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Facilitating credit secured by movable property

Vanuatu PPSA By George Andrews, Commissioner, Vanuatu Financial Services Commission, Business Forum 12 June 2008. Facilitating credit secured by movable property. Overview. Current Situation Benefits Collateral History Key Policies Examples Enforcement Implementation New Initiatives.

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Facilitating credit secured by movable property

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  1. Vanuatu PPSABy George Andrews, Commissioner, Vanuatu Financial Services Commission, Business Forum 12 June 2008 Facilitating credit secured by movable property

  2. Overview • Current Situation • Benefits • Collateral • History • Key Policies • Examples • Enforcement • Implementation • New Initiatives

  3. Current Situation • Mortgage • Bill of Sale • Personal Loan • Company Charge

  4. Benefits of Vanuatu PPSA • Financing for new equipment • Cash flow financing for importers, exporters, wholesalers, retailers • Financing for agricultural production • Financing for building improvements • Financing for government projects • Consumer financing

  5. Key Changes • Anyone can secure a loan with present or future-acquired movable property (c.f. company charge which is limited to corporations) • Electronic registry gives filers and searchers instant access to necessary information • Cost of enforcement upon default is reduced

  6. What may be used as collateral? • Tangibles: equipment, vehicles, inventory (stock in trade), crops, livestock, farm products • Quasi-tangibles: letters of credit, documents of title, negotiable instruments • Intangibles: accounts receivable, intellectual property rights • Property to be acquired in the future • Any property right other than rights in land and buildings

  7. Who can give and take a security interest in movables? • Anyone may give a security interest in movables of any nature (c.f. company charge – only companies can give a charge on future-acquired property) • Anyone may take a security interest in movables – banks, finance companies, credit unions, individuals

  8. Example Transactions • Retailer secures line of credit for operating expenses with present & future-acquired inventory & receivables • Farmer secures credit for seed & fertilizer with present & future crops, livestock and their offspring • Exporter secures loan for shipping fees with the right to future payment from off-shore buyers of goods

  9. Brief History • PPSA replaces antiquated common law devices (e.g. company charge, conditional sale, consignment, assignment of claims) • U.S. and Canada innovated the new approach in the 1960s and 1970s • Eastern European, then Asian countries experimented with reform in 1990s • NZ adopted Canada-like PPSA in 1999

  10. Brief History, part 2 In the Pacific . . . • NZ PPSA with electronic registry adopted in 1999, implemented in 2000 • Guam has used U.S. version of PPSA since 1972 • FSM adopted PPSA reform with electronic registry in 2006 • Samoa and Solomons will soon enact PPSAs • Australia is considering legislation similar to NZ

  11. Examples of Conflict Resolved by PPSA Priority Rules • Example 1: Secured creditor vs Buyer of Collateral • Kalo lends to Tom to buy car; loan is secured by a car; Kalo files notice describing the car on Jan. 1 • Tom sells car to John on June 1 • Upon default by Tom, Kalo may recover the car from John (Exception: Kalo may not recover from John if Tom is a dealer of cars)

  12. Examples of Conflict Resolved by PPSA Priority Rules Example 2: Secured creditor vs Secured Creditor • Kalo lends to Tom, secured by present and future acquired equipment, inventory, and receivables; registers notice on Jan. 1 • John lends to Tom, secured by present & future equipment, inventory & receivables; registers notice on June 1 • Upon Tom’s default on either loan, Kalo has priority over John because Kalo filed the first notice. John should have searched the registry to discover Kalo’s notice

  13. Example of Notice Date: June 1, 2008 DebtorCreditor John Jones ABC Finance 123 A Street 123 B Street Port Vila VU Port Vila VU Collateral Description: Shop inventory and receivables, presently owned or acquired in the future

  14. Examples of Enforcement • Kalo (debtor) defaults on loan secured by vehicle (car) • Secured Creditor may take possession of and sell vehicle to satisfy secured debt, returning any surplus to debtor • Car dealer may redeem (take back) vehicle prior to sale by paying the secured debt in full

  15. Implementation Strategy • NZ PPSR offers free registry software license • ADB offers free adaptation to meet all Vanuatu needs (e.g. bi-lingual screens) • Maintenance performed, at least initially, off-shore by NZ IT management team • Provincial HQs & CCI - Terminals • CCI – Awareness/Training

  16. NEW INITIATIVES • New Companies Act • New Trustee Act • New Insolvency and Bankruptcy Act • New On-Line Company Registry

  17. END THANK YOU

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