The New OHADA Uniform Act on Security

Transcription

1 May 2011 The New OHADA Uiform Act o Security The Coucil of Miisters of the member states 1 of the Treaty for the Orgaizatio for the Harmoizatio of Busiess Law i Africa ( OHADA ) adopted a ew uiform act o security o 15 December 2010 (the New Uiform Act ). Published i the OHADA Official Joural o 15 February 2011, the New Uiform Act etered ito effect automatically i each member state, without ay further formalities, o 16 May The New Uiform Act govers all security created o or after 16 May All security created before 16 May 2011 will cotiue to be govered by the uiform act o security dated 17 April 1997 (the Former Uiform Act ). The reform of the Former Uiform Act is oe of the latest chapters i the history of the various OHADA uiform acts (the OHADA Uiform Acts ). 3 The OHADA Uiform Acts cover a wide rage of areas of busiess law from security to bakruptcy to geeral commercial law ad are aimed at promotig a harmoised legal system throughout the OHADA member states. I additio to the efforts to revise ad update certai of the existig OHADA Uiform Acts, the Permaet Secretary of OHADA is also busy workig o ew uiform acts i relatio to labour law, cosumer cotracts ad geeral cotract law. The New Uiform Act implemets certai fudametal chages i the ladscape of security law i OHADA jurisdictios, icludig: amedig the legal regime applicable to certai existig types of security (icludig otably certai perfectio formalities); creatig ew types of security iterests; ad for the first time i these jurisdictios, istitutig a legal regime for the takig of security by a security aget a sigificat step forward i the cotext of multi-leder fiacigs ad sydicatios. 1 Curretly, the OHADA member states are Bei, Burkia Faso, Cameroo, Cetral Africa Republic, Chad, Comoros, Cogo, Côte d Ivoire, Equatorial Guiea, Gabo, Guiea, Guiea Bissau, Mali, Niger, Seegal ad Togo. The Democratic Republic of Cogo is expected to joi soo ad will become the 17th member state. 2 The New Uiform Act provides that it will come ito effect iety days from its publicatio i the OHADA Official Joural. No atioal eactig legislatio is ecessary. 3 The OHADA Uiform Acts are: Commercial Compaies ad Ecoomic Iterest Group dated 17 April 1997, Security dated 17 April 1997, Simplified Procedures for Debt Recovery ad Eforcemet Measures dated 10 April 1998, Collective Proceedigs for Wipig Off Debts dated 10 April 1998, Arbitratio dated 11 March 1999, Accoutig dated 23 March 2000, Carriage of Goods by Road dated 22 March 2003, Geeral Commercial Law dated 15 December 2010, ad Cooperative Compaies dated 15 December Together with the New Uiform Act, the OHADA Coucil of Miister have also adopted o the same date the revised Uiform Act o Geeral Commercial Law ad the Uiform Act o Cooperative Compaies. Key Issues The New Uiform Act istitutes rules to appoit a security aget i multi-leder ad sydicated fiacigs. With a few exceptios, the security iterests are ow perfected by a filig at the RCCM ad for mortgages i accordace with local laws. The New Uiform Act has abadoed i certai circumstaces the traditioal prohibitio o self-help for eforcemet of security. Security iterests ca guaratee future obligatios ad ca be created over future assets uder certai circumstaces. The New Uiform Act creates several ew types of security, icludig the assigmet of receivables by way of security, cash collateral, ad the pledge of itellectual property rights. It has also moderised several importat aspects of the existig types of security. If you would like to kow more about the subjects covered i this publicatio or our services, please cotact: Athoy Giustii Delphie Siio Courti Ross Howard Alhassae Barry To oe of the above, please use firstame.lastame@cliffordchace.com

2 2 The New OHADA Uiform Act o Security We set out below a overview of some of the highlights of this ew legislatio ad its impact o secured fiacigs i OHADA jurisdictios. The Security Aget Oe major iovatio i the New Uiform Act is the istitutio of a legal regime for the gratig of security to a security aget. I multi-leder ad sydicated fiacigs, the ability to grat security i favour of a third party (such as a trustee uder Eglish law) greatly facilitates the creatio, maagemet, perfectio ad eforcemet of security for the sydicate of leders ad their successors sice it permits oe party to receive ad maage collateral ad security rights for multiple leders ad permits the leders to trasfer ad assig their rights uder the loa without havig to trasfer the correspodig collateral ad security rights (which, otwithstadig the trasfer or assigmet, remai i the hads of the security aget). I jurisdictios that recogise the cocept of trusts (such as Eglad), leders use trust arragemets i order to take security i favour of a security aget/trustee i its ow ame but actig i its capacity as trustee for the beefit of a pool of multiple leders that may chage over time. I certai other jurisdictios where the cocept of trusts is ot recogized (especially i certai civil law jurisdictios), the market has developed the practice of so-called parallel debt to achieve essetially the same result. I a parallel debt structure, the borrower assumes a paymet obligatio i favour of the security aget that is separate ad idepedet from the borrower s paymet obligatios to the leders but which exactly mirrors those latter obligatios. The borrower the gives security ot for its obligatio to the leders but istead for this parallel debt obligatio, ad thus, the leders ca chage but the obligatio secured by the collateral ad the beeficiary remai the same (the parallel debt obligatio owed by the borrower to the security aget/trustee). Trusts arragemets ad parallel debt structures have bee used sparigly i the cotext of sydicated fiacigs i OHADA jurisdictios sice almost oe of the OHADA member states recogises the cocept of trusts, ad local cousel were seldom etirely comfortable with the parallel debt structure. The result was may fiacigs i which idividual leders took security ad were required each to sig the security documets ad, for certai security iterests, be desigated by ame as beeficiaries uder filigs at the competet Trade ad Persoal Property Credit Register (the RCCM ). This situatio i tur meat that additioal steps ad formalities (some of which are cumbersome, such as the cacellatio of the existig filig at the RCCM ad ew filig, amedmets to the security documets, ew registratio of the amedmets with the tax authorities, paymet of additioal costs ad fees, etc.) had to be take whe leders trasferred loas ad a ew leder became a beeficiary of the security. To address this difficulty (which we ote also exists i may jurisdictios outside the OHADA members states), the New Uiform Act istitutes rules for leders to appoit a security aget ad for that aget to take security o their behalf. Uder the New Uiform Act, all security or other guaratees for the performace of a obligatio ca be grated, registered, filed, maaged, ad eforced by a atioal or foreig fiacial istitutio or credit istitutio actig i its ow ame ad i its capacity as security aget for the beefit of creditors of the secured obligatios that have appoited it. Oce appoited, the security aget ca represet secured creditors for virtually all matters related to the secured obligatios ad ca make the various required filigs at the RCCM i the sole ame of the security aget. Whe so actig ad for such filigs, the security aget must clearly idicate its capacity as security aget. I some cases, the New Uiform Act provides that the creatio or eforcemet of the security leads to a trasfer of owership of collateral i favour of the secured party. I the case of a security aget, the ew law provides that such collateral will costitute a dedicated estate (patrimoie d affectatio) of the security aget solely for the purpose of its missio as security aget, ad that such property must be segregated from the aget s ow assets. The segregated collateral is protected i case of bakruptcy of the security aget ad more geerally from foreclosure by creditors of the security aget (with a few relatively mior exceptios). Secured creditors have the right to replace the security aget if the latter does ot satisfactorily perform its duties or is declared bakrupt. I case of replacemet, all the rights ad actios belogig to the former security aget are trasferred by operatio of law to the ew security aget. May commetators will justly view the ew security aget regime as comprehesive ad iovative. That said, there are still several issues to be resolved, icludig defiig the rights ad obligatios of security agets (presumably left to the parties to decide by cotract), better uderstadig the ature of the security aget s role (is it aki to a trustee, a aget or is it sui geeris?), Clifford Chace LLP, May 2011

3 The New OHADA Uiform Act o Security 3 determiig how security agets will fuctio i practice (how, for istace, will they accout for assets held by them? what will the tax treatmet be?) ad how courts will view them (will leders cotiue to have direct rights to security or rights of actio?). Surety-bods ad autoomous guaratees ad couter-guaratees The New Uiform Act, like the Former Uiform Act before it, provides a framework for persoal guaratees, such as surety-bods, ad autoomous guaratees ad couter-guaratees. I ad of itself, this is a advatage over the laws of a umber of jurisdictios where, util recetly, the latter were ofte creatures of cotract without a specific uderlyig legal regime. Surety-bods The New Uiform Act has improved the regime for surety-bods (essetially, guaratees of a third party s obligatios aki to the Frech cautioemet) o several importat poits: It clarifies that a surety-bod ca secure future obligatios ad that it ca be a geeral surety-bod, automatically coverig uless provided otherwise all pricipal, iterest ad icidetal costs up to a maximum amout guarateed. New rules have bee itroduced for the formal requiremets for a obligatio to be a surety-bod. The beeficiary of a surety-bod is obliged to provide iformatio cocerig the guarateed obligatios 4 oly semi-aually, rather tha quarterly as was formerly the case. Autoomous guaratees ad couter-guaratees The regime applicable to autoomous guaratees ad couter-guaratees (essetially, so-called first demad guaratees or idepedet guaratees ) ( Guaratees ) uder the New Uiform Act is ispired by the Uiform Customs ad Practice for Documetary Credits (UCP 600) prepared ad published by the Iteratioal Chamber of Commerce (the ICC ), the ICC Uiform Rules for Demad Guaratees (URDG 758), the UNCITRAL priciples for the Iteratioal Idepedet Guaratees ad Stad-by Letters of Credit ad the practices of iteratioal stadby letters of credit. Ulike the surety-bod, these Guaratees create obligatios that are autoomous ad idepedet from the relatioship betwee the istructig party (ofte a debtor) ad the beeficiary of the Guaratee. Here agai, the New Uiform Act has clarified ad simplified the regime o several importat poits: Mirrorig URDG 758, the New Uiform Act defies Guaratees as udertakigs, while the Former Uiform Act defied them as agreemets. This distictio would presumably mea that a beeficiary does ot eed to sig a Guaratee for it to be valid. Also, the New Uiform Act clarifies the distictio betwee the rights of beeficiaries uder Guaratees ad their rights over the proceeds that may arise from Guaratees, with the former ot beig assigable while the latter are. Uder the New Uiform Act, istructios i relatio to Guaratees with a fixed term are ow irrevocable, while istructios i relatio to Guaratees with a idefiite term are revocable (formerly, the istructig party could revoke all Guaratees). Fially, where a writte demad is made to the guarator for paymet ad the supportig documets are provided to it, the New Uiform Act has followed URDG 758 by specifyig that the guarator has 5 busiess days to examie the demad, as opposed to the reasoable period of time available uder the Former Uiform Act. Geeral Cosideratios o Security Iterests Before lookig at issues related specifically to differet types of security, we set forth below certai issues that arise uder the ew law with respect to security i geeral. Securig future debts ad security over future assets The New Uiform Act clarifies a certai ambiguity that existed uder the Former Uiform Act as to the scope of security iterests by providig that they ca guaratee future, coditioal, ucoditioal, fixed ad floatig obligatios. Also, sice the grat of a pledge o loger requires possessio of the collateral to pass to the beeficiary (as explaied more fully below), it is ow possible to take a pledge over future assets, as log as those assets are sufficietly idetified. I this case, the right of the secured creditor will attach to the ew assets immediately upo the pledgor becomig the ower of those assets (certai questios may remai about perfectio i such case, icludig if formalities differet from those origially udertake are ecessary to 4 Such iformatio icludes the cosideratio for the obligatios of the guarateed obligor, their maturity, ad their amout (pricipal, iterest ad otherwise). Clifford Chace LLP, May 2011

4 4 The New OHADA Uiform Act o Security the future collateral). Uder certai coditios, future buildigs ad fixed structures ca also be subject to a mortgage, ad a mortgage ca also secure future debts. Creatio of security iterests All security whether a mortgage or a pledge, whether over tagible or itagible assets, preset or future ca ow be created by a writte documet cotaiig the required iformatio, ad failure to comply with this requiremet will result i the security beig void. Uder the Former Uiform Act, specific formalities existed for the creatio of pledges of receivables ad share pledges i additio to a writte documet. Moreover, a importat simplificatio of the ew law is the removal of the eed to idicate i the security agreemet itself the coditios uder which the secured obligatios (ad the related iterest) would become due ad payable (coditios d exigibilité de la dette pricipale et des itérêts). Because the scope of this requiremet was cosidered ucertai, it became customary uder the Former Uiform Act to attach to security documets a summary of all the evets of default ad prepaymets, etc. set forth i the loa agreemet, which was ofte cumbersome ad impractical. Eforcemet of security iterests I the evet of o-paymet by a pledgor, the New Uiform Act provides that a secured creditor ca resort to forced sale at a public auctio or ca request the judicial attributio of the pledged assets up to the amout of the secured obligatios, which are essetially the remedies available uder various civil law systems. However, i a departure from (ad some believe a welcome moderisatio of) civil law practice, Article 104 of the New Uiform Act has abadoed i certai circumstaces the Former Uiform Act s prohibitio o self-help for eforcemet. Such self-help is ofte foud i the form of a clause that permits a secured creditor to appropriate to itself the pledged asset upo default of its debtor a so-called cotractual attributio clause or pacte commissoire. Accordigly, if the property pledged is a sum of moey or property whose value is the subject of a official quotatio, the New Uiform Act provides that the parties ca ow freely agree that i the evet of opaymet, the secured creditor would become the ower of that asset. Moreover, whe the debtor of the secured obligatios is a professioal debtor as defied i the New Uiform Act (that is, a debtor whose debt arises out of the exercise of its busiess or is i direct relatio with oe of its busiess activities, eve if it is ot its pricipal activity), the parties ca agree to a cotractual attributio clause for all types of tagible assets (ot just sums of moey or a asset subject to a official quotatio). The referece i Article 104 to tagible assets, parties ad the focus o the debtor of the secured obligatios (as opposed to the pledgor) gives rise to certai questios: Article 104 permits all tagible assets to be subject to a cotractual attributio clause where the debtor of the secured obligatios is a professioal. We believe that such Article is seekig to limit recourse to cotractual attributio clauses to the professioal cotext, ad thus to protect cosumers. I doig so, however, the law seems to be assumig that the pledgor ad the debtor of the secured obligatios are oe ad the same perso. This is ot always the case sice oe perso ca provide a pledge for the debts of aother. I such a situatio, the pledgor is a third party ad thus ot the debtor of the secured obligatios, ad it is ot clear why the New Uiform Act would permit a oprofessioal pledgor to agree to the cotractual attributio clause for ay pledged tagible asset (belogig to it, ad ot to the debtor of the secured obligatios ) o the basis that the debtor of the secured obligatios is a professioal debtor. I additio, i situatios where the pledgor is differet from the debtor of the secured obligatios, which parties must agree to the cotractual attributio clause is it all three (pledgor, debtor ad secured creditor) or oly the secured creditor ad the pledgor? Aother more geeral questio about Article 104 is whether the parties to a pledge of receivables ca iclude a cotractual attributio clause ad o what basis. Ideed, Article 104 refers, o the oe had, to a pledged asset which is a sum of moey or subject to a official quotatio (i this case, o restrictio exists as to the debtor of the secured obligatios ) ad, o the other had, to other tagible assets (i this case, the debtor of the secured obligatios must be a professioal debtor). If we cosider that receivables are ot tagible assets, the the questio remais whether they ca be cosidered a sum of moey for the purposes of Article 104. To the extet that the creatio of the cash collateral requires a trasfer of owership of the pledged fuds to the secured creditor (see below for more details o the cash collateral), Article 104 is ot applicable to the cash collateral. Therefore, we query whether the referece to pledged asset which is a sum of moey might Clifford Chace LLP, May 2011

5 The New OHADA Uiform Act o Security 5 also exted to ad be costrued to iclude receivables? 5 A cotractual attributio clause ca also be iserted i a mortgage if the mortgagor is a legal etity ad the buildig is ot used for habitatio. I the case of the eforcemet uder the cotractual attributio clause, the value of the pledged or mortgaged asset is to be estimated by a expert, ad if it exceeds the secured obligatios, the excess must be paid to the pledgor. The cotractual attributio clause must be published by a filig at the competet RCCM i order to be effective as agaist third parties. Perfectio of security iterests The New Uiform Act has opted for a system of perfectio by filig. Accordigly, except for cash collateral ad the pledge of securities accouts, all the security iterests are ow perfected as agaist third parties by a filig at the appropriate RCCM ad for mortgages i accordace with local laws. The New Uiform Act sets out a geeral rule that the competet RCCM for the filig of all pledges is the RCCM of the place of icorporatio of the pledgor. There are also specific rules as exceptios to the geeral rule - for certai types of security iterests (such as the pledge of receivables, the assigmet of receivables, the pledge of shares ad fiacial istrumets, ad the pledge of busiess as a goig cocer). The former law s cumbersome ad expesive requiremet to register pledges with the tax authorities has bee abadoed (but local authorities will still be free to charge for filigs at the RCCM), ad the list of the parties who ca carry out perfectio formalities has bee exteded to cover ot oly the secured creditors, but also the security aget ad the pledgor. Specific additioal perfectio formalities are required for certai pledges (such as pledges of receivables, share pledges, ad the pledge of itellectual property rights) as outlied below. Perfectio will preserve the rights of secured creditors for a agreed period, which caot exceed 10 years (as opposed to 5 years uder the Former Uiform Act). The geeral rule o perfectio by filig at the RCCM appears to raise certai practical difficulties, for istace if the pledgor is ot located i a OHADA coutry (as the ew law offers o clear guidace as to where the filig should be made i this circumstace) or if the pledgor is a idividual or govermet or other etity ot listed i the RCCM. Specific Key Issues o Security Iterests The New Uiform Act has moderised the existig types of security ad has created ew security iterests. Existig Security Iterests Pledge of tagible movable assets The creatio of pledges of tagible movable assets has bee greatly simplified ad ow oly requires a writte cotract cotaiig certai madatory iformatio. The New Uiform Act has abadoed the requiremet of a effective ad cotiued dispossessio (either physical or costructive) of collateral from the pledgor, sice dispossessio is o loger a coditio of the validity of the pledge (gage). Uder the New Uiform Act, the dispossessio requiremet is merely a alterative method for the perfectio of the pledge of tagible assets. I additio, pledges ca ow be created over future assets, as log as they are sufficietly idetifiable. Pledge of receivables The pledge of receivables also o loger requires dispossessio. Agai, it is simply created by a writte cotract cotaiig certai madatory iformatio. The previous cumbersome obligatio to deliver title to the pledged receivables (titre de créaces) to the secured creditors ad to otify the pledge to the pledged debtor by bailiff (huissier) has bee abadoed. This will greatly simplify the creatio of this security because i may cases the title to the pledged receivables (titre de créaces) were either destroyed or lost, or the claim was simply ot documeted. Future ad coditioal receivables ca also be pledged, as log as they are sufficietly idetified ad idividualised. Uder the New Uiform Act, by derogatio to the geeral rule for perfectio (which as oted above requires filig i the RCCM of the pledgor), a pledge of receivables is perfected by a double formality it must be otified to the pledged debtor to be valid agaist it ad the pledge must be filed at the RCCM of the domicile of the pledged debtor to be valid as agaist other third parties. While the abadomet of dispossessio is welcome (greatly simplifyig the formalities ad icreasig certaity), the choice of perfectio by filig at the RCCM of the pledged debtor ad otice may raise certai ew practical difficulties: i cases where there are a large umber of pledged debtors, it will require a filig at the RCCM of, ad otice to, each pledged debtor; ad, for creditors wishig to check the security give by a party to others, it would require the creditor to verify the filigs i every RCCM of possible pledged debtors. Also, as oted above more 5 We ote that the cotractual attributio clause is ot required for the assigmet of receivables by way of security (ot to be cofused with the pledge of receivables) because the assigmet trasfers owership of the receivables to the beeficiary of the assigmet (i.e., the secured creditor). Clifford Chace LLP, May 2011

6 6 The New OHADA Uiform Act o Security geerally, the case of pledged debtors located outside a OHADA coutry ad those ot listed i the RCCM appear to be ope issues. Pledge of shares ad fiacial istrumets There have ot bee fudametal chages to this security. The New Uiform Act ow allows the proceeds of shares or fiacial istrumets to be icluded i the scope of the pledge. Uder the New Uiform Act, by derogatio to the geeral rule for perfectio, pledges of shares ad fiacial istrumets are perfected as agaist third parties by a filig at the RCCM of the issuig compay. Additioal perfectio formalities that were specific to the pledges of shares ad fiacial istrumets uder the Former Uiform Act (such as the recordig i the issuig compay s share registry ad the approval of the pledge by the appropriate corporate body) are uchaged, but the New Uiform Act ow gives the secured creditor a optio betwee a otificatio of the pledge to the issuig compay by bailiff (sigificatio) ad a simple otificatio. Pledge of securities accout (comptes de titres fiaciers) This pledge existed uder the Former Uiform Act for listed compaies, whose securities were dematerialised ad represeted by iscriptio i a securities accout. The regime has bee moderised ad clarified by largely replicatig the Frech law provisios o the subject. The pledge is created by the sigature of a statemet of pledge cotaiig the required iformatio. The scope of the securities accout pledge icludes the iitial securities credited to the securities accout, those that may be substituted i place of them or may supplemet them ad ay cash proceeds (such as divideds ad other cash distributios). This pledge is ot filed at the RCCM, but is recorded i the securities accout holder s registries. I practice, this security will cocer few corporatios because uder the relevat OHADA law oly listed compaies ca dematerialise their securities. Pledge of busiess as a goig cocer (fods de commerce) While there have bee o fudametal chages to this security, oe improvemet is that the madatory iformatio required to be icluded i the pledge agreemet has ow bee limited to what is strictly required for the idetificatio of the pledged assets (ames of the parties, desigatio ad address of the fods de commerce, idetificatio of the elemets composig the fods de commerce, ad the elemets that will permit the determiatio of the secured obligatios). Uder the New Uiform Act, by derogatio to the geeral rule for perfectio, the pledge of busiess as a goig cocer is perfected as agaist third parties by a filig at the RCCM of the ower of the fods de commerce ad at the RCCM of the various braches where the fods de commerce is operated. As uder the Former Uiform Act, itellectual property rights ad professioal equipmet ad vehicles ca still be icluded i the scope of the pledge of busiess as a goig cocer, ad such iclusio will require additioal perfectio formalities specific to them. Pledge of ivetory Security over ivetory ca be subject to the geeral regime of the pledge of tagible assets, or creditors ca tur to a specific regime for the pledge of ivetory. There have bee o major amedmets to the specific regime. It should, however, be oted that the New Uiform Act expads the madatory isurace requiremets for pledged ivetory to cover partial or total deterioratios, i additio to destructio of the stocks. Pledge of professioal equipmet ad vehicles The fudametal chage here is the expasio of the parties that ca be beeficiaries of this type of pledge. Uder the Former Uiform Act, oly a seller of equipmet, a guarator of the purchase price ad/or a leder gratig a loa used for the purchase of professioal equipmet ad vehicles could beefit from this specific security iterest over such assets (as opposed to ay party that could beefit from a pledge of fods de commerce whe professioal equipmet ad vehicles are icluded i it). Uder the New Uiform Act, ay party ca ow beefit from this pledge. This is a vast improvemet. Due to the former limitatios, professioal equipmet was geerally icluded i the pledge of fods de commerce. Where there was o fods de commerce such as the fiacig of ew or future busiesses it was ot possible for geeral creditors to beefit from security over the professioal equipmet (uless paid for out of the fiacig). By expadig the scope of potetial beeficiaries of this pledge, the New Uiform Act has greatly facilitated the takig of security over professioal equipmet. Mortgages Mortgages have always bee the least harmoised of the OHADA law security iterests. Their creatio ad perfectio formalities are still very much depedet o local laws ad customs i each member state, but i geeral their creatio requires a otarised act ad they are perfected by a filig at the competet mortgage registry. That said, the New Clifford Chace LLP, May 2011

7 The New OHADA Uiform Act o Security 7 Uiform Act has modified ad harmoised the regime o mortgages o at least oe sigificat poit. It is ow possible to take a mortgage over future buildigs ad fixed structures uder certai circumstaces (icludig ew fixed structures ad buildigs o lad fallig uder public domai ad atioal domai categories) (although oe eeds to see how this ew feature will work whe implemeted i the cotext of the various atioal rules ad requiremets o mortgages). Retetio Rights (Possessory Lie) Retetio rights or possessory lies have ot bee fudametally modified. It should, however, be oted that whe the same tagible asset is subject to a pledge without dispossessio ad a retetio right, the New Uiform Act resolves the coflict betwee them by givig priority to the beeficiary of the pledge if the pledge was filed at the RCCM before the beeficiary of the retetio right came to possess the asset. New Security Iterests The New Uiform Act of Security creates several ew types of security. Cash collateral The ew law creates a specific regime regulatig the takig of cash collateral. For this type of security to be take, cash collateral must be held i a blocked accout opeed with a credit istitutio licesed to hold deposits. The blocked accout must be i the ame of the secured creditor, who will become the ower of the fuds deposited o the blocked accout util the debt becomes due ad payable. This security iterest is ot filed at the RCCM; rather, its perfectio is achieved by a otificatio to the accout bak. I case of opaymet of a due ad payable secured amout, the, eight days after the pledgor is duly iformed by the secured creditor, the secured creditor may simply collect the fuds deposited i the blocked accout up to the amout of the secured obligatios. However, util the secured obligatios become due ad payable, the secured creditor caot use the fuds deposited i the blocked accout. It should be oted that the New Uiform Act does ot address the questio of whether such segregated fuds ca be seized by creditors of the secured creditor or whether they fall ito its estate i case of isolvecy of the secured creditor. Assigmet by way of security I additio to the specific regime for cash collateral, a secod method of trasfer of owership by way of security is the assigmet of receivables. Such assigmet ca cover preset or future receivables (as log as they are sufficietly idetified ad idividualised). The assigmet is created by a writte cotract cotaiig specific madatory iformatio. The New Uiform Act provides that a claim agaist a third party ca be assiged by way of security for ay credit exteded by atioal or foreig legal etities, which carry out o a habitual basis ad o their ow accout bakig or credit activities. Ulike the Frech law Dailly assigmet o which it is largely based the New Uiform Act does ot specify that the assigmet must be i favour of the credit istitutio that has exteded the credit or that the assigmet must be made by the beeficiary of the credit. Emphasis is rather o the ature of the secured obligatios. As a result, ulike Frech law, this may mea that ay third party (for example, a paret compay) should be able to assig its receivables by way of security to guaratee the credit exteded to the uderlyig debtor (for example, its subsidiary). However, we query whether this provisio would allow that same paret compay, whe issuig a first demad guaratee for a subsidiary s obligatios, to assig the paret s receivables to secure the paret s guarateed obligatios, which are autoomous ad idepedet from the credit exteded to the subsidiary. Similarly, cofirmatio will be required as to whether hedgig providers ca beefit from such a assigmet because the secured obligatios arise out of hedgig arragemets. Are hedgig arragemets credit exteded as such term is used i this ew provisio? Fially, there will ievitably be debate about characterisig potetial secured parties as atioal or foreig legal etities, which carry out o a habitual basis ad o their ow accout bakig or credit activities. While this assigmet ca cover all types of receivables (which is coveiet), by derogatio to the geeral rule for perfectio ad i a maer similar to the pledge of receivables, it is perfected as agaist third parties by a filig at the RCCM of the domicile of the assiged debtor ad agaist the assiged debtor by a simple otificatio to it (which is ot so coveiet, as oted above i relatio to pledges of receivables). Also, if the assiged debtor accepts the assigmet, the assiged debtor caot raise agaist the beeficiary persoal defeces arisig from the assiged debtor s relatioship with the assigor (subject to fraud). Pledge of bak accouts Uder the Former Uiform Act, there was o specific regime for the pledge of bak accouts. Followig the traditioal practice uder Frech law, security over bak accouts was take as a pledge of receivables where the pledged receivables were cosidered to be the credit balace stadig o the accout o the day of eforcemet of the Clifford Chace LLP, May 2011

8 8 The New OHADA Uiform Act o Security pledge. The New Uiform Act ow creates a specific regime for pledges of bak accouts. The approach adopted is essetially the same as before, but the ew law clarifies issues specific to pledges of bak accouts. For example, the ew law clarifies the date o which the credit balace of the bak accout crystalises for the purpose of the pledge ad specifically permits multiple eforcemets of the pledge if, o a eforcemet date, the credit balace of the bak accout is ot sufficiet to fully discharge the secured obligatios. This pledge is perfected i the same maer as a pledge of receivables. Although both the cash collateral ad the pledge of bak accout ivolve a bak accout, there are clear differeces betwee them, amely, with cash collateral, the owership of the fuds held i the blocked accout is trasferred to the secured creditor, while i the pledge of bak accout the pledgor remais the sole ower of the fuds held i the accout util the eforcemet of the pledge. Also, i cash collateral situatios, either party (other tha the secured creditor if the secured debt is due ad payable but ot paid) ca use the fuds held i the blocked accout, while with the pledge of bak accout, the pledgor ca freely use the accout (util it is blocked). Pledge of itellectual property rights Uder the Former Uiform Act, there was o specific regime for the pledge of itellectual property rights. Creditors could take security over such rights oly withi the scope of a pledge of a busiess as a goig cocer. Uder the New Uiform Act, itellectual property rights ca still be icluded i a pledge of fods de commerce, but there is also ow a specific security regime available. If the pledged itellectual property right is registered o oe of the special registries, the publicity requiremets set forth i the applicable regulatio must be complied with i additio to the filig at the competet RCCM i order to perfect the pledge. Uless provided otherwise, the pledge of itellectual property rights does ot exted to accessories ad proceeds resultig from the exploitatio of the pledged itellectual property rights. Retetio of title (clause de réserve de propriété) Uder the Former Uiform Act, there was o specific regime goverig cases of sales where the seller retaied title to the asset beig sold util such time as the purchase price was paid. There was istead a regime i the Uiform Act o Geeral Commercial Law for sales agreemets. The New Uiform Act creates a specific regime aki to that existig uder Frech law ad applicable to all cotracts, ot oly to sales cotracts. Coclusio I lie with the goals of the OHADA Uiform Acts, oe of the mai objectives of the New Uiform Act was to make OHADA jurisdictios more attractive eviromets for doig busiess, particularly for secured fiacigs. O the whole, the New Uiform Act succeeds, offerig more flexibility ad a wider rage of security optios to creditors. I ivestig the cosiderable time ad effort required to eact the New Uiform Act, the OHADA member states have sought to respod to criticisms of the Former Uiform Act by improvig the efficiecy of OHADA security iterests ad simplifyig their creatio, perfectio ad eforcemet. Needless to say, like ay effort at sigificat law reform, the adoptio of the New Uiform Act brigs with it a degree of ucertaity i relatio to ew or revised provisios ad a umber of questios that will evetually eed to be resolved by the establishmet of commo practices ad/or decisios from atioal courts as well as those of the Commo Court of Justice ad Arbitratio. Clifford Chace LLP, May Place Vedôme, CS 50018, Paris Cedex 01, Frace Clifford Chace LLP is a limited liability partership registered i Eglad ad Wales uder umber OC Registered office: 10 Upper Bak Street, Lodo, E14 5JJ. We use the word parter to refer to a member of Clifford Chace LLP, or a employee or cosultat with equivalet stadig ad qualificatios. This publicatio does ot ecessarily deal with every importat topic or cover every aspect of the topics with which it deals. It is ot desiged to provide legal or other advice. If you do ot wish to receive further iformatio from Clifford Chace about evets or legal developmets which we believe may be of iterest to you, please either sed a to omorecotact@cliffordchace.com or cotact our database admiistrator by post at Clifford Chace LLP, 10 Upper Bak Street, Caary Wharf, Lodo E14 5JJ. Abu Dhabi Amsterdam Bagkok Barceloa Beijig Brussels Bucharest Dubai Düsseldorf Frakfurt Hog Kog Istabul Kyiv Lodo Luxembourg Madrid Mila Moscow Muich New York Paris Perth Prague Riyadh (co-operatio agreemet) Rome São Paulo Shaghai Sigapore Sydey Tokyo Warsaw Washigto, D.C. Clifford Chace has a co-operatio agreemet with Al-Jadaa & Parters Law Firm i Riyadh J