This Act does not apply to security rights in proceeds of collateral if the proceeds constitute a type of asset that is governed by another law.

Nothing in this Act affects the rights and obligations of the grantor and the secured creditor under the Consumer Protection Act (Cap. 501).

Nothing in this Act overrides a provision of any other law that limits the creation or enforcement of a security right in, or the transferability of, specific types of asset, with the exception of a provision that limits the creation or enforcement of a security right in, or the transferability of an asset on the sole ground that it is a future asset, or a part of, or undivided interest in, an asset.

Except for sections 5(2) 6, 8, 56, 57 and 80 to 87, the provisions of this Act may be derogated from or varied by agreement, provided that the agreement does not affect the rights or obligations of any person that is not a party to the agreement.

A person shall exercise the rights and perform the obligations under this Act diligently and in good faith.

A security right is created by a security agreement, provided that the grantor has rights in the asset to be encumbered or the power to encumber it.

A security agreement may provide for the creation of a security right in a future asset, but the security right in that asset is created only at the time when the grantor acquires rights in it or the power to encumber it.

A security agreement entered into in accordance with this section is enforceable and creates a security right, irrespective of the satisfaction of the requirements that may be imposed by any other written law.

A security right may secure one or more obligations of any type, present or future, determined or determinable, conditional or unconditional, fixed or fluctuating.

The assets encumbered or to be encumbered shall be described in the security agreement in a manner that reasonably allows their identification.

A description that indicates that the collateral consists of all of the grantor's movable assets, or of all of the grantor's movable assets within a generic category, satisfies the standard of subsection (1).

The obligations secured or to be secured shall be described in the security agreement in a manner that reasonably allows their identification.

A generic description of the secured obligations satisfies the standard of subsection (4).

A security right in an asset extends to its identifiable proceeds.

A security right in a receivable is effective as between the grantor and the secured creditor and as against the debtor of the receivable despite an agreement limiting the grantor's right to create a security right entered into between the grantor and the debtor of the receivable or any subsequent secured creditor.

A person who is not a party to the agreement referred to in subsection (1) cannot be held liable for any damages resulting from the grantor's breach of the agreement on the sole ground that it had knowledge of the agreement.

A security right in a right to payment of funds credited to a deposit account is effective despite an agreement between the grantor and the financial institution limiting the grantor's right to create a security right.

A secured creditor with a security right in a receivable or other intangible asset, or in a negotiable instrument has the benefit of any personal or property right that secures or supports payment or other performance of the collateral without a new act of transfer.

Where the right referred to in subsection (1) is transferable only with a new act of transfer, the grantor is obligated to transfer the benefit of that right to the secured creditor.

If the secured creditor transfers a security right or a part of it, the secured creditor may register an amendment notice to reflect the transfer.

A transfer of a security right is effective whether or not an amendment notice has been registered.

There is established the Office of Registrar who shall oversee the general running of the Registry.

The function of the Registry shall be to receive, store and make accessible to the public information on registered notices with respect to security rights and rights of non-consensual creditors.

The Registrar shall not, on the Registrar’s own motion, amend or delete information contained in the registry records.

The Registrar shall preserve information contained in the registry records and reconstruct the information in the event of loss or damage.

The Registrar shall remove information in a registered notice from its public records only upon the expiry of the period of effectiveness of the registration of a notice.

Registration of an initial notice or an amendment notice that either adds collateral not included in the security agreement or adds a grantor is ineffective unless authorized by the grantor in writing.

A notice may be registered before the creation of a security right or the conclusion of a security agreement to which the notice relates as long as there is evidence of the authorization in writing.

A written security agreement is sufficient to constitute authorization by the grantor for the registration of a notice.

If there is more than one grantor or secured creditor, the required information shall be entered separately for each grantor or secured creditor.

The Registrar shall assign a unique registration number to a registered initial notice and associate all registered amendment and cancellation notices that contain that number with the registered initial notice.

The registration of an initial, amendment and cancellation notice is effective from the date and time when the information in the notice is entered into the records in the Registry.

The Registrar shall enter information in a notice into the records in the Registry without delay after the notice is submitted and in the order in which each notice was submitted.

The Registrar shall record the date and time when the information in a notice is entered into the records in the Registry.

The registration of an initial notice is effective for the period of time indicated by the registrant in the designated field of the notice, but shall not in any event, exceed ten years.

The period of effectiveness of the registration of an initial notice may be extended only within six months before its expiry by the registration of an amendment notice that indicates in the designated field a new period, in any event not exceeding ten years.

The registration of an amendment notice extends the period of effectiveness for the period indicated in the amendment notice beginning from the time the current period would have expired if the amendment notice had not been registered.

Within ten working days after receipt by registrant of a copy of the information in accordance with subsection (1), the registrant shall send it to the person identified in the registered notice as the grantor.

A registrant who fails to comply with subsection (2) commits an offence and is liable, on conviction, to a fine not exceeding five thousand shillings.

The person identified in a registered initial notice as the secured creditor may, in the prescribed manner, register an amendment or cancellation notice relating to that registered notice.

The registration of an amendment or cancellation notice is ineffective unless authorized by the person identified in the registered initial or amendment notice as the secured creditor.

In cases described in subsections (1) (a) and (2) (a), the secured creditor shall not charge or accept any fee or expense for complying with its obligation.

If any of the conditions set out in subsections (1) and (2) is met, the grantor may, in writing request the secured creditor to register an amendment or cancellation notice and the secured creditor shall not charge for complying with the grantor's request.

If the secured creditor fails to comply with the grantor's request within ten working days after its receipt, the grantor may seek the registration of an amendment or cancellation notice by the Registrar.

Before giving effect to the requested registration, the Registrar shall give notice to the secured creditor.

Appeals from the decision of the Registrar shall lie with a court of competent jurisdiction.

A search certificate issued by the Registrar is proof of its contents.

An error in the grantor identifier entered by the registrant in a notice renders the registration of the notice ineffective.

An error in the grantor identifier does not render the registration of the notice ineffective with respect to other grantors correctly identified in the notice.

An error in required information other than the grantor's identifier does not render the registration ineffective unless the error would seriously mislead a reasonable searcher.

Any error in the statistical information prescribed by the Regulations does not affect the effectiveness of the registration.

An error in the description of the collateral does not render the registration of the notice ineffective with respect to other collateral sufficiently described.

An error in the serial number of the serial-numbered collateral renders the registration ineffective as against a buyer or lessee of that asset.

If the grantor's identifier changes after a notice is registered and the secured creditor registers an amendment notice indicating the new identifier of the grantor within sixty days after the change but before the expiry of the period of effectiveness of the registered notice, the security right to which the notice relates remains effective against third parties and retains the priority it had over the rights of competing claimants before the change.

If a security right has been made effective against third parties and the collateral is transferred to a transferee that acquires the collateral rights subject to the security right, the security right remains effective against third parties and retains the priority it had over the rights of competing claimants before the transfer, provided that the secured creditor registers an amendment notice adding the transferee as a new grantor within ten working days after the secured creditor acquires knowledge of the transfer and the transferee's identifier.

In the case of successive transfers of the collateral, subsections (1) and (2) apply to the last transfer.

Subject to the rights of a non-consensual creditor under section 46, the priority of a security right extends to all secured obligations, including obligations incurred after the security right became effective against third parties.

The priority of a security right covers all collateral described in a notice registered by the Registrar, irrespective of whether they are acquired by the grantor or come into existence before or after the time of registration.

If more than one security right extends to commingled goods, a security right that is effective against third parties before the goods become commingled has priority over a security right that is not effective against third parties at the time the collateral becomes commingled goods.

If more than one security right in commingled goods is effective against third parties, the security rights rank equally in proportion to the value of the collateral at the time it became commingled goods.

A security right may be created in tangible assets that are attachments to immovable property or may continue in tangible assets that become attachments to immovable property.

A security right made effective against third parties in an attachment to immovable property under this Act has priority over a competing interest created and made effective against third parties under immovable property law.

If the collateral is sold or otherwise transferred, leased or licensed and a security right in that collateral is effective against third parties at the time of the sale or transfer, lease or license, the buyer, transferee, lessee or licensee acquires its rights subject to the security right except as provided in this section.

A buyer or other transferee of the collateral acquires its rights free of the security right if the secured creditor authorizes the sale or other transfer of the asset free of the security right.

The rights of a lessee or licensee are not affected by the security right if the secured creditor authorizes the grantor to lease or license the asset not affected by the security right.

A buyer of tangible collateral sold in the ordinary course of the seller's business acquires its rights free of the security right, provided that, at the time of the conclusion of the sale agreement, the buyer does not have knowledge that the sale violates the rights of the secured creditor under the security agreement.

The rights of a lessee of tangible collateral leased in the ordinary course of the lessor's business are not affected by the security right, provided that, at the time of the conclusion of the lease agreement, the lessee does not have knowledge that the lease violates the rights of the secured creditor under the security agreement.

The rights of a non-exclusive licensee of intangible collateral licensed in the ordinary course of the licensor' s business are not affected by the security right, provided that, at the time of the conclusion of the license agreement, the licensee does not have knowledge that the license violates the rights of the secured creditor under the security agreement.

If a buyer or other transferee of tangible collateral acquires its rights free of a security right, any subsequent buyer or other transferee also acquires its rights free of that security right.

If the rights of a lessee of a tangible collateral or licensee of intangible collateral are not affected by the security right, the rights of any sub-lessee or sub-licensee are also unaffected by that security sight.

The right of a non-consensual creditor has priority over a security right if, before the security right is made effective against third parties, the non-consensual creditor has registered a notice with the Registrar.

A possessory lien on goods which secures payment or performance of an obligation for services or materials furnished with respect to goods by a person in the ordinary course of the person's business has priority over a security right in the goods as long as the holder of the possessory lien remains in possession of the goods.

In the case of an acquisition security right in equipment, a security right in proceeds has the same priority as the acquisition security right.

In the case of an acquisition security right in inventory or intellectual property, a security right in proceeds has the same priority as the acquisition security right, except where the proceeds take the form of receivables, negotiable instruments, or rights to payment of funds credited to a deposit account.

The priority of a security right in proceeds referred to in subsection (2) is conditional on the acquisition secured creditor notifying non-acquisition secured creditors with a security right in the same kind of asset as the proceeds that, before the proceeds were generated, the acquisition secured creditor registered a notice with the Registrar.

A person may at any time subordinate the priority of its rights under this Act in favour of any existing or future competing claimant without the need for the beneficiary to be a party to the subordination.

Subordination does not affect the rights of competing claimants other than the rights of the person subordinating its priority and those of the beneficiary of the subordination.

Notification of a security right in a receivable is effective when received by the debtor of the receivable if it reasonably identifies the encumbered receivable and the secured creditor.

Notification of a security right in a receivable may relate to receivables arising after notification.

Unless the debtor of the receivable receives notification of a security right in a receivable, the debt may be discharged by paying in accordance with the original contract.

After the debtor of the receivable receives notification of a security right in a receivable, the debt may be discharged only by paying the secured creditor or by paying as otherwise instructed in the notification or subsequently by the secured creditor in writing received by the debtor of the receivable.

If the debtor of the receivable receives notification of more than one security right in the same receivable created by the same grantor, it is discharged by paying in accordance with the first notification received.

The debtor of the receivable is entitled to request the secured creditor to provide within a reasonable period of time adequate proof that the security right in a receivable has been created.

Until the secured creditor complies with subsection (6), the debtor of the receivable may discharge its obligation by paying the grantor, even if the debtor of the receivable has received a notification of a security right.

Despite subsection (1), the debtor of the receivable may not raise as a defence or right of set-off against the secured creditor breach of an agreement referred to in section 11 limiting the grantor's right to create the security right.

The debtor of the receivable may agree with the grantor in writing not to raise against the secured creditor the defences and rights of set-off referred to in subsection (1), but the debtor of the receivable may not waive defences arising from fraudulent acts on the part of the secured creditor or based on the incapacity of the debtor of the receivable.

The creation of a security right in a right to payment of funds credited to a deposit account does not affect the rights and obligations of the institution with which that deposit account is maintained without the consent of the institution, nor does it obligate the institution to provide any information about that deposit account to third parties.

Any rights of set-off that the institution may have are not affected by any security right that the institution may have in a right to payment of funds credited to a deposit account that it maintains.

The exercise of a post-default right with respect to the collateral does not prevent the exercise of a post-default right with respect to the secured obligation, and the exercise of a post-default right with respect to the secured obligation does not prevent the exercise of a post-default right with respect to the collateral.

The grantor and any other person that owes payment or other performance of the secured obligation may not waive unilaterally or vary by agreement any of its rights under this Part before default.

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).

If there is a default with respect to any obligation, the secured creditor shall serve on the grantor a notification, in writing or in other form agreed between the parties, to pay the money owing or perform and observe the agreement as the case may be.

The Cabinet Secretary may prescribe the form and content of a notification to be served under this section.

The court may order the postponement of any proceedings brought under this section until the secured creditor has exhausted all other remedies relating to the collateral under this Part or a security agreement.

Despite subsection (2), a court may order the parties to resort to alternative forms of dispute resolution including reconciliation, mediation, arbitration and other dispute resolution mechanisms.

Any person whose rights are affected by the enforcement process in accordance with this Part is entitled to redeem the collateral by paying or otherwise performing the secured obligation in full, including the reasonable cost of enforcement.

The right of redemption may be exercised until the asset is sold or otherwise disposed of, acquired or collected by the secured creditor or until the conclusion of an agreement by the secured creditor for that purpose.

Despite the fact that another secured creditor or a non-consensual creditor has commenced enforcement, a secured creditor whose security right has priority over that of the enforcing secured creditor or non-consensual creditor is entitled to take over the enforcement process.

The right referred to in subsection (1) may be invoked at any time before the asset is sold or otherwise disposed of, or acquired by the secured creditor or until the conclusion of an agreement by the secured creditor for that purpose.

The right of the higher-ranking secured creditor to take over the enforcement process includes the right to enforce the rights by any method available to a secured creditor under section 65.

A secured creditor may, without removal, render the collateral unusable and dispose of it on the grantor's premises.

After default, the secured creditor is entitled to sell or otherwise dispose of, lease or license the collateral in its present condition or following any commercially reasonable preparation or processing.

The secured creditor may select the method, manner, time, place and other aspects of the sale or other disposition, lease or license, including whether to sell or otherwise dispose of, lease or license collaterals individually, in groups or as a whole.

The notification shall be in the language of the security agreement or such other language that is reasonably expected to inform its recipients about its contents.

The contents of a notification providing substantially the information specified in subsection (2) are sufficient, even if the notification includes information not specified in that subsection or minor errors that are not seriously misleading.

The notification need not be given if the collateral may perish before the end of ten working days after the secured creditor obtains its possession and may decline in value quickly.

If requested by the secured creditor, a holder of a subordinate security right, lien or other right shall furnish reasonable proof of the right or lien within a reasonable time if the secured creditor is to comply with the holder's demand under subsection (1)(c).

Whether or not there is any dispute as to the entitlement or priority of any competing claimant, the enforcing secured creditor may pay the surplus to a court for distribution in accordance with the provisions of this Act on priority.

A debtor remains liable for any shortfall owing after application of the net proceeds under this section.

A secured creditor may propose in writing to acquire one or more of the collaterals in total or partial satisfaction of the secured obligation.

The grantor may request the secured creditor to make a proposal in accordance with subsection (1) and if the secured creditor accepts it, the secured creditor shall proceed as provided in subsections (2), (3) and (4).

If a secured creditor sells or otherwise disposes of the collateral, a buyer or other transferee acquires the grantor's right in the asset free of the rights of the enforcing secured creditor and any competing claimant, except the rights that have priority over the security right of the enforcing secured creditor.

If a secured creditor leases or licenses the collateral, a lessee or licensee is entitled to the benefit of the lease or license during its term, except as against creditors with rights that have priority over the right of the enforcing secured creditor.

If a secured creditor sells or otherwise disposes of, leases or licenses the collateral and does so in violation of this Part, the buyer or other transferee, lessee, or licensee of the collateral acquires the rights or benefits mentioned in subsections (1) and (2), provided that the buyer or other transferee, lessee or licensee had no knowledge of a violation of this Part which materially prejudiced the rights of the grantor or another person.

After default by the grantor, a secured creditor with a security right in a receivable, negotiable instrument, right to payment of funds credited to a deposit account or security is entitled to collect payment from the debtor of the receivable, obligor under the negotiable instrument, depositary bank or issuer of the security.

The secured creditor may, with the consent of the grantor, exercise the right to collect under subsection (1) even before default.

A secured creditor exercising the right to collect under subsection (1) or (2) is also entitled to enforce any personal or property right that secures or supports payment.

The right of the secured creditor to collect under subsections (1) to (3) is subject to sections 59 to 63.

Except as otherwise provided in this section, the law applicable to the creation, effectiveness against third parties and priority of a security right in a tangible asset is the law of the country in which the asset is located.

The law applicable to the creation, third-party effectiveness and priority of a security right in a tangible asset of a type ordinarily used in more than one country is the law of that country in which the grantor is located.

The law applicable to the creation, effectiveness against third parties and priority of a security right in an intangible asset is the law of the country in which the grantor is located.

The law applicable to the creation, effectiveness against third parties, priority and enforcement of a security right in a right to payment of funds credited to a deposit account, as well as to the rights and obligations between the financial institution and the secured creditor, is the law of the country in which that financial institution has its place of business. If the financial institution has places of business in more than one country, the law applicable is the law of the country in which the branch maintaining the deposit account is located.

The law applicable to the creation, effectiveness against third parties and priority of a security right in an electronic security is the law of the country in which the issuer is located.

The law applicable to the creation, effectiveness against third parties and priority of a security right in intellectual property is the law of the country in which the intellectual property is protected.

The law applicable to the creation of a security right in proceeds is the law applicable to the creation of the security right in the original collateral from which the proceeds arose.

The law applicable to the third-party effectiveness and priority of a security right in proceeds is the law applicable to the third-party effectiveness and priority of a security right in the original collateral of the same kind as the proceeds.

If the rights of all secured creditors in the collateral are created and made effective against third parties and the rights of all claimants are established before a change in the location of the collateral or the grantor, references in the provisions of this Part to the location of the collateral or of the grantor refer, with respect to third-party effectiveness and priority issues, to the location prior to the change in location.

If the security right remains effective against third parties under subsection(1), the time of third-party effectiveness is the time when it was achieved under the provisions of the relevant law.

The Cabinet Secretary may make regulations with respect to any matter under this Act that is necessary or convenient to be prescribed by regulations for carrying out or giving effect to this Act.

For the purposes of this Part—

"prior law" means the law governing security rights that was in force immediately before the coming into force of this Act;

"prior security right" means a right covered by a security agreement entered into before the coming into force of this Act that is a security right within the meaning of this Act and to which this Act would have applied if it had been in force at the time when the security right was created.

Except as otherwise provided in this Part, this Act applies to all security rights within its scope, including prior security rights.

The prior law applies to a matter that is the subject of proceedings before a court or arbitral tribunal commenced before the coming into force of this Act.

If the enforcement of a prior security right commenced before the coming into force of this Act, the enforcement may continue under the prior law.

The prior law determines whether a prior security right was created before the coming into force of this Act.

A prior security right remains effective between the parties despite the fact that its creation did not comply with the creation requirements of this Act.

A written agreement between the grantor and the secured creditor creating a prior security right and entered into before the coming into force of this Act is sufficient to constitute authorization by the grantor for the registration of a notice relating to that security right after the coming into force of this Act.

If the third-party effectiveness requirements of this Act are satisfied before the third-party effectiveness of a prior security right ceases in accordance with subsection (1), the security right continues to be effective against third parties under this Act from the time when it was made effective against third parties under the prior law.

If the third-party effectiveness requirements of this Act are not satisfied before the third-party effectiveness of a prior security right ceases in accordance with subsection (1), the prior security right is effective against third parties only from the time it is made effective against third parties under this Act.

The time to be used for determining priority of a prior security right is the time it became effective against third parties.