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The new OHADA Uniform Act on Security

Legal integration in Francophone Africa results in particular from the “Uniform Acts” adopted by the Organization for the Harmonization of Business Law in Africa (OHADA), established by the Treaty signed in Port Louis (Mauritius) in 1993, entered into force in September 1995. OHADA currently includes 17 Member States . An amendment to the Treaty, signed in Quebec in October 2008, has entered into force on 21 March 2010.

The following Uniform Acts, which are directly applied in Member States have been adopted:

  • Uniform Act relating to General Commercial Law
  • Uniform Act relating to Commercial Companies and Economic Group Partnerships
  • Uniform Act organizing Security
  • Uniform Act organizing Debt Collection Procedures and Measures of Execution
  • Uniform Act organizing Insolvency and Liquidation Proceedings
  • Uniform Act on Arbitration Law
  • Uniform Act organizing and harmonizing the undertaking's accounts in OHADA Member Countries
  • Uniform Act relating to the transportation of goods by road

The main Uniform Acts are currently under revision and two amended Uniform Acts relating respectively to General Commercial Law and to security interests have been adopted on 15 December 2010. The two new Acts entered in force on the 16 of May 2011.

The main improvement and innovations of the reform resulting from the new Act on Security may be summarized as follows:

  • Security may be granted over any asset whether present or future and may secure any present, future or conditional obligation;
  • New security mechanisms allow transfer of cash by way of security and simplified assignment of receivables by way of security in favor of banks;
  • Creation, perfection and enforcement of security interests have been simplified;
  • It is now possible to appoint a security agent for the purpose of the creation, perfection, management and enforcement of any security.
The scope and definitions of security interests are enlarged to adapt to various issues faced by lenders and debtors.

The new Uniform Act clarifies that a security may be granted to secure future, conditional, unconditional, fixed and floating obligations, provided that they are sufficiently identified.

In addition, the creation of a pledge without dispossession over tangible assets (gage sans dépossession) allows now a debtor to grant security over one of its present or future tangible assets without being dispossessed of such asset. A pledge over future assets arises as soon as the pledgor owns those assets.

With the new Uniform Act, the pledge of receivables no longer requires dispossession.

A specific legal regime applicable to the pledge over bank accounts balances has been created which allow the debtor to use the account in accordance with the provisions of the pledge agreement and until the enforcement of the pledge.

New security interests created under the reform includes a simplified assignment of receivables by way of security, provided that such assignment is made in favor of banks, and transfer of cash by way of security (transfert fiduciaire de somme d’argent). These new instruments facilitate the securing of financial flux in particular in project finance schemes.

Creation, perfection and enforcement formalities of the security interests have been simplified

The perfection of a security interest (without transfer of property) may now be accomplished either by the dispossession of the pledgor or, if there is no dispossession, by means of a filing at the relevant Registry of Commerce (Registre du commerce et du crédit mobilier). Specific formalities in this respect have been unified and simplified.

In this respect, the success of the reform will depend on the ability of the OHADA Member States to effectively put in place and develop a unified and computerized registry accessible and efficient..

Regarding the enforcement of security interests without transfer of property, the reform implemented “self-help” for enforcement upon default of the debtor in certain circumstances. If the pledged property is a sum of money or property whose value is subject to an official quotation, the parties to the pledge may agree that in the event of non-payment the secured creditor would become the owner of that asset without any further formalities. Where the debtor is a professional, this “self help” for enforcement may also be agreed regarding pledge over tangible assets provided that these assets are evaluated by an appointed expert as of the date of the transfer.

A major innovation in the new Uniform Act is the institution of a security agent

Any security may be created, perfected, managed and enforced by a national or foreign financial institution or credit institution acting in its own name and its capacity as security agent for the benefit of creditors of the secured obligations that have appointed it.

Acting in this capacity, the security agent can represent the secured creditors for the matters related to the security taken to secure the obligations, from the creation/perfection to the security interests to the enforcement of them.

Where the security taken lead to a transfer of ownership of collateral in favour of the secured party, the Uniform Act provides that this collateral transferred to the security agent constitutes a dedicated asset (patrimoine d’affectation) which will remain segregated from the security agent’s own assets. As such, the secured assets remain protected in case of bankruptcy of the security agent.

The reform of Security mechanisms results in significant improvements that will facilitate financings and notably syndicated financings within the OHADA region.

Publication
Droit-OHADA-des-suretes
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Authors

Jean-Jacques Lecat
Jean-Jacques Lecat
Picture of Pierre Marly
Pierre Marly
Partner
Paris