With only minimal fanfare and little public notice, the National Assembly last week unanimously passed into law the Security Interests in Movable Property Bill 2024. The statutory protection of a credit system over immovable property has long been an aspiration of many who are and were involved in the financial industry. The need became evident as early as the late 1980s as Guyana’s economy began to look to external sources for economic development. By the early 1990s the Government invited a Canadian lawyer who was stationed in Guyana for several months, at intervals, who prepared draft legislation. It then silently vanished, never to be heard of again.
The main enforceable securities in Guyana that have been virtually risk free have been mortgages and debentures. To obtain a mortgage a person has to own what is called “immovable property,” that is, transported land with or without a building on it. A mortgage enjoys a high degree of legal priority. A debenture can only be issued to a company which has assets, usually both movable and immovable, but the assets can be movable only. It is for the lender, usually a bank, to determine whether to risk lending on the security of only movable assets.
The humble citizen, except for those building or buying homes and wish to borrow from a bank or building society on a mortgage, has been hitherto completely excluded from the formal financial system because they have no immovable property or own no companies. For movable property, only the Bills of Sale Act and Bills of Exchange Act exist and, maybe, one or two others that I may have missed, which are old legislation offering a degree of protection for loans to purchase motor vehicles and the use of bills of exchange, which includes cheques. Expectation that legislation will materialize eventually fell dormant.
The Security Interests in Movable Property Act 2024 is a substantial piece of legislation consisting of 102 sections, many of which have sub-sections, all housed in a body of 66 pages. The Act is not an easy read and even those who are familiar with these types of documents will have difficulty. But since there has been little public education on the issue the effort must be made to demonstrate why it is transformative.
There are four realities that have existed for a long time in our economic, financial and investment scenario. First, the banks have money to lend but have been unwilling to do so on the security of movable property in the absence of legislative protection. Secondly, many people are willing to invest but have no immovable assets or companies with assets that the banks require as security. Small farmers with leases, or small contractors, or small miners, are prime examples of this category. Thirdly, many borrowers for domestic purposes with movable assets are unable to raise funds to improve their standard of living. Investments such as these, home improvement is an example, have multiplier effects. Fourthly, Guyanese and Guyana’s economy have been adversely affected by this absolutely necessary legislation which has now come decades late. But, as they say, better late than never.
In this regard, the investments which could have been taking place to develop our economy have not occurred. The effect is now being felt because with an oil economy, foreign business, including Chinese businesses, which have independent, or non-Guyanese sources of financing, have had unfair advantages over Guyanese businesses, which are capable of competing, if the financial resources had been available. While Guyana cannot regain lost advantages, there is no doubt that the creation of the new security interests in movable property would transform the financial and economic landscape of Guyana.
The Act applies to liens, every transaction that creates a security interest (such as a finance lease or a commercial consignment), a lease of goods for more than one year and an outright consignment of intangibles (movable property other than goods, chattel paper, title documents investment securities, money or negotiable instruments). It does not include a right of set off, an interest created by or provided for (i) by the creation or transfer of an interest in land; (ii) a transfer of present or future pay, or other compensation for labour or services; (iii) an assignment for the benefit of creditors; (iv) a transfer of an interest or claim under an annuity or insurance policy; (v) a transfer of a right to damages in tort not related to commercial activity; (vi) the registration of a transfer, assignment, mortgage, or assignment of a mortgage of a ship; (vii) a transfer or a mortgage in a licence, concession or personal interest issued under a written law for which a security interest is prohibited; (viii) an agreement made under the Hire Purchase Act 2022.
The Act also makes provision for: the registration of security interests at the Commercial Registry; the creation of a security interest by agreement including in relation to property jointly owned; a security agreement may encumber a movable asset or part or an undivided right in it; all of a debtor’s movable assets. Numerous other provisions relating to registration of security interests, priority and enforcement of security interest, complete the Act which is a welcome addition to Guyana’s financial architecture.