Security should be available over all type of personal property taken, obligations, or type

A person, whether natural or artificial, should be able to grant security over all types of personal property.220 _{In the same context, a modern secured transactions law should allow}

security over all types of obligations i.e. fluctuating assets, present assets and future debts.221 Where a secured transactions law accommodates all types of obligations such as future and fluctuating amount as they become available after attachment, property received by the grantor will not require new security interest to be registered.222 The CBNR adopts this notion.223 _{In other words, security can be created regardless of whether the parties have} named the security agreement as chattel mortgage, hypothecation, possessory pledge, contractual lien, etc. For this purpose, there would be one universal security interest with a purportedly harmonised law regulating it when it involves creation, perfection, and rules of priority.224 Thus, an artificial or natural person may create a security interest whether a consumer, farmer, micro-business, company or partnership.

217 _{ST Guide, Chapter VIII, para 65 – 66.} 218 _{ST Guide, Chapter VIII, para 67.} 219 _{See Draft Law, para 69.}

220 _{EBRD Core Principle VII.} 221 _ibid.

222 _{Increased Access to Credit: Reforming Secured Transaction Law (ITC Technical Paper Doc. No. BE-10-}

180.E, Geneva 2010) 36.

223 _{CBNR, Art. 3 (1).} 224 _ibid.

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Regarding corporate enterprises, the CBNR does not recognise the equitable charge as security interest for the purpose of this law.225 This clearly contravenes the provisions of the Cuming Report which recommended that floating charges and fixed charges should be treated as a security interest, while sections 197 – 207 CAMA should no longer apply to company charges except to the extent that it applies to charges and mortgages on land created after the proposed law comes into force.226 The Draft law mirrors this recommendation to the extent that section 178 – 182 and 197 – 210 should become inapplicable.227 Logically, the omission of the company charge cannot be justified. The continuous use of charge documents and its terminologies would create unnecessary risks for creditors and investors. However, the researcher recommends that the concept of the company charge should remain, but instead, they should be subject to the registration and priority rules of the CBNR. For the purpose of insolvency and restructuring, some provisions in CAMA, Companies Winding- Up Rules 2001 and Companies Regulations 2012 that deal with distribution of corporation assets and proceeds on liquidation may still need to recognise the concepts of fixed and floating charge. These statutes provide for the allocation of assets during corporate restructuring.

To make matters worse, the CBNR states that the NCR will be responsible for registering financial leases without realising that there was a separate legislative Bill on financial lease. 228 It failed to recognise during its draft process that a legislative Bill was under consideration (now passed into law) which has now created a Registration Authority specifically for operating and financial lease.229 What is left now is that there are two laws regulating the registration and priority of financial leases. A harmonised publicity rule applicable to all types of security interests would have offered predictability in priority, which could have led to improved access to finance without necessarily irritating the already embedded legal concepts and recognised property and commercial law doctrines.230 A wholesale reform of the registration and priority rules of the CBNR and other types of security interests including the company charge and financial lease should be seriously considered in order for this new regime to avoid encountering unnecessary problems. In the event that these types of security devices cannot be recorded by the NCR, a viable solution

225 _{CBNR, Art. 3 (3) (b).}

226 _{Cuming Report, para 4.2.12.3.} 227 _{Draft Law, para 92.1.}

228 _{CBNR, Art. 3 (2).}

229 _{Equipment Leasing Act (‘ELA’) 2015, a federal legislation, now oversees the registration and priority of}

equipment leases, ss. 7, 12, 13, 21.

230 _{Giuliano G Castellano, ‘Reforming Non-Possessory Secured Transactions Law: A New Strategy’ (2015) 78}

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could be for the charge register and financial lease register to reform their specialised registration regimes, in the form of adopting a notice registration system to enable cross- registration and cross-searching of security interests,231 although this should only be a short term solution in the interim.

It is also important that all types of creditors are treated fairly. With respect to PMSI’s, a transparent system of establishing priority should be possible. The CBNR treats PMSI’s as a security interest which can gain priority in the same collateral created by the same debtor if it is perfected when the debtor takes possession of the collateral.232 _{The CBNR states that} a PMSI means ‘(a) a right taken by a financial institution who provides credit to enable the debtor to acquire the collateral if such credit is in fact used; and (b) a right of a finance lessor’.233 _{This very bare definition does not explain what the right of a financial lessor may} contain but what can be understood from this meaning is that the CBNR does not try to re- characterise title-based devices such as the financial lease as a secured transaction. Interpreting the rights (and priority) of a purchase money creditor as provided shows that that a PMSI in collateral and its proceeds shall have a certain type of super-priority over a non-PMSI in the same collateral created by the same borrower if the PMSI is perfected when the borrower receives the collateral.234

As seen already, a purchase money creditor may have a super-priority in the collateral and its proceeds over other claimants created by the same debtor if the PMSI is registered when the debtor receives the collateral.235 This approach permits the seller to finance the acquisition of collateral while retaining title in the collateral ahead of third party claimants.236 Without this super priority protection, a purchase money creditor will be automatically subordinate to an earlier perfected security interest securing present and future rights.237 In essence, the financial lease for instance, maintains its nature as a traditional financing device, but yet, purportedly relies on the same rules applicable to security interests under the CBNR. This is somewhat indistinguishable from UNCITRAL’s categorisation of ‘non-unitary approach’ in recognising secured transactions, as against a ‘unitary approach’ which is recommended by the ST Guide whereby it re-characterises and denominates acquisition security rights (including retention-of-title rights and finance lease rights) as

231 _{ST Guide, Chapter IV, para 117; ST Registry Guide, para 66.} 232 _{CBNR, Art. 27; Draft Law, para 29.1 (a).}

233 _{CBNR, Part I, para 2 (1).} 234 _{CBNR, para 27.}

235 _{CBNR, Art. 27.}

236 _{ST Guide, Chapter IX, para 56 – 58.}

237 _{N. Orkun Akseli, International Secured Transactions Law: Facilitation of Credit and International} Conventions and Instruments (Routledge 2011) 234.

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security rights.238 The CBNR does not adopt the unitary approach, but nevertheless, recognises financial lease as a functional equivalent to a real security in that it performs a similar economic function of reserving title, as a title-based device, for the lessor on equipment and machinery.