subject to the provisions of subsections (2) and Security right in
(3) and of section 42, a security right in goods that attached- accession
(a) before such goods became an accession,

shall have priority as to the accession, over
the claim of any person in respect of the
whole; and
(b) after the goods became an accession, shall

have priority as to the accession, over the
claim of any person who subsequently
acquired an interest in the whole, but not
over the claim of any person who had an
interest in the whole of the goods on the
date the security right attached to the
accession, and who has not consented in
writing to the security right in the accession
or disclaimed an interest in the accession,
as part of the whole.
(2) A security right referred to in subsection (1) shall

be-
(a) subordinate to the interest of-
(i) a subsequent buyer of an interest in

the whole of the goods; and
(ii) a creditor with a prior perfected security

right in the whole of the goods, to the
extent that the creditor makes
subsequent advances,
if the subsequent sale or the subsequent
advance under the prior perfected security
right, is made or contracted for, before the
security right is perfected; and
(b) subordinate to the interest of a creditor who

registers a notice of judgment or notice of
claim, before the security right is perfected.
(3) Notwithstanding the provisions of paragraph (b)

of subsection (2), an acquisition security right in an accession
that is perfected before or within ten days after the debtor
obtains possession of the accession, shall have priority over
the interest of a creditor referred to in that paragraph.
(4) If a secured party has an interest in an accession
that has priority over the claim of any person having an
interest in the whole, the secured party may, on default and
subject to the provisions of this Act relating to default, remove
the accession from the whole, if, unless otherwise agreed,
the secured party reimburses any person having an
encumbrance or the owner of the whole of the goods who is
not the debtor, for the cost of repairing any physical injury,
excluding diminution in value of the whole, caused by the
absence of the accession or by the necessity of replacement.
(5) A person entitled to any reimbursement under

subsection (4) may refuse permission to remove the
accession, until the secured party has given adequate security
for the reimbursement.
(6) A secured party who has the right to remove an

accession from the whole, shall serve on each person known
to the secured party as having an interest in the balance of
the goods and on any person with a security right in such
balance, perfected by registration against the name of the
debtor through the serial identification number of such
balance of the goods, if such number is required for
registration, a notice in writing of the secured party’s
intention to remove the accession, containing-
(a) the name and address of the secured party;
(b) a description of the accession to be

removed, sufficient to enable it to be
identified;
(c) the amount required to satisfy the

obligation secured by the security right of
the secured party;
(d) a description of the other goods sufficient

to enable them to be identified; and
(e) a statement of the intention to remove the

accession from the whole, unless the
amount secured is paid on or before a date
specified in the notice, which date shall
not be less than ten days after the service
of the notice.
(7) The notice referred to in subsection (6) shall be
served by registered post, at least ten days before the
accession is removed.
(8) A person having an interest in the whole that is

subject to a security right in the accession may, before the
accession has been removed by the secured party in
accordance with the provisions of subsection (4), retain the
accession upon payment to the secured party of the amount
owing in respect of the security right having priority over
such person’s interest.
42. (1) A perfected security right in goods that Security right in

subsequently become part of a product or mass of a product, processed or co-
continues in such product or mass, if- mingled assets
(a) the goods are so manufactured,

processed, assembled or co-mingled that
their identity is lost in the product or in the
mass of the product; and
(b) more than one security right attaches to

the product or the mass of the product,
and the secured parties shall rank equally according to the

ratio that the cost of the goods to which each interest
originally attached, bears to the cost of the total product or
the mass.
(2) Proceeds in the form of funds that become co-
mingled with other funds, so that they are no longer
identifiable-
(a) shall nevertheless be treated as identifiable

proceeds; and
(b) if at any time after the co-mingling takes

place the total amount of the funds is found
to be less than the amount of the proceeds
prior to co-mingling, then the competing
claimants shall share the co-mingled funds
on a pro rata basis.
Right to 43. A security right in a right to payment under a lease of

payment under a immovable property to which this Act applies, shall be
lease of
immovable subordinate to the interest of a person who acquires for value
property the lessor’s interest in the lease or in the immovable property
which is the subject matter of the lease, if the interest or the
notice thereof of the person is registered in the relevant Land
Registry Office before the interest or notice thereof of the
secured party is registered in such relevant Land Registry
Office.
Right to 44. A security right in a payment under a mortgage or

payment under a charge of immovable property to which this Act applies, shall
mortgage of
immovable be subordinate to the interest of a person who acquires for
property value the mortgagee’s or chargee’s interest in the mortgage
or the charge, if the interest of the person is registered in the
relevant Land Registry Office before a notice of the security
right is registered in such relevant Land Registry Office.
Voluntary 45. (1) A secured party may, by a security agreement or by
subordination
a separate agreement entered into between the competing
claimants, subordinate the secured party’s security right to
any other interest and such subordination shall be effective
according to its terms.
(2) A subordination shall be effective according to its

terms between the parties and may be enforced by a third
party, if the third party is the person or one of the class of
persons for whose benefit the subordination was intended.
46. The rights of a debtor in collateral may be transferred Alienation of a

debtor’s rights
voluntarily or otherwise, notwithstanding any provision in
in collateral
the security agreement prohibiting transfer or declaring a
transfer to be a default, but no such transfer shall prejudice
the rights of the secured party under the security agreement
or otherwise.
47. (1) Unless an account debtor has made an enforceable Assignment of
agreement not to assert defences or any claims arising out of intangibles etc,
and rights of
a contract between such account debtor and the assignor, an
third party
account debtor may set up by way of a defence against the
account debtors
assignee-
(a) all defences available to the account debtor

against the assignor arising out of the terms
of the contract or a related contract,
including equitable set-off and
misrepresentation; and
(b) the right to set-off any debt owing to the

account debtor by the assignor, that was
payable to the account debtor before the
debtor received notice of the assignment.
(2) A person obligated on an account or chattel paper

may pay the assignor until the person receives notice
reasonably identifying the relevant rights that the account or
chattel paper has been assigned and, if requested by the
account debtor, the assignee shall furnish proof within a
reasonable time that the assignment has been made and if the
assignee does not do so, the person may pay the assignor.
(3) To the extent that the right to payment or part

payment under a contract which has been assigned has not
been earned by performance and despite notice of the
assignment, any modification of, or substitution for the
contract made in good faith and in accordance with reasonable
commercial standards and without material adverse effect

upon the assignee’s rights under the contract or the
assignor’s ability to perform the contract, shall be effective
against the assignee, unless the person obligated on the
account or chattel paper has otherwise agreed. However, the
assignee shall acquire corresponding rights under the
modified or substituted contract.
(4) A term in the contract between the account debtor

and assignor that prohibits or restricts the assignment of, or
the giving of a security right in the whole of the account or
chattel paper for money due or to become due, or that requires
the account debtor’s consent to such assignment or such
giving of a security right, shall be-
(a) binding on the assignor, only to the extent

of making the assignor liable to the
account debtor for breach of their contract;
and
(b) unenforceable against third parties.
(5) For the purpose of this section, “account debtor”

means a person who is obligated on an account or on chattel
paper.
PART VI
REGISTRATION
Registration of 48. (1) The powers, duties and functions pertaining to

security rights the registration of security rights of movable property shall
and the
establishment be exercised, performed and discharged by the Authority.
of the Register
(2) The Bureau shall, for the purpose of this Act,

establish, maintain and operate a register to be called and
known as the Register of Security Rights in Movable Property
(hereinafter referred to as the “Register”).
(3) The Register shall be maintained in such manner

as to facilitate a search easily and promptly, using any one or
more of the criteria specified below:-
(a) by the unique identification number of the

debtor;
(b) by the financing statement number; or
(c) by any other additional criteria as may be

prescribed.
49. (1) In order to perfect a security right by registration Application

under this Act, a financing statement prepared in the for
registration
prescribed form shall be required to be registered with the of security
Registrar. rights
(2) A person filing a financing statement is required to

confirm that the security agreement, to which it relates, has
been made or that the debtor consents to the filing of such
statement.
(3) A financing statement-
(a) that is not in accordance with the form

prescribed for the same and does not
comply with the requirements imposed by
the provisions of this Act or any relevant
regulations made in that behalf;
(b) in respect of which the prescribed fee has

not been paid or an arrangement for paying
the filing fee is not in place; or
(c) in which any mandatory fields required to

be filled when registering electronically,
have not been duly completed,
may be rejected by the Registrar.
Financing 50. (1) A financing statement-
statement
(a) may be filed before or after the security
agreement to which it relates is made,
except where the collateral consists of
consumer goods;
(b) may relate to more than one security right
created or provided for in more than one
security agreement between the parties,
except where the collateral consists of
consumer goods; and
(c) shall include the following information:-
(i) the name of the debtor;
(ii) the debtor’s unique identification

number;
(iii) the name and address of the secured

party or its agent;
(iv) a description of the collateral in the

prescribed manner;
(v) the duration of the filing;
(vi) the maximum amount of obligation

secured; and
(vii) such other information as may be

prescribed.
(2) A financing statement shall also disclose whether

the secured party is a trustee.
When a 51. (1) A financing statement that is filed shall become a
registration registered financing statement, when a date, time, and a
becomes
effective
number (to be known as the “financing statement number”
are assigned to it by the Registrar.
(2) A financing statement once registered shall
continue to be effective-
(a) until it is discharged; or
(b) if the financing statement concerned

specifies a date on which its registration
ceases to be effective and the registration
has not by then been discharged, until the
date so specified.
52. (1) Upon the registration of a financing statement, the Verification

Registrar shall deliver to the secured party named in the statement
financing statement or its authorized agent, a verification
statement in the prescribed form, using a prescribed method
of communication.
(2) A verification statement referred to in subsection

(1) shall include the following:-
(a) the information contained in the financing

statement;
(b) the financing statement number; and
(c) the date and time of its registration.
53. (1) The registration of a financing statement shall Errors in the

become invalid if such statement contains an erroneous financing
statement
unique identification number which prevents the statement
from being discovered. However, the validity of a financing
statement shall not otherwise be affected due to any defect
found therein, unless a reasonable person is likely to be misled
materially by such defect.
(2) A failure to provide a description of any collateral

in a financing statement shall not make the registration
ineffective in relation to any other collateral described in
such financing statement.
(3) For the purpose of this section, a “defect” includes

any irregularity, omission or error, other than an erroneous
unique identification number.
Amendment of a 54. (1) A registered financing statement may, at any time

registered before it expires, be amended by the filing of an amendment
financing
statement
statement.
(2) An amendment statement is registered when a date,
time and a number are assigned to it by the Registrar.
Extension or 55. (1) The registration of a financing statement may, at

discharge of any time before it expires, be extended or discharged by the
registration filing of an amendment statement.
(2) A registration which is extended shall continue to

have effect until-
(a) the date specified in the amendment
statement; or
(b) the date on which the registration is

discharged.
(3) For the purpose of determining priority, the

effective time and date for a registration that is extended,
shall be the time and date of its initial registration.
Rejection of 56. (1) An amendment statement that does not meet the
an requirements imposed by this Act or any regulations made
amendment
to a financing thereunder relating to the same may be rejected by the
statement Registrar.
(2) In addition to the provisions of subsection (1), an

amendment statement may also be rejected by the Registrar
for any of the reasons specified in subsection (3) of section
49.
Notice of 57. (1) Where in relation to a security right the secured
transfer party transfers an interest in the collateral, an amendment
statement disclosing such transfer may be filed.
(2) The transferee of a security right or of receivables,
which are subject of a transaction specified in section 2, shall
not be required to file an amendment statement in order for
the effectiveness of the registration to be continued against
an administrator or a liquidator or a person referred to in

section 5.
(3) Where an amendment statement is filed under

subsection (1), but an interest in part of the collateral is
transferred, the statement shall include a description of the
interest in part of the collateral which is transferred.
(4) An amendment statement disclosing a transfer of a
security right may be filed before or after the transfer.
(5) Once an amendment statement is registered, the

transferee shall be regarded as the secured party for the
purposes of this Act.
(6) Where, in relation to an unperfected security right

the secured party transfers an interest in the collateral, a
financing statement may be filed in which the transferee is
disclosed as the secured party.
58. (1) If a security right has been subordinated by the Notice of
secured party to the interest of another person, an amendment subordination
statement may be filed disclosing such subordination.
(2) An amendment statement referred to in subsection

(1) may be filed before the registration of the financing
statement relating to the security right expires.
59. (1) Any person may search the Register subject to such Searches
condition or exception and in such manner as may be
prescribed, including any requirement pertaining to the
payment of a fee.
(2) A search result that is certified by the Registrar
may be received in evidence in any court, as prima facie
proof of the substance contained therein.
60. (1) Where a financing statement is registered and one Debtor etc,
of the conditions set out in Column I of the Table set out may require
below is satisfied, the debtor or any person with an interest amendment
statement
in the property which falls within the description of the
collateral in the financing statement, may give a notice in
writing (hereinafter referred to as a “requirement notice”) to

the secured party named in the financing statement or its
authorized agent.
(2) The requirement notice shall-
(a) specify the condition which is satisfied ;
(b) require the secured party to file an

amendment statement, specifying the
effect as indicated in Column II of the Table
set out below, corresponding to the
condition set out in Column I of the Table;
and
(c) inform the secured party that the failure to

comply with the requirement notice may
result in the person who gives the notice,
filing the appropriate amendment
statement.
TABLE
Column I Column II
Condition Effect
That the obligation under all To discharge the registration.

the security agreements to
which the financing
statement relates has been
performed.
That the secured party has To amend or discharge the

agreed to release part or all registration so as to reflect
of the collateral described in the terms of the security
the financing statement. agreement.
That the description of the To amend the description of

collateral in the financing collateral to exclude items or
statement includes an item kinds of property that are
or a kind of property that is
not collateral under the
not a collateral under a
security agreement between security agreement between
the secured party and the the secured party and the
debtor. debtor.
That no security agreement To discharge the

exists between the persons registration or where the
named in the financing
debtor is not the sole debtor,
statement as the secured
to amend the registration.
party and the debtor.
(3) Where the person giving a requirement notice is

not the sole debtor, he shall be required to give a copy of the
requirement notice to every other debtor to whom the
financing statement relates, within five working days of the
requirement notice being issued to the secured party.
(4) Where the secured party fails, within fourteen

working days after a requirement notice is issued, to-
(a) comply with such notice; or
(b) (i) commence proceedings in any court

having appropriate jurisdiction to
obtain an order to maintain the
registration to which the requirement
notice relates;
(ii) notify the person who issued the notice;

and
(iii) file in the prescribed form with the

Registrar, information about the case
number and date of commencement of
the proceedings,
the person who issued the requirement notice may file an

amendment statement as requested by such notice.
(5) Where the court does not give an order in any
proceeding commenced under subsection (4) within thirty
working days or within such longer period as the court may
direct, the person who issued the requirement notice may file
an amendment statement as requested by such notice.
(6) The provisions of subsections (4) and (5) shall not
apply to a trust case, and in such a case, a court having
appropriate jurisdiction may, on application made in that behalf
by a person issuing the requirement notice, direct that the
registration be amended or discharged, if-
(a) one or more of the conditions specified in
the requirement notice are satisfied; and
(b) the secured party does not comply with
the requirement notice for the purpose of
giving effect to the order,
and the court may make such order as it deems appropriate
for the purpose of giving effect to the direction issued
by it.
(7) A requirement notice required to be issued under
this section, shall be issued in such manner as may be
prescribed.
(8) For the purpose of this section, a “trust case”
means a case in which the financing statement discloses that
the secured party is a trustee.
Entitlement 61. (1) Where any person without a reasonable cause-
to damages
for incorrect (a) files a financing statement confirming the
filing existence of a security right under an
agreement, which in fact does not exist; or
(b) files a financing statement confirming that
the debtor has consented to the filing of
such financing statement, when in fact the
debtor has not consented to such filing,
the debtor shall have a right to recover damages from that

person for any loss or damage caused to the debtor that was
reasonably foreseeable as likely to have resulted from such
filing.
(2) Where a secured party fails to forward a copy of the

verification statement to the debtor within ten working days
of receiving a copy of the same under subsection (2) of section
52, the debtor shall have a right to recover damages from
such person for any loss or damage that was reasonably
foreseeable as likely to result from such failure.
62. (1) A person who- Requirement

to notify the
(a) obtains an order for the appointment of a Authority
receiver or a receiver and manager of a about the
appointment
company’s property; or of a
receiver, & c.,
(b) appoints a receiver or a receiver and manager
of a company’s property under the powers
contained in an instrument,
shall be required to register such appointment with the

Registrar within seven days of making such appointment.
(2) A receiver or a receiver and manager of a

company’s property appointed by virtue of an instrument
and who ceases to act as such, shall be required to file an
amendment statement.
(3) A notice issued under this section shall be in the

prescribed form and be issued in the prescribed manner.
(4) A person who fails to comply with the

requirements imposed by this section commits an offence
and shall be liable on conviction before a Magistrate’s Court
to a fine not exceeding one hundred thousand rupees.
63. (1) The filing of a financing statement or an amendment Filing of a

statement shall not constitute constructive notice or actual financing
statement not
knowledge of its existence or contents, to any person. to consitute a
notice
(2) A purchaser who in the ordinary course of business

purchases any collateral, shall not be required to inquire as to
whether-
(a) the collateral has been charged or pledged

or in the case of receivables, sold; or
(b) the disposition constitutes a breach of the

terms of the charge.
PART VII
GENERAL PROVISIONS
Inconsistency 64. (1) Any legal or equitable principle governing the rights
with the
provisions of
and obligations arising under a security agreement shall,
this Act except in so far as they are inconsistent with any provision of
this Act, continue to be applicable.
(2) All obligations arising under a security agreement

under this Act or under any other law shall be exercised and
discharged in good faith and in a commercially reasonable
manner.
Action for 65. If a person fails without a reasonable cause to discharge
damages any obligation imposed on such person by this Act, the person
to whom such obligation is owed shall have a right to be
compensated for any damage or loss caused to such person,
which is reasonably foreseeable as likely to have resulted
from such failure.
A court's powr to 66. On an application made to a court having appropriate
determine
priorities and
jurisdiction by a person having an interest in the collateral,
entitlements to such court shall have the power to make one or both of the
collateral following orders:-
(a) an order determining a question relating to

the priority or entitlement to the collateral;
(b) an order extending or abridging,

conditionally or otherwise, the time periods
granted under this Act for the compliance

with any requirements imposed by or under
this Act.
67. The serving of any notices required to be carried out Service of

under the provisions of this Act, shall be carried out in notices
accordance with the relevant provisions pertaining to the
same contained in the Civil Procedure Code (Chapter 101).
68. (1) Except as otherwise specifically provided for in this Conflicts with
Act, in the event of any conflict between the provisions of the
provisions of
this Act and any other law, the provisions of this Act shall
any other law
prevail.
(2) Notwithstanding the provisions of subsection (1),

in the event of a conflict between the provisions of this Act
and the provisions of any other law providing for the
protection of consumers, the provisions of such other law
shall prevail.
69. The members of the Board and the Registrar and other Members, the
officers and employees of the Authority shall be deemed to Registrar and
officers and
be public servants, within the meaning and for the purposes employees,
of the Penal Code (Chapter 19). deemed to be
public
servants
70. The Authority shall be deemed to be a Scheduled Authority

Institution within the meaning and for the purposes of the deemed to be
a Scheduled
Anti-Corruption Act, No. 9 of 2023 and the provisions of that Institution
Act shall be construed accordingly.
71. (1) All expenses incurred by the Authority in any suit Expenses to
or proceeding brought by or against it before any court, shall be paid out of
the Fund of
be paid out of the Fund of the Authority and any cost paid to the Authority
or recovered by the Authority in any such suit or proceeding,
shall be credited to the Fund of the Authority.
(2) Any expenses incurred by a Member of the Board,
by the Registrar or any officer or employee of the Authority,
in any suit or proceeding brought by or against such person
before any court, in respect of any act which is done or
purported to be done by such person under this Act or on

any direction issued by the Board, as the case may be, shall,
if the court holds that such act was done in good faith, be
paid out of the Fund of the Authority, unless such expenses
are recovered by that person in such suit or proceeding.
Regulations 72. (1) The Minister may, from time to time, make regulations
in respect of any matter which are required by this Act to be
prescribed or in respect of which regulations are authorized
to be made under this Act.
(2) Every regulation made by the Minister shall be

published in the Gazette and shall come into operation on the
date of such publication or on such later date as may be
specified therein.
(3) Every regulation made by the Minister shall, within

three months after its publication in the Gazette, be brought
before Parliament for approval.
(4) Any regulation which is not so approved shall be

deemed to be rescinded as from the date of its disapproval,
but without prejudice to anything duly done thereunder.
(5) Notification of the date on which any regulation

made by the Minister is so deemed to be rescinded shall be
published in the Gazette.
Rules 73. (1) The Authority may make rules in respect of matters
for which rules are authorized or required to be made under
this Act or which it may consider necessary for the purpose
of achieving its objectives.
(2) In particular and without prejudice to the generality

of the powers conferred by subsection (1), the Authority
may make rules in respect of the following matters:-
(a) the manner and mode of application for

registration of security rights and of
judgment creditors; and
(b) amount of fees or charges to be levied in

respect of services that are provided by
the Authority.
(3) All rules made by the Authority under subsection

(1) shall be approved by the Minister and be published
thereafter in the Gazette.
PART VIII
REPEALS AND SAVINGS
74. (1) The Secured Transactions Act, No.49 of 2009 Repeals and
savings
(hereinafter referred to as the “repealed Act”) is hereby
repealed.
(2) Notwithstanding the repeal of the repealed Act-
(a) a security right that was registered under

the repealed Act and subsisting on the day
immediately preceding the appointed date
shall continue to be a valid security right,
for the purpose of satisfying the
requirements specified in paragraph (b) of
section 4 of this Act; and
(b) any civil or criminal proceeding instituted

under the repealed Act and pending on the
day immediately preceding the appointed
date in relation to an instrument creating-
(i) a pledge, mortgage or bill of sale of

any movable property; or
(ii) (A) an interest in a fixture of any

immovable property; or
(B) an assignment of a right to

payment under a mortgage,
charge or lease of any
immovable property, where the
assignment does not convey or

transfer the assignor’s interest
in the immovable property,
which has been registered under this Act in
terms of section 9 of the Registration of
Documents (Amendment) Act, No. 18 of 2024
shall be deemed to have been instituted under
this Act.
PART IX
INTERPRETATION
Interpretation 75. (1) In this Act, unless the context otherwise requires -
“accessions” means goods that are installed in, or
affixed to, other goods;
“account” means a monetary obligation not
evidenced by a chattel paper, a security or
an instrument, whether or not the
obligation has been earned by
performance;
“acquisition security right” means -
(a) a security right taken or reserved in a
collateral to secure payment of all or part
of its price;
(b) a security right taken in a collateral by a
person who gives value for the purpose
of enabling the debtor to acquire rights
in the collateral, to the extent that the
value is applied to acquire the rights;
or
(c) the interest of a lessor of goods under
a lease for a term over one year,
but does not include a transaction of sale
by, and lease-back to, the seller;
“amendment statement” means a statement that

satisfies the requirements imposed by this
Act and any regulations made thereunder
and which is filed by the secured party or
its agent, under section 54, 55, 57, 58 or 60
of this Act;
“Bureau” means the Credit Information Bureau of

Sri Lanka established by the Credit
Information Bureau of Sri Lanka Act, No.
18 of 1990;
“certified security” means a security represented

by a certificate that-
(a) provides that the person entitled to the

securities is the person in possession
of the certificate; or
(b) identifies the person entitled to the

securities;
“chattel paper” means a document in writing that

evidence, both a monetary obligation and
a security right, in or in a lease of, specific
goods;
“collateral” means any movable property that is

subject to a security right;
“commercially reasonable” means the adoption of a

procedure in the disposition of a collateral
under such conditions as may be
considered reasonable according to the
prevailing circumstances, calculated to
obtain the best market price for the same
considering the prevailing circumstances;
“consumer goods” means goods that are used or

acquired primarily for consumption or for
any household purpose;
“debtor” means -
(a) a person who owes a payment or the
performance of an obligation that is
secured, and who owns or has rights in
the collateral;
(b) a purchaser under a hire purchase
agreement or a lessee under a lease for a
term over one year;
(c) a purchaser who acquires goods subject
to a retention of title clause or under a
conditional sale; and
(d) a transferor of an account or chattel paper,
and includes the transferee of a debtor’s interest
in the collateral, where the context so permits;
“default” means-
(a) the failure to pay or otherwise perform the
obligation secured when due; or
(b) the occurrence of any event or a set of
circumstances whereupon, under the terms
of the security agreement, the security right
becomes enforceable;
“diminution in value” means the difference between
before and after, of the value of any property
which has been damaged;
“document of title” means a writing issued by, or
addressed to a bailee, that -
(a) covers goods in the bailee’s possession
that are identifiable or that are fungible
portions of an identifiable mass; and
(b) is in the ordinary course of business,
treated as establishing that the person in
possession of it is entitled to receive, hold
and dispose of the document and the

goods it covers;
“equipment” means goods that are not an inventory
or consumer goods;
“financing statement” means a statement containing
the information required under paragraph
(c) of subsection (1) of section 50, and,
where the context so permits, includes an
amendment statement and a document
registered under the Registration of
Documents Ordinance (Chapter 117),
together with any writing that accompanies
or was registered to rectify, amend or renew
such registration;
“fungible collateral” means goods of such nature
or kind as can be freely exchangeable or
replaceable in whole or in part, for another
of a like nature or kind;
“future advance” means the advance of any money,
credit or other value secured by a security
agreement, whether or not such advance
is made pursuant to a commitment;
“goods” means movable property other than chattel
paper, documents of title, instruments,
money and investment property, and
includes fixtures, growing crops, the
unborn young of animals, timber to be cut
and minerals and hydrocarbons to be
extracted;
“instrument” means -
(a) a bill of exchange, a promissory note
or a cheque within the meaning of the
Bills of Exchange Ordinance (Chapter
82);
(b) a letter of credit or an advance of credit,
if the letter or advance states that it
must be surrendered upon claiming

payment thereunder; and
(c) any other writing that establishes a right
to payment of money and is of a type that
in the ordinary course of business is
transferred by delivery with any necessary
endorsement or assignment,
but does not include a writing that constitutes a

part of chattel paper, document of title, instrument,
money or investment property;
“intangible” means movable property including

choses in action that is not goods, chattel
paper, documents of title, instruments,
money or investment property;
“inventory” means goods that are-
(a) held by a person for sale or lease or

that have been leased by that person
as a lessor;
(b) to be furnished or that have been

furnished under a contract or service;
(c) raw materials or work in progress; or
(d) material used or consumed in any

business or profession;
“lease for a term over one year” includes a series of

short term leases of the same asset that in
aggregate exceeds one year, but does not
include-
(a) a lease of goods by a lessor who is
not regularly engaged in the business
of leasing goods;
(b) a lease of household furnishing or

appliances as part of a lease of
immovable property where the goods

are incidental to the use and
enjoyment of the immovable
property; or
(c) a lease of goods of a prescribed kind,
regardless of the length of the term
of lease;
“minerals” includes oil, gas and hydrocarbons;
“Minister” means the Minister to whom the
implementation of the provisions of this Act
is assigned;
“movable property” means-
(a) goods, a document of title, chattel
paper, security, instrument, money or
any intangible property; or
(b) (i) an interest in a fixture of any
immovable property; or
(ii) an assignment of a right to
payment under a mortgage,
charge or lease of any immovable
property, where the assignment
does not convey or transfer the
assignor ’s interest in the
immovable property;
“notice of change” means data included in any
prescribed form required to be submitted
to the Bureau, in order for a financing
statement to be discharged or otherwise
amended;
“notice of judgment” and “notice of claim” means
the data in any prescribed form required to
be registered with the Authority to effect a
registration under this Act, and where the
context so admits, includes the data
authorized in order to give effect to an

amendment, renewal or discharge of such
registration;
“obligation secured”, for the purpose of determining
the amount payable under a lease that
secures payment or performance of an
obligation, means -
(a) the amount originally contracted to
be paid as rent under the lease; and
(b) all other amounts payable under the
terms of the lease, including the
amount, if any, required to be paid by
the lessee to obtain ownership of the
collateral, less the amounts paid;
“pawnbroker” shall have the same meaning as given
to that term in the Pawnbrokers Ordinance
(Chapter 90);
“pledgor” means a person who delivers goods in
pledge or for pawn to a pawnbroker;
“prescribed” means prescribed by regulations made
under this Act;
“proceeds” means identifiable or traceable movable
property in any form derived directly or
indirectly from any dealing with the
collateral or the proceeds therefrom, and
includes-
(a) any payment representing an
indemnity or compensation for loss
or damage caused to the collateral,
including a right to an insurance
payment or proceeds therefrom; and
(b) any payment made in total or partial
discharge or redemption of chattel
paper, an instrument or any
intangible;
“purchase” includes obtaining by sale, lease,

mortgage, pledge, lien, gift or any other
consensual transaction creating an interest
in movable property;
“receiver” includes a receiver and manager;
“registered interest” means a right in immovable

property that is registered with a competent
authority;
“secured party” means -
(a) a person who holds a security right

for the person’s own benefit;
(b) a person who holds a security right

for the benefit of another person;
(c) a trustee, if a security right is

embodied in a trust indenture; and
(d) where the context so admits, includes

a receiver;
“security agreement” means an agreement that

creates or provides for a security right and
includes a document evidencing a security
right;
“security right” means an interest in movable

property that secures payment or
performance of an obligation and includes,
whether or not the interest secures
payment or performance of an obligation,
the interest of-
(a) a lessor under a lease for a term over

one year; and
(b) a transferee of an account or chattel

paper;
“trust indenture” means any security agreement by

the terms of which a body corporate, with
or without a share capital and wherever or
however incorporated, issues or
guarantees debt obligations or provides
for the issue or guarantee of debt
obligations, and appoints a person as
trustee for the holders of the debt
obligations so issued, guaranteed or
provided for; and
“value” means any consideration sufficient to
support a contract and includes an
antecedent debt or liability, and
accordingly “new value” means value
other than an antecedent debt or liability.
(2) Except as otherwise expressly provided for by this

Act, the determination as to whether any goods are
“consumer goods”, “inventory” or “equipment”, shall be
made at the time the security right is created.
(3) Proceeds are traceable, whether or not there is a

fiduciary relationship between the person who has a security
right in the proceeds as provided in section 35 and the person
who has rights in or has dealt with the proceeds.
Sinhala text 76. In the event of any inconsistency between the Sinhala
to prevail in and Tamil texts of this Act, the Sinhala text shall prevail.
case of
inconsistency
English Acts of the Parliament can be purchased at the “PRAKASHANA PIYASA”, DEPARTMENT OF
GOVERNMENT PRINTING, NO. 118, DR. DANISTER DE SILVA MAWATHA, COLOMBO 8.

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PARLIAMENT OF THE DEMOCRATIC

SECURED TRANSACTIONS (AMENDMENT)

[Certified on 01st of April, 2024]

Printed on the Order of Government

Published as a Supplement to Part II of the Gazette of the Democratic

PRINTED AT THE DEPARTMENT OF GOVERNMENT PRINTING, SRI LANKA

Price : Rs. 96.00 Postage : Rs. 150.00

This Act can be downloaded from www.documents.gov.lk

[Certified on 01st of April, 2024]

AN ACT TO PROVIDE FOR AN INSTITUTIONAL

BE it enacted by the Parliament of the Democratic Socialist

(a) in respect of every transaction that in

(ii) an assignment, consignment, lease or

(b) to a transfer of an account or chattel paper,

(b) the transfer of an interest or claim in or under a

(c) the assignment or transfer of an interest in the

(d) the transfer of an unearned right to a payment

(e) the creation or the transfer of an interest in any

(i) an interest in a fixture; or

(ii) an assignment of a right to payment under a

(f) the sale of accounts, chattel papers or goods as

(g) the transfer of accounts made solely for

(i) a transaction that is subject to the

(j) the payments arising from or under

(2) For the purpose of paragraph (h) of subsection (1),

(b) all measures required to attain perfection

Subordination of 5. (1) An unperfected security right in collateral, shall

(a) the interest of a perfected security right;

(c) the right of any person under any law,

(2) An unperfected security right in-

(a) collateral, shall not be effective against-

(ii) a liquidator appointed under the

(b) chattel paper, documents of title or goods

(ii) gives value; and

(iii) receives delivery of the collateral

(c) tangibles other than accounts shall not be

(i) acquires the interest in the collateral

(ii) gives value without knowledge of the

ESTABLISHMENT OF THE SECURED

Establishment 6. (1) There shall be established an authority called the

(2) The Authority shall, by the name assigned to it by

Object of the 7. The object of the Authority shall be to promote the

8. The duties and functions of the Authority shall be- Duties

(b) to register the rights of judgment creditors;

(c) to determine the policies related to the

(e) to perform and discharge such duties and

9. The Authority shall exercise such powers as may become Powers

(a) the Governor of the Central Bank of Sri

(b) the Secretary to the Treasury or a person

(c) the Chairman and a Director of the Bureau

(2) The seal of the Authority shall be in the custody of

(a) all such sums of money as may be voted

(b) all such sums of money received as fees or

(c) all such sums of money as may be received

(3) There shall be paid out of the Fund of the Authority

(3) The provisions of Article 154 of the Constitution

(2) The Registrar shall be responsible for the general

(4) The Minister may, for reasons assigned therefor, remove

(5) The Registrar may, with the written approval of the