Registering and Enforcing a Security Interest at Kenya’s Collateral Registry

Creating a security right over a Kenyan business’s inventory or equipment is only half the transaction. Whether that right survives a competing claim, and what a lender can actually do when a borrower defaults, depends on registration and enforcement mechanics under the Movable Property Security Rights Act. Unlike a mortgage over land, enforcement here can happen without ever going to court. This piece covers registering a notice at the collateral registry, how priority between competing creditors is determined, and what a secured creditor can and must do to enforce after default.

Registering a Notice at the Collateral Registry

The Act establishes a Registry, under a Registrar, that receives, stores, and makes public information on registered notices of security rights. In practice this registry operates as the E-Collateral Registry, run by the Business Registration Service. A registered notice must identify the grantor and secured creditor and describe the collateral, and registration becomes effective immediately once entered into the Registry’s records. A registered notice remains effective for a period the parties select, up to a maximum of ten years, after which it must be renewed or it lapses. Searches can be conducted against a grantor’s identifier or against a specific serial-numbered asset, which is what allows a prospective buyer or lender to check whether an asset is already encumbered before transacting.

Priority Between Competing Creditors

Where more than one creditor holds a registered security right over the same collateral from the same grantor, priority generally follows the order in which notices were registered, not the order in which the underlying security agreements were signed. This “first to register” rule rewards a lender that registers promptly and creates real risk for one that delays. The Act also carves out specific priority rules for particular situations: a supplier that finances a buyer’s acquisition of specific goods, an acquisition security right, can gain priority over an earlier, more general security right if the supplier registers before the buyer takes possession, and a buyer who purchases goods in the ordinary course of the seller’s business generally takes those goods free of a security right they did not know about. A non-consensual creditor, such as one enforcing a judgment, can also gain priority if it registers before the security right becomes effective against third parties.

Enforcement After Default

Section 65 of the Act allows the grantor and secured creditor to exercise any right provided under the security agreement, under the Act’s enforcement provisions, or under any other written law once the debtor has failed to pay or perform. Critically, section 66 allows a secured creditor to pursue these post-default rights either by applying to a court or, without applying to a court at all, in accordance with the Act’s own enforcement provisions. This extrajudicial route is what distinguishes movable-asset enforcement from the court-supervised process typically required to enforce a charge over land, and it is a significant practical advantage for lenders, provided the statutory notice steps are followed correctly.

The Notice Requirements: Sections 67 and 73

Enforcement is not unilateral or immediate. Section 67 requires a secured creditor, on default, to serve the grantor with a written notification that adequately explains the nature and extent of the default, the amount owing, the timeframe available to correct it, the consequences of not doing so, and the remedies available to the creditor. If the creditor proceeds to take possession and sell, lease, or license the collateral, section 73 requires a further notification of the intended disposition to be sent to the grantor, the debtor, and any other secured creditor with a registered interest in the same collateral, at least five working days before the sale or other disposition takes place. Skipping either notice exposes a creditor to a claim for non-compliance under the Act, even where the underlying default is not in dispute.

Practical Steps for Lenders and Borrowers

A lender taking movable-asset security should register its notice at the E-Collateral Registry immediately after the security agreement is signed, since priority depends on registration timing, not signing date, and should calendar the notice’s expiry date well before the ten-year maximum to avoid an inadvertent lapse. On default, a lender relying on the extrajudicial enforcement route should treat the section 67 and section 73 notices as mandatory procedural steps, not formalities, and should keep clear records that both were properly served. A borrower granting security over inventory or receivables should understand that a generic, revolving description of collateral in the security agreement is enforceable, and should check the E-Collateral Registry itself before assuming a given asset is unencumbered.