Since the adoption of the treaty on the harmonization of business law in Africa in 1993 as revised in 2008 (the OHADA Treaty) (see our January 2009 Blakes Bulletin on Doing Business in Africa) and the coming into force of several uniform acts, certain changes to the various uniform acts appeared to be necessary. A process involving the evaluation and reform of the various uniform acts adopted under the OHADA Treaty has been initiated since 2007 with the support of various practitioners and experts and discussions have been held with representatives of Member States and business people.
The evolution of the OHADA Treaty has culminated in the reform of the law governing security interests in order to strengthen bankers’ and investors’ confidence and increase economic development. Security interest law had been provided for in the Uniform Act Organizing Securities dated April 17, 1997.
The new Uniform Act Organizing Securities (Uniform Act) was enacted on December 15, 2010 in Lomé and published in the Official Journal of the Organization for the Harmonization of Business Law in Africa (OHADA) on February 15, 2011, i.e., within 60 days in accordance with Article 9 of the OHADA Treaty. The Uniform Act came into force on May 15, 2011, i.e., 90 days after the publication date.
The Uniform Act makes certain major changes, such as:
Clarification of scope. The types of security interests available are those indicated in the Uniform Act (with the exception of maritime, airspace or fluvial (river) security interests and guarantees of obligations among financial institutions).
Security interests may cover existing and future property. Future property was excluded from the Uniform Act of 1997 but henceforth a security interest can charge property that does not yet exist or that is not yet in the debtor’s estate. This change is important in situations where the parties would like to give an existing security interest a new scope in order to charge property not covered when it was created, such as in cases where the security interest covers property acquired to replace other property or the proceeds of disposition of the property initially charged, or in connection with security interest charging the earnings and the products of the soil or materials. This aspect of the reform also concerns real property in connection with the acquisition of land for purposes of construction and the financing necessary for construction by granting a mortgage on the future building as collateral.
Security interests may cover all future property of debtor. Under the Uniform Act of 1997, securities had to cover specific, defined assets, not the universality of the debtor’s existing and future property. The Uniform Act removed a narrow concept of specific assets from OHADA security law and authorizes the granting or taking of security over all the debtor’s property, which is similar to the basis for a mortgage on the universality of property according to the Civil Code of Québec and gives greater flexibility in the taking of security.
Adoption of the principle of distinction. This principle sets out whether personal property given as collateral is tangible or intangible in order to determine the typology of the security interest. The Uniform Act distinguishes a pledge over tangible personal property, with or without delivery, i.e., with or without physical delivery of the pledged tangible personal property in the hands of the creditor or a third party agreed upon by the parties, and a pledge over intangible personal property. Delivery is no longer a prerequisite to the validity of the pledge but rather, like certain hypothecs with delivery under the Civil Code of Québec, the physical delivery of the hypothecated or charged property in the hands of the creditor or a third party agreed upon by the parties can make the pledge opposable against third parties (perfected) without any further notification formalities.
Adoption of new security interests based on ownership. The Uniform Act provides for a more effective possessory lien and the assignment of existing or future debts as collateral, as security reserved for national or foreign credit establishments. The Uniform Act also provides for the transfer of sums of money in trust as temporary transfer of property as collateral.
Creation of security agent. This is an important change designed to facilitate bank syndication operations, among other things. Article 6 of the Uniform Act indicates who can act as security agent: national or foreign financial institutions or credit establishments. The scope is very broad since the applicable rules apply to secured debt, collateral security and any “guarantee of the performance of an obligation” [translation]. The agent is designated pursuant to a deed including certain mandatory wording under penalty of being declared null and void but the deed may be entered into after the security interest is taken. The agent’s role is to represent creditors in their dealings with the debtor, their guarantors and third parties. The agent has the ability to sue and be sued within the limits of the powers that have been entrusted to it. The agent can also substitute a third party to carry out its duties.
Simplification of constitution method and generalization of registration. The Uniform Act has removed the registration requirement other than for mortgages on immovables and has generalized filing in the Trade and Personal Property Credit Register of security interests on personal property without delivery with the creation of a computerized national personal property credit register.
Facilitation of contractual realization of debt. The Uniform Act establishes a contractual allocation of property given as collateral without court intervention, as a contractual method of realizing secured debt other than for the pledging of a business.
Governing and transitional law. The Uniform Act applies to all Member States and only involves the OHADA zone. Several rules concerning the election of domicile and jurisdiction clauses are found in the Uniform Act. Under Article 227, the Uniform Act repeals the Uniform Act Organizing Securities dated April 17, 1997 and only applies to security interests granted or constituted after its coming into force. Security interests granted or constituted in accordance with the legislation in force at the time before the Uniform Act came into force will