Part IV Online Notice Registration of Security Interests

Generally, creditors depend on information to determine the creditworthiness of borrowers, while policing the transaction and actions of borrowers during the lifetime of the loan.157 Access to information regarding security from the register increases the volume of overall lending.158 Registration is probably the most effective method of publicising the existence of property encumbrances.159 For decades, paper registration has been the main source of publicising registered information in Nigeria but they are not without disadvantages such as:-

i. The filed documents could be destroyed, for example, by fire, water or pests;

ii. The time required to search and identify them from a pile makes it cumbersome, and costly in terms of employee remuneration;

iii. Storage of files require large space which may not always be readily available; iv. Indexes are prone to errors since they are created manually;

v. Paper documents are susceptible to forgery;

vi. Public access to paper documents are restricted since access to filed documents will only be available where it is located.

Therefore, to avoid disputes between parties and registry officials, the need to access registered information in a speedy and efficient manner is a requirement of any modern secured transaction regime. One of such efficient ways may be through an online registration system to record security interests in personal property.160 Of course there are already existing public registers such as the CAC company charge register, intellectual property registries, bill of sale High Court registries, and equipment lease registry, but their archives do not operate uniformly. The proposed uniform register will eliminate fragmented registries thereby promoting transparency, certainty and ease of access to information especially where the collateral involved, for example, account receivables, cannot be physically encumbered. The main advantage of such a comprehensive register will be to allow the public unrestricted access to registered information without incurring too much cost, while being accessible remotely.161 Permitting public access will mean that any person can access the register electronically.

157 _{Gerard McCormack, ‘Secured Transactions Law Reform, UNCITRAL and the Export of Foreign Legal}

Models’ in N. Orkun Akseli (ed), Availability of Credit and Secured Transactions in a Time of Crisis

(Cambridge University Press 2013) 41.

158 _ibid.

159 _{N. Orkun Akseli, International Secured Transactions Law: Facilitation of Credit and International} Conventions and Instruments (Routledge 2011) 175.

160 _{CEAL Registry Report, 1- 4; Draft Law, para 39.1.} 161 _{Draft Law, para 40.1.}

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It is not expressly stated under the Draft Law whether documentary filing will continue to be used in the event that there is limited internet access for electronic filing. Obviously, persons living in rural areas are moRE likely to encounter problems such as lack of constant electricity and poor access to internet services.162 However, private information business services might be set up for this purpose, to copy, at no cost, and sell registered information at a reasonable cost, in an organised and regulated way for third parties.163 In addition, it will be the responsibility of the State or a delegated administrative body to supervise the electronic register. Where there is damage to the register, or loss of recorded collateral information, their liability will be limited to system malfunction.164 For the general benefit of secured creditors, it is important that where an error or omission has been detected, especially when it relates to the identity of the grantor which could lead to postponement of the secured creditor’s priority position, the secured creditor should take reasonable steps to register any correction immediately. If the secured creditor fails to register the correction, his priority position may be ineffective against other creditors if the grantor suffers insolvency.

The CEAL Registry Report considered the efficacy of implementing the pro- American notice registration system for the electronic register.165 The notice registration system applies where notice of the existence of the security or the intention to create a security is registered and not the entire transaction.166 This system of registration means that the creditor is required to register only limited information concerning the transaction such as the names and legal addresses of the contracting parties or their representatives and the description of the collateral.167 In the absence of an existing security agreement, a notice that is registered will be void. Basically, perfection will be effected by registering a notice of the agreement in the register.168 To be specific, the notice becomes effective the moment the information is filed in the register.169 As expected, registration would be quick and easy which will not necessarily contain all the information in the agreement.170 The register will

162 _{CEAL Registry Report p 30.} 163 _{CEAL Registry Report p 9.}

164 _{Draft Law, para 44.1; ST Guide, Recommendation 56.}

165 _{CEAL Registry Report, 12 – 17; The notice filing system can also be found in other jurisdictions such as}

Ontario, Canada (Personal Property Security Act R.S.O. 1990).

166 _{Richard Calnan, ‘What Makes a Good Law of Security?’ in Frederique Dahan (ed), Research Handbook on} Secured Financing in Commercial Transactions (Edward Elgar 2015) 447.

167 _{CEAL Registry Report, 12; Draft Law, para 45.1.} 168 _{Draft Law, para 42.1.}

169 _{Draft Law, para 50.1; ST Guide, Chapter IV, para 102 – 105; Recommendation 70.}

170 _{Spyridon V Bazinas, ‘The Influence of the UNCITRAL Legislative Guide on Secured Transactions’ in}

Frederique Dahan (ed), Research Handbook on Secured Financing in Commercial Transactions (Edward Elgar 2015) 41.

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be centralised and it will provide minimum electronic verification which will be done by the creditor or the agent of the creditor.171 The cost of filing, if any, will be substantially low without any hidden taxes, stamp duties or fees other than the normal administrative fees negotiated between parties for administering the filing process of the security interest.172

The overriding objective of notice registration is to circumvent the process of filing voluminous documents with too much information, as against the transaction filing method which requires the filing of the transaction itself. Recording less information lowers filing costs and simplifies the registration process.173_{This system also promotes more privacy as} the enquiring party is only provided with basic information that a security interests exists. It was also stated that there should be no review of registrations to check authenticity or legality by legal administrators before a security interest in registered.174 _{Hence, there would be no} government guarantee of checking the accuracy of the notice statement prior to registration. It was argued that the need to appoint a state employee or administrator to perform this duty is unnecessary due to the fact that it will take a longer time to review the originality and authenticity of filed documents, plus the cost of paying for the review and registration may be high.175 All things considered, the general perception of the operation of the notice registration system seem to have been accepted with optimism based on how it has adequately functioned in other parts of the world.

If the notice of the security does not adequately identify the collateral, the registration will remain effective that is if the description does not mislead a reasonable searcher.176 The Draft Law does not state how third parties will be affected by an incorrect statement pertaining to the duration of registration and amount so secured in the registered notice. However, the ST Guide states that third parties relying on such statement should be protected from the effects of such discrepancies in notice statements relating to the duration of registration and the maximum amount secured.177

171 _{Draft Law, para 42.2 - 42.3.} 172 _{Draft Law, para 42.4.}

173 _{Heywood Fleisig, Mehnaz Safavian and Nuria de la Peña, ‘Reforming Collateral Laws to Expand Access}

to Finance’ (The World Bank 2006) 39.

174 _{CEAL Registry Report, 17.} 175 _{CEAL Registry Report, 15 - 16.} 176 _{Draft Law, para 46.2.}

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