The Movable Property Security Rights (Amendment) Bill, 2024

THE MOVABLE PROPERTY SECURITY RIGHTS

(AMENDMENT) BILL, 2024
A Bill for
AN ACT of Parliament to amend the Movable Property
Security Rights Act, 2017; and for connected
purposes
ENACTED by the Parliament of Kenya, as follows—
Short title. 1. This Act may be cited as the Movable Property
Security Rights (Amendment) Bill, 2024.
Amendment of 2. Section 2 of the Movable Property Security
section 2 of
Cap. 499A.
Rights Act, 2007 (hereinafter referred to as the “principal
Act”), is amended by—
(a) inserting the following new definitions in proper
alphabetical sequence—
“chassis number” means a unique code located on
the chassis or body frame of a motor vehicle or trailer;
“future performance agreement” means a future
Cap 501. performance agreement to which the Consumer
Protection Act applies;
“hire-purchase agreement” means an agreement
under which goods are let or hired with an option to
purchase and an agreement for the purchase of goods by
instalment payments (whether the agreement describes
the payments as rent or hire or otherwise) under which
the person who agrees to purchase the goods is given
possession of them before the total amount payable has
been paid and includes—
(a) any agreement to sell goods under which the
buyer grants security over the goods to the seller
for the whole or part of the purchase price and
the property in the goods passes to the buyer
subject to that security (in which case the
agreement is a hire purchase agreement made at
the time the sale is made); and
(b) a sale and loan arrangement under which a
person lends money on the security of any goods
that have been bought or are to be bought if the
whole or part of the purchase price is paid out of
the proceeds of the loan, and the loan is made by

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the seller or is arranged by the seller and made

by a third party who is engaged in the business
of lending money or who habitually lends money
in the course of the third party's business (in
which case the arrangement is a hire purchase
agreement made at the time of the making of the
loan); but
(c) does not include, subject to paragraph (a), any
agreement under which property in the goods
passes absolutely to the person who agrees to
purchase them at the time of the agreement or
upon or at any time before delivery of the
goods”;
“hire-purchase business” means a business of
entering into hire-purchase agreements;
“licence” means a licence to carry on hire-purchase
business issued under section 93A and 93C;
Cap. 403. “motor vehicle” has the meaning assigned to it under
section 2 of the Traffic Act;
“trailer” has the meaning assigned to it under section
2 of the Traffic Act;
(b) deleting the definition of the word “non-
consensual credit” and substituting therefor the
following new definition—
“non-consensual creditor” means a creditor that has
obtained a property right in a movable asset by operation
of any law, including under an execution process or as a
result of owed taxes and similar fees; and
(c) deleting the definition of the word “serial
number”.
Amendment of 3. Section 27 of the principal Act is amended in
section 27 of
Cap of 499A.
subsection (1) by deleting the word “serial” appearing in
paragraph (c) and substituting therefor the word
“chassis”.
Amendment of 4. Section 33 of the principal Act is amended by
section 33 of
Cap of 499A.
inserting the following new subsections immediately after
subsection (6)—
(6A) If the secured creditor fails to comply with
the notice issued by the Registrar under

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subsection (6) within ten working days after its

receipt, the Registrar shall register the
amendment or cancellation notice.
(6B) Upon registration of the amendment or
cancellation notice under subsection (6A), the secured
creditor shall pay to the Registrar an administrative fee of
five thousand shillings within fourteen days of the
registration.
(6C) The Registrar shall upon payment of the fee
above activate the user account.
(6D) If the secured creditor fails to pay the
administrative fee set out in subsection (6B), the Registrar
may suspend the user account restricting access to the
Registry.
(b) inserting the following new subsections
immediately after subsection (7)—
(8) The grantor may—
(a) petition a court of competent jurisdiction to
issue an order under this section at any time;
and
(b) seek damages for the failure of the secured
creditor to comply with the duty to register an
amendment or cancellation notice under this
section.
Amendment of 5. Section 34 of the principal Act is amended in
section 34 of
Cap. 499A.
subsection (1) by deleting paragraph (b) and substituting
therefor the following new paragraph—
(b) the chassis number of the serial numbered
collateral.
Amendment of 6. Section 35 of the principal Act is amended in
section 35 of
Cap. 499A.
subsection 6 by deleting the words “serial number” and
substituting therefor the words “chassis number”.
Insertion of 7. The principal Act is amended by inserting the
new section
57A in Cap.
following new section immediately after section 52—
499A.
Protection from 52A. (1) A consensual transferee of an
liability of the
negotiable
encumbered negotiable document that takes
document. possession of the negotiable document and

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gives value without knowledge that the

transfer is in violation of the rights of the
secured creditor under the security
agreement takes free of a security right in
that negotiable document.
Amendment of 8. Section 65 of the principal Act is amended by
section 65 of
Cap. 499A.
deleting subsection (4) and substituting therefor the
following new subsection—
(4) Despite the provisions of this section, if the
security right has been created under a future
performance agreement, the secured creditor may
enforce its rights subject to the provisions of the
Cap 501.
Consumer Protection Act.
Amendment of 9. Section 88 of the principal Act is amended in
section 88 of
Cap. 499A.
subsection (2) by inserting the following new paragraph
immediately after paragraph (d) —
(da) the licensing of hire-purchase businesses.
Amendment of 10. Section 89 of the principal Act is amended by
section 89 of
Cap. 499A.
inserting the following new sub-section immediately after
sub-section (2)—
(3) A license to carry on hire purchase business
Cap 507. issued under the Hire Purchase Act shall be deemed
to have been issued under this Act.
Amendment of 11. Section 92 of the principal Act is amended in
section 92 of
Cap. 499A.
subsection (1) by deleting paragraph (b).
Insertion of 12. The principal Act is amended by inserting the
new sections to
Cap. 499A.
following new sections immediately after section 93—
Licensing of 93A. (1) A person shall not carry on
hire-purchase
business.
hire purchase business without a valid
licence issued by the Registrar under this
Act.
(2) Any person who contravenes
subsection (1) commits an offence and shall
be liable on conviction to a fine not
exceeding five hundred thousand shillings
or to imprisonment for a term not
exceeding one year, or to both.
Application for 93B. (1) A person that intends to carry
a licence.

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on hire purchase business shall apply for a

licence to the Registrar in the prescribed
form and pay the prescribed fees.
(2) In considering the application under
subsection (1), the Registrar may require to
be satisfied as to—
(a) the financial condition and history
of the applicant;
(b) the character of the applicant's
management;
(c) the professional and moral
suitability of the persons proposed
to manage or control the applicant;
(d) the compliance with the provisions
under the Companies Act, 2015 or
the enabling Act;
(e) the validity of a license issued by
the Regulatory body; and
(f) any other such information as the
Registrar may require.
Issuance of 93C. (1) The Registrar may, upon
licence.
review of the application for a hire
purchase business licence—
(a) issue the licence, with or without
conditions; or
(b) refuse to grant the licence.
(2) Where the Registrar refuses to grant
a licence under this section or imposes
conditions, the Registrar shall give notice
to the applicant providing reasons in
writing, for such refusal or imposition of
conditions.
(3) A hire purchase business licence
issued under this section shall be valid up-
to the 31st of December each year.
Renewal of a 93D. (1) A person carrying on hire
licence.
purchase business may apply for a renewal
of a licence not later than one month before

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the expiration date of the existing licence.

(2) The applicant shall be required to
update the details of its management where
changes have occurred in the year
preceding the renewal application.
(3) The application under this section
shall be accompanied by the prescribed fee.
(4) In considering an application for
renewal of a licence, the Registrar shall
take consider the requirements set out in
section 93B(2).
(5) Where an application under sub-
section (1) has not been processed by the
Registrar, after the expiry of the licence
that licence shall remain in effect until it is
either renewed or the applicant is notified
that the application has been refused.
(7) If a hire purchase business does not
apply for a renewal of the licence within
the time allowed under subsection (1), or
within such extended period as the
Registrar may allow but not exceeding one
month, the licence shall not be renewed.
(8) If the hire purchase business wishes
to continue conducting hire purchase
activities, after the expiration of the licence
and prescribed renewal time, it shall be
required to pay the fees prescribed for a
fresh application.
Revocation of a 93E. (1) The Registrar may, by notice
licence.
in writing to the hire purchase business,
revoke a licence if the hire purchase
business—
(a) ceases to carry on business in
Kenya or goes into liquidation or is
otherwise dissolved; or
(b) fails to comply with—
(i) this Act;
(ii) the Companies Act, 2015;

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(iii) the enabling Act;

(iv) any condition of a licence
Provided that the Registrar, before
revoking a licence, shall give to the
hire purchase business not less than
twenty-eight days’ notice in writing of
the Registrar’s intention, and shall
consider any representations made to
the Registrar in writing by the hire
purchase business within that period
before revoking the licence.
(2) The hire purchase business may,
notwithstanding that its licence has been
revoked, continue to carry on business to
wind up its affairs for such period as the
Registrar may determine so long as it does
not enter into any new hire purchase
agreements.
(3) Notwithstanding the revocation of a
licence under this section, the Registrar
shall consider the protection of the interests
of the hirers under the Consumer
Protections Act.
(4) The Registrar shall publish in the
Gazette the name of every hire purchase
business whose licence is revoked under
this section or as the Registrar may specify.
(5) Appeals from the decision of the
Registrar shall lie with a court of competent
jurisdiction.
License to be 93F. (1) The holder of a licence issued
displayed.
under section 93C shall ensure that the
licence or a copy thereof is at all times
conspicuously displayed in or on every
premise in which he carries on hire
purchase business.
(2) A person who contravenes the
provisions of subsection (1) commits an
offence and shall be liable on conviction to

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pay the Registrar an administrative fee of

ten thousand shillings within seven days
from the date of inspection and a further
one thousand for each day of default.
Interest rate. 93G. The Central Bank of Kenya shall
determine the interest rates in respect of
any hire purchase of good under a hire
purchase agreement.
Amendment of 13. The Warehouse Receipt System Act, 2019 is
section 2 of
Cap 350.
amended by in section 2 by—

(a) deleting the definition of the word “owner”;

(b) deleting the definition of the word “purchaser”
and substituting therefor the following new
definition—
“purchaser” includes a secured creditor;
Amendment of 14. Section 832 of the Companies Act, 2015 is
section 832 of
Cap. 486.
amended in sub section (3) by deleting paragraph (c) and
substitute therefor the following new paragraph —
(c) certificates of registration of company security
rights, including copies of notices of security rights
registered in the Movable Property Security Registry
according to the Movable Property Security Rights
Act, 2017 provided by companies that created such
security rights or other evidence of the creation of a
security right provided by a secured creditor.
Amendment of 15. Section 878 of the Companies Act, 2015 is
section 878 of
Cap 486.
amended in sub section (4) by—

(a) deleting paragraph (b);

(b) deleting paragraph (c) and substituting therefor
the following new paragraph—
(c)a charge for the purposes of securing an
issue of debentures by the company other
than according to a transaction subject to the
Movable Property Security Rights Act, 2017;
(c) deleting paragraph (f);
(d) deleting the words “good or intellectual”
appearing in paragraph (g) and substituting

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therefor the following word “immovable”.

Repeal of Cap 16. The Hire-Purchase Act is repealed.
507.

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MEMORANDUM OF OBJECTS AND REASONS

The principal object of this Bill is to amend the Movable Property Security
Rights Act, (CAP 499A) modernise and harmonies the existing secured
transaction laws dealing with security rights in movable assets. The Bill
further seeks to provide a sound environment for credit purchase
transactions, defined under the Movable Property Security Rights Act to
include Hire Purchase Agreements, by fully transitioning the Hire
Purchase Act to the Movable Property Security Rights Act. The Bill also
seeks to ensure that the provisions of the Movable Property Security
Rights Act align with best international practices.
Clause 1 of the Bill deals with the short title of the Act.
Clause 2 of the Bill proposes the amendment of section 2 of the Movable
Property Security Rights Act,(CAP 499A) (“the principal Act”) to include
new definitions of “chassis number”, “future performance agreement”,
“hire purchase agreement ”, “hire purchase business”, “licence” “motor
vehicle”, “trailer” and “secondary Sacco society”. The clause further
substitutes the word “non-consensual creditor with a new definition and
deletes the word “serial number”.
Clause 3 of the Bill proposes the amendment of section 27 of the principal
Act to align it with the new definition of chassis number.
Clause 4 of the Bill provides for amendment of section 33 of the principal
Act to provide for consequences for failure to comply with compulsory
registration of an amendment or cancellation notice.
Clause 5 of the Bill proposes the amendment of section 34 of the principal
Act to align it with the new definition of chassis number.
Clause 6 of the Bill provides for the amendment of section 35 of the
principal Act to align it with the new definition of chassis number.
Clause 7 of the Bill proposes the amendment of the principal Act to
include a new section 52A to provide for the priority of transferees of
negotiable documents, including warehouse receipts, comparable to
section 52 which includes such a rule for transferees of negotiable
instruments.
Clause 8 of the Bill provides for the amendment of section 65 of the
principal Act to harmonies the existing secured transaction laws dealing
with security rights in movable assets.

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Clause 9 of the Bill provides for the amendment of section 88 of the

principal Act to empower the cabinet secretary to make regulations in
respect to licensing of hire-purchase businesses.
Clause 10 of the Bill provides for the amendment of section 89 of the
principal Act to provide for the transitional application of the Act
concerning licenses issued under the Hire Purchase Act.
Clause 11 of the Bill provides for the amendment of section 92 of the
principal Act to delete paragraph (b) which served as a transitional clause
relating the effectiveness of a prior security right against a third party
under the previous law.
Clause 12 of the Bill proposes the amendment of the principal Act to
include a new section 93A to provide for the transition of licensing of hire
purchase businesses from the Hire Purchase Act to harmonies the existing
secured transaction laws dealing with security rights in movable assets.
Clause 13 of the Bill provides for the amendment of section 2 of the
Warehouse Receipt System Act (CAP 350) to harmonies the existing
secured transaction laws dealing with security rights in movable assets.
Clause 14 of the Bill provides for the amendment of section 832 of the
Companies Act, 2015 Act (CAP 486) to harmonies the existing secured
transaction laws dealing with security rights in movable assets.
Clause 15 of the Bill provides for the amendment of section 878 of the
Companies Act, 2015 Act (CAP 486) to harmonies the existing secured
transaction laws dealing with security rights in movable assets.
Clause 16 of the Bill provides for the repeal of the Hire-Purchase Act
(CAP 507) to harmonies the existing secured transaction laws dealing with
security rights in movable assets.

J. B. N. MUTURI
Attorney General.

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Section 2 of (CAP 499A) which it is intended to amend—

2. Interpretation
"non-consensual creditor" means a creditor that has obtained a right in the
collateral by operation of any law, including under an execution process or
as a result of owed taxes and similar fees;
"serial number" means the serial number located on the chassis or body
frame of a motor vehicle or trailer;

Section 27 of (CAP 499A) which it is intended to amend—

27. Information required in an initial notice
(1)An initial notice shall contain the following information in the relevant
designated fields, as further prescribed in the Regulations—
(a) the identifier and address of the grantor;
(b)the identifier and address of the secured creditor or its representative;
(c) a description of the collateral in accordance with section 8 or by a
serial number for the serial-numbered collateral only that is not held as
inventory;
(d)the period of effectiveness of the registration; and
(e)any other information for statistical purposes only.

Section 34 of (CAP 499A) which is intended to amend—

34. Search criteria and results
(1) A search of the registry records may be conducted according to—
(a)the identifier of the grantor; or
(b) the serial number of the collateral

Section 35 of (CAP 499A) which is intended to amend—

35. Errors in required information by the registrant entered in a
notice
(6) An error in the serial number of the serial-numbered collateral renders
the registration ineffective as against a buyer or lessee of that asset.

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Section 65 of (CAP 499A) which is intended to amend—

65 post-default rights
(4) If the security right has been created under a hire-purchase agreement,
the secured creditor may enforce its rights only in accordance with the
Hire Purchase Act (Cap. 507).

Section 92 of (CAP 499A) which is intended to amend—

92 Third-party effectiveness of a prior security right
(1) A prior security right that was effective against third parties under prior
law continues to be effective against third parties under this Act until the
earlier of—
(a) the time it would have ceased to be effective against third parties under
the prior law; and
(b) the expiration of nine months after the coming into force of this Act.

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