71345 Making Security Interests Public: Registration Mechanisms in 35 Jurisdictions ALEJANDRO ALVAREZ DE LA CAMPA, SANTIAGO CROCI DOWNES, AND BETINA TIRELLI HENNIG Doing Business & The Global Secured Transactions and Collateral Registries Program CONTENTS I ACKNOWLEDGMENTS The report was prepared by a World Bank team comprising Alejandro Alvarez de la Campa (Global Product Specialist, Secured Transactions and Collateral Registries Program), Santiago Croci Downes (Private Sector Development Specialist, Doing Business Project), and Betina Tirelli Hennig (Private Sector Development Analyst, Doing Business Project). The team is grateful for excellent support and review by Elaine MacEachern (Senior Secured Transactions Specialist), and Everett Theodore Wohlers (Senior Secured Transactions Specialist). We also thank Silvia Solidoro (Consultant) for her assistance in the period of data collection. The team would like to thank all government authorities with whom it interacted during the report’s preparation for the time that they devoted to interviews and for sharing their views and knowledge. Contents OVERVIEW . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2 SECTION 1: SURVEY METHODOLOGY . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4 SECTION 2: FINDINGS AND BEST PRACTICES . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 6 Access to the registry and to the registry information . . . . . . . . . . . . . . . . . . . . . . . 6 Registration process . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 7 Notice systems: paper-based or online registration . . . . . . . . . . . . . . . . . . . . . . . . . 7 Registration in six jurisdictions: electronic, paper-based, and hybrid systems . . . . . . 8 Registration among jurisdictions surveyed . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 11 Number of registrations. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 12 Registration costs . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 12 Centralized registry information . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 13 By types of assets for which notices of security interest are registered . . . . . . . . . . 14 By geographical coverage of collateral registry. . . . . . . . . . . . . . . . . . . . . . . . . . . . 14 By types of debtors and types of legal interests . . . . . . . . . . . . . . . . . . . . . . . . . . . 15 The search process . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 15 Summary of the main features of a modern collateral registry . . . . . . . . . . . . . . 18 ANNEX I . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 20 ANNEX II . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 21 ANNEX III. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 23 ANNEX IV . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 25 ANNEX V . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 26 CONTENTS 1 Overview The importance of a strong secured transactions law and effective registration system for movable collateral has been a focal point of legal reform for international organizations over the past two decades. Efforts by international donors to modernize secured transactions systems started in the 1990s in Central and Eastern Europe.1 Several jurisdictions in the region—such as Bulgaria, the Czech Republic, the Slovak Republic, and Ukraine—started reforming their legal frameworks based on modern principles. Reforms were introduced in other regions in subsequent years. After the East Asian �nancial crisis in the late 1990s, a G-22 report highlighted the importance of modernizing secured transactions systems to diversify credit risk and foster nonbank �nancial intermediation. As a result, multilateral banks initiated benchmarking exercises on secured transactions by adopting international conventions, model laws, and developing regional technical assistance tools. In 2001 the International Institute for the Uni�cation of Private Law (UNIDROIT) adopted the Convention on International Interests in Mobile Equipment. Furthermore, the United Nations Commission on International Trade Law (UNCITRAL) adopted the UN Convention on the Assignment of Receivables in International Trade. The same year the World Bank rati�ed principles for insolvency and creditor right systems (revised in 2005) and the Asian Development Bank conducted a major study of secured transaction law reform in China, India, Indonesia, Pakistan, and Thailand. In 2002 the Organization of American States enacted an Inter-American Model Law on Secured Transactions2 and in 2009 adopted the Model Registry Regulations under the Model Inter-American Law on Secured Transactions.3 Meanwhile, UNCITRAL adopted in 2007 a guide to legislation on secured transactions.4 In 2010 the International Finance Corporation (IFC) issued a guide on secured transaction systems and collateral registries.5 A new version of World Bank principles on insolvency and creditor rights is expected to be adopted soon, as well as a guide on registration systems from UNCITRAL. 1 EBRD, Model Law on Secured Transactions, 1994. 2 http://www.oas.org/dil/Model_Law_on_Secured_Transactions.pdf. 3 Model Registry Regulations under the Model Inter-American Law on Secured Transactions, http://www.oas.org/dil/ CIDIP-VII_doc_3-09_rev3_model_regulations.pdf. 4 UNCITRAL, Legislative Guide on Secured Transactions, 2007. 5 Alvarez de la Campa, Alejandro, Everett T. Wohlers, Yair Baranes, and Sevi Simavi. 2010. Secured Transactions Systems and Collateral Registries. Washington, DC: International Finance Corporation. 2 MAKING SECURITY INTERESTS PUBLIC: REGISTRATION MECHANISMS IN 35 JURISDICTIONS The role of modern collateral registries in This report also addresses the different registration the publication of security interests mechanisms for security interests in movable property and their effectiveness in achieving the two goals stated Movable assets—tangible or intangible—often account above. It does so using the results of a 2010 World Bank for most of �rms’ capital stock. Thus it is important Group survey on collateral registries. for jurisdictions to develop adequate laws on secured transactions to allow borrowers and lenders to recognize The publication was developed for use as a diagnostic movable assets as collateral, supporting �nancing tool and informational source for policymakers, secured with such assets. development practitioners, and legal experts involved in collateral registry reform. It may also be educational Though the legal and regulatory framework is essential for those who are not experts in this �eld, but might to any secured transactions system, the ef�cacy of a be affected by collateral registries in their business secured transactions law also requires an effective or personal activities. This paper complements the registration mechanism for interests in movable literature on legal and institutional frameworks property. for secured transactions, which has not extensively This report focuses on analysis of such institutions, documented the functionality of existing registry highlighting the importance of a publicly accessible systems. registry where information on interests in movable assets The report emphasizes the practices and features can be registered. The main goals of collateral registries available in different registries and key characteristics are to provide public notice of interests in movable assets of effective collateral registries. The experiences of and to establish priority in the assets described in the jurisdictions that have instituted best practice registries notice for secured creditors. show how technology can improve the ef�ciency of collateral registries. OVERVIEW 3 SECTION 1: Survey methodology The Collateral Registries survey was developed by the International Finance Corporation (IFC) and World Bank’s Doing Business Project, and the IFC’s Global Secured Transactions and Collateral Registries Program. Since its inception in 2003, the Doing Business Project has influenced about 300 regulatory reforms around the world by measuring and tracking changes in the regulations applying to domestic companies in 11 areas, including secured transactions. Doing Business 2012: Doing Business in a More Transparent World, launched in October 2011, showed that between June 2010 and June 2011, 21 jurisdictions reformed their secured transaction laws.6 The goal of the Secured Transactions and Collateral Registries Program, on the other hand, is to increase access to credit for �rms, especially SMEs, by providing technical advice on implementing secured transactions laws and developing collateral registries to facilitate the use of movable assets as collateral. This survey is one of the �rst empirical studies on registries of security interests for movable collateral. 7 The answers were provided directly by the managers of registries. Contact information was obtained from each of the registries surveyed and can be provided on request if an institution gives permission. Managers of 36 registries in 35 jurisdictions around the world were interviewed between February and October 2010. An effort was made to obtain information from every region and to facilitate continued update and expansion of the database (Table 1). The Collateral Registries survey was designed to obtain quantitative data (such as the number of registrations or full-time registry employees) and qualitative data (such as whether online registration is possible). This approach allowed for better understanding of the strengths and weaknesses of registries. The survey included four main sections: types of registry, types of movable collateral, number of registrations, and registry regulations and features. First, information was requested on registry types. When more than one registry existed in a jurisdiction, the types of assets registered in each registry were assessed to decide which registry should be surveyed. Another issue that arose was the concept of state or provincial registries relative to national or federal ones. In Canada and the United States uni�ed collateral registries exist at the state level (as in British Columbia and Texas) but not at the federal level. In these cases, the state registries were compared with national jurisdictions 6 Secured transactions reforms highlighted by Doing Business 2012: Doing Business in a More Transparent World: Chile, Georgia, Honduras, Liberia, Mexico, Tonga, and members of the Organization for the Harmonization of Business Law in Africa (OHADA). 7 Different jurisdictions sometimes use different terms for a security interest, such as charge or pledge. 4 MAKING SECURITY INTERESTS PUBLIC: REGISTRATION MECHANISMS IN 35 JURISDICTIONS of similar per capita income, population Table 1: Jurisdictions and registries surveyed size, and registry type. Finally, for Region Registries jurisdictions with more than one registry East Asia and Cambodia (Secured Transaction Filing Of�ce) depending on the type of debtor (such as Paci�c China (Credit Reference Center, Accounts Receivables Finance a bill of sale registry for individuals and Registration System) unincorporated companies, and a company Hong Kong SAR, China (Companies Registry) registry for incorporated companies), only Macau (Commercial and Movable Property Registry) Malaysia (Companies Commission) the registries for interests in incorporated Singapore (Accounting and Corporate Regulatory Authority) companies were surveyed. Solomon Islands (Secured Transaction Registry) Vanuatu (Personal Property Securities Registry) Second, data were gathered on the types Europe and Albania (Registri I Barreve Siguruese) of movable collateral for which security Central Asia Bosnia and Herzegovina (Ministry of Justice, Pledge Registry) interests can be registered—such as Bulgaria (Central Register of Pledges) inventory, livestock, or equipment—and Croatia (Claim Security Register for Movable Assets and Rights) the percentage of registrations per category Kosovo (Zyra për Regjistrim të Pengut) of movable property in the registry’s most Macedonia (Central Registry) recent year of operation. For example, Romania (Arhiva Electronica de Garantii Reale Mobiliare) at the Pledge Registry in Bosnia and Serbia (Register of Pledges on Movable Assets and Rights) Slovak Republic (Central Notarial Registry of Liens) Herzegovina, 20 percent of registrations in Latin America Colombia (Registro Mercantil) 2009 involved machinery and equipment. and Caribbean Guatemala (Registro de Garantías Mobiliarias) Such percentages enabled the analysis Jamaica (Companies Of�ce) of the most common movable property Middle East and Jordan (Driver and Vehicle License Department) used by companies as collateral and, North Africa consequently, their acceptance by �nancial OECD Australia (Register of Companies Charges) institutions. Not all the registries were able Canada, Nova Scotia (Personal Property Registry) Canada, British Columbia (Personal Property Registry) to provide these data, usually because they Finland (Register of Enterprise Mortgages) lacked ef�cient tracking systems. France (Le Registre des Privilèges, des Nantissements, et des Gages) Third, statistics were gathered on the Ireland (Companies Registration Of�ce) number of registrations, amendments, New Zealand (Personal Property Securities Register) extensions, searches, and terminations Norway (Register of Mortgaged Movable Property) starting in 2000 or for the period since Spain (Registro de Bienes Muebles) regarding registries created afterward. United States, Texas (Of�ce of the Secretary of State of Texas) This information provides an overview of South Asia Bangladesh (Of�ce of the Registrar of Joint Stock Companies and Firms) the level of use and dynamism of secured Sub-Saharan Kenya (Companies Registry) �nancing guaranteed by movable goods. Africa Mauritius (Conservator of Mortgages) Rwanda (Of�ce of the Registrar General, Rwanda Development Finally, data were gathered on registry Board) regulations (such as the types of assets Senegal (Registre de Commerce et Crédit Mobilier) registered) and features (such as existence Total 36 registries of websites and online registration). SECTION 1: SURVEY METHODOLOGY 5 SECTION 2: Findings and best practices Access to the registry and to the registry information International standards Access to the registry and its information is key when evaluating the performance of a well-functioning registry system. Grantors, potential secured and unsecured creditors, and potential competing claims have an interest in the information contained in a collateral registry and in its availability. Thus the legal and institutional frameworks of the registry should permit simple registration of notices and searching for information. Ideally, the registry should be accessible online around the clock to anyone, without the need to prove the parties’ consent to perform a registration. Personal appearance by one or both parties should not be required because it precludes remote registration (by an electronic interface, email, fax, or mail) and impedes use of the registry.8 Under best practices, online access should be available for registration and searches by recurrent users (such as banks) and one-time users. A common method of providing online access to recurrent users is to allow them to establish accounts by assigning user names and passwords. Fees are charged to accounts, so users do not need to pay in advance of each transaction. Online access should also be provided to users without accounts. Credit or debit card information works for such users, as does logging in with receipt number for an advance payment made to the registry bank account. A search of the registry information or submission of a �le for registration should be allowed by anyone who has paid the fee, if a fee applies, regardless of the reason9 or party involved in the process.10 Searching should be provided based on the debtor’s identi�cation or a serial number if the law provides for indexing by such numbers. Ideally, searching should be free or subject to a reasonable fee, such as one to cover maintenance of the electronic platform. Survey results The survey results show a trend toward open access. Some jurisdictions that �rst established paper-based registries have added online searching and registrations, while others have provided exclusively online access for those functions since the registry’s creation. Examples 8 See recommendation 54 (d) of the UNCITRAL Legislative Guide on Secured Transactions and Article 36 of the OAS Model Law on Secured Transactions. 9 See recommendation 54 (g) of the UNCITRAL Legislative Guide on Secured Transactions. 10 See recommendation 54 (f ) of the UNCITRAL Legislative Guide on Secured Transactions. 6 MAKING SECURITY INTERESTS PUBLIC: REGISTRATION MECHANISMS IN 35 JURISDICTIONS where online searches are possible include Cambodia, error, since the registry staff do not need to transpose the Guatemala, the Solomon Islands, and Vanuatu. information from the document into the system. Some jurisdictions still require appearance by one or both Survey results parties at registration, precluding remote registration and More than half of the jurisdictions surveyed still use creating barriers to use of the registry. Of the jurisdictions document registration. Thus, this is a reform area surveyed, Finland, Jordan, Macau, Senegal, and the that might be of interest to governments around the Slovak Republic require personal appearance. world. Guatemala, Hong Kong SAR (China), Ireland, Other restrictions on access to registries include the Serbia, and the Slovak Republic require a copy of the system in the Slovak Republic, where only a notary can original security agreement. Croatia requires a copy of register on behalf of the creditor, and the systems in the original loan agreement, in addition to a copy of Singapore, Hong Kong, China, and Jamaica, where only the security agreement. The former Yugoslav Republic interested parties can register. of Macedonia, Kenya, Rwanda, and Senegal require a notarized copy of the security agreement or loan In about 60 percent of the registries surveyed, searches agreement. Bangladesh and Kosovo, among others, also are free or cost less than USD5. In Romania and the require proof of payment of stamp duties in addition to Slovak Republic searches are free of charge. security or loan agreements. On the contrary, registries such as the ones in Cambodia, Solomon Islands, New Zealand and Vanuatu do not require additional documentation to be presented, besides the registration Registration process form. Annex 1 includes more detailed information on documents needed for registration in each jurisdiction. International standards The functions of registration are, or at least should be, to publicize a security interest and to perfect it against Notice systems: paper-based or online third parties. There are two types of registration: notice registration? registration and document registration. International standards Paper-based notice registration systems usually require Document registration requires delivery and recording information submission in a notice or form by a of the agreement and possibly other documentation. On registrant, entry of the notice’s information into the the other hand, a notice registration will not require registry record, assignment of a date and time to the documents to be registered, just basic information to notice, and entry of the relevant information from the alert a potential creditor or buyer of a claim of a security notice into the registry index — when the information interest in the assets described in the notice. A notice becomes available to searchers. In an online registry, registration system is considered ideal for registration of these steps occur when registrants complete registration. security over movable assets.11 Under international best practices, electronic systems are A notice registry has much lower administrative and preferred over paper systems mainly because registrants archival costs than a document registry, which requires and searchers have immediate access to the registry registering voluminous documentation as well as the review record. Such practices also minimize the risk of entry by specialists of the documents provided and the assets used as collateral. It also reduces the risk of registration 11 See recommendation 54 (b) of the UNCITRAL Legislative Guide on Secured Transactions. SECTION 2: FINDINGS & BEST PRACTICES 7 of incomplete or irrelevant information and of human registration concrete, speci�c, and limited, online error.12 registry systems reduce the potential for corruption as the registry staff cannot withold registrations. A sound A paper-based registry may create a priority risk of non- regulatory environment and an electronic registry that disclosure of an effective registration if its rules make a applies rule-based decisions eliminate all or nearly all registration effective on receipt rather than upon entry discretionary judgments.13 into the database. If a potential creditor or buyer searches a registry database between admission of the notice by the Survey results registry and when its content is entered into the database The form of registry that most incorporates the best and available for search, the searcher will not �nd the practices is a completely electronic one under which effective registration and may rely to its detriment on the registration information is transmitted online and search results. In some paper-based systems, this risk is retrieved electronically from the registry database. transferred to the registrant by making the registration About a quarter of the jurisdictions surveyed use an effective just after the information is transposed into the exclusively computerized, online system, and do not system, so searches will reveal all effective registrations. accept paper registration forms. These jurisdictions The registrant or creditor can control its risk by not include Bosnia and Herzegovina, Canada (British making advances until it receives con�rmation from the Colombia and Nova Scotia), Cambodia, China (Credit registry that the data have been entered from the paper Reference Center), New Zealand, and Vanuatu. registration into the database. In other jurisdictions, such as Albania, Croatia, and the Paper-based archive systems are also less transparent former Yugoslav Republic of Macedonia, information for other factors. The likelihood of having information is entered from paper registration forms into electronic destroyed or lost is higher. This may cause problems databases. Once paper registration forms are accepted in when determining priority rights among creditors. databases, they are stored in registry archives. Another factor to take into account is that an online system, as opposed to a paper-based system, can Many jurisdictions provide for both registration and should incorporate safeguards that permit the options (paper or electronic) simultaneously, identi�cation of the registrant. This may be useful in including Guatemala, Spain, and the United States case of fraudulent acts by users of the registries. Though (Texas). Though hybrid systems might seem most uncommon, they generally consist of false registration feasible in some cases, they are not the best solution. by unknown individuals intending to harass or cause They should only be used to facilitate transition to economic damage to a person named as debtor, or online systems. inappropriate termination of an existing debtor’s registration. Registration in six jurisdictions: Online registration systems also should be designed electronic, paper-based, and hybrid to eliminate the handling of cash payments by systems the registry’s staff by using the payment processes Procedures to register or search differ. The following previously described. This eliminates accidental summaries of registration mechanisms in six loss of cash and makes corruption less likely. And jurisdictions show those differences. by making acceptance and rejection criteria for 12 See recommendation 54 (j) of the UNCITRAL Legislative Guide on Secured Transactions and Articles 45 and 46 of OAS Model Law on 13 International Finance Corporation. 2010. Secured Transactions Systems, and Secured Transactions. Collateral Registries. Washington, DC. 8 MAKING SECURITY INTERESTS PUBLIC: REGISTRATION MECHANISMS IN 35 JURISDICTIONS ELECTRONIC SYSTEMS PAPER-BASED SYSTEMS Vanuatu Albania Vanuatu shows how well an electronic registration Albanian’s Central Collateral Registry, started in 2001, system can work. The Personal Property Securities was established by the Secured Transactions Law. This Registry, started in 2009, was created by the Financial law applies to all real rights on intangible property Services Commission. The system is completely or tangible property, whether present or future, that computerized and does not accept paper-based secures one or more obligations arising before or after registration forms.14 Searches are also available online the securing agreement. and may be performed by simply entering the name of the debtor, the registration ID number, or the asset’s The registry has an electronic database, but online serial number in the search section of the website. registration is unavailable. A security holder or their Searches are free of charge. representative submits an application for registration to the registry of�ce. The application form must To perform a registration, registrants must simply include details such as registration duration, debtor’s provide their names, contact information, debtor names and secured party’s information, serial number of the and addresses, secured party names and addresses, and goods or description of other collateral that do not have collateral description, which could be general or speci�c. a serial number, and registering person’s information. The submission of the form does not require the New Zealand attachment of any original documents. Registry staff The Personal Property Securities Register (PPSR) enter the information from the application form into the was created in 200215 and is under the Ministry of system, and a receipt (certi�cate of registration) is sent Economic Development. The registry is electronic, showing the full entry of the data to the registrant, the accepting only online registrations. Searches can also be security holder, and debtor.17 Due to cost requirements, performed online at minimum cost. operation of the registry was privatized in 2009. That has created some uncertainty about ownership of the To register a notice of security interest, secured database and control over the registration function.18 creditors need to create a secured identi�cation number. After this number is created, access is provided to a Bulgaria registrant’s user (such as loan of�cers), who can register In Bulgaria a registrant must present an application notices of security interests and accrue transaction for registration on paper, along with proof of payment fees to accounts. A notice shall contain information of a stamp duty and signature of the creditor. Once on a security interest expiration date if the �nancing a registration form is accepted, the basic data are statement is to be registered for less than �ve years,16 transferred to a database and the original forms with the debtor, collateral, and secured party details. more detailed information scanned and attached to the registration record. The paper entry is valid for �ve years and can be renewed for �ve more years. Without a renewal, the registry software automatically considers the registration record inactive. 14 The Republic of Vanuatu Personal Property Securities Registry is available at http://www.ppsr.vu/index.aspx. 15 http://www.ppsr.govt.nz. 17 $V GHÀQHG LQ WKH $OEDQLDQ /DZ RQ 6HFXULQJ &KDUJHV DGRSWHG LQ 2FWREHU 16 $ ÀQDQFLQJ VWDWHPHQW RYHU DQ\ SHUVRQDO SURSHUW\ FDQ EH UHJLVWHUHG IRU D 1999. VWDWXWRU\ SHULRG RI ÀYH \HDUV RU D VKRUWHU SHULRG DQG FDQ EH UHQHZHG IRU 18 Baranes, Yair. 2010. “Establishing Modern Secured Financing Systems in ÀYH \HDUV FRQWLQXDOO\ XQWLO WKH GHEWRU KDV SHUIRUPHG DOO REOLJDWLRQV Developing Economies.� FS Series 10. USAID, Washington D.C. SECTION 2: FINDINGS & BEST PRACTICES 9 The Central Collateral Registry, created in 1997,19 The Central Registry has a computerized database. requires serial-numbered goods to be identi�ed by serial Public access to all records is available to users at the number and vehicles by chassis number. But when registry for a fee. The registry’s main of�ce is in Skopje the collateral is a set of goods in turnover, a general and it has 31 of�ces across the country. Registration description is suf�cient. When entering an enterprise forms must include all details of parties and security security interest, it is also enough to stipulate “security interests, together with supporting documentation, interest of the enterprise as a set of rights, obligations, such as notarized copies of the security agreement and and factual relations.� Furthermore, future assets can be loan agreement. In addition, the secured claim and described in general terms when initial entries are made. security interest must be exactly described in the security When they come into being, they must be described agreement and in the registration statement. A study by speci�cally in an amendment to the initial registration. the European Bank for Reconstruction and Development In the case of future harvest, species production (wheat, (EBRD) stated that economies which require copies of rye, and the like), the amount of expected yield and the security agreement or the agreement establishing the location of planting are to be distinguished. underlying secured claim add a considerable burden to the registration process. This is especially a problem due Completion of the registration form is usually to the tendency in certain regions to include unnecessary conducted by the secured creditor. The application does information in such agreements. This is the case in not have to be notarized. Nevertheless, if registration Bulgaria, FYR Macedonia, and Romania.20 is requested by a person other than the debtor, the debtor’s consent is required in an of�cial notarized form. Amendments to the Secured Transactions Law HYBRID SYSTEM in 2008 provided for online registration and free Guatemala electronic reports. But for various reasons (lack of Guatemala has adopted the Organization of the �nancial resources, lack of adequately paid information American States Model Law on secured transactions. The technology specialists, and general regulations), the registry in Guatemala was created in 2009.21 Online and registry is currently not able to provide this service. paper registrations are accepted, but there is skepticism about how the registry operates—especially regarding Moreover, though the branches of the Collateral registration costs.22 The fee to register a security interest Registry have electronic interconnections, they do not is not flat. It is based on a complicated formula and may have access to the centralized database and so are not become quite onerous. The fee is equivalent to about allowed to make entries, perform searches, and issue USD19 plus 0.15 percent of the maximum amount of certi�cates and reports. But at the central registry, any the obligation when the obligation exceeds USD1,118. person can perform a search without further restrictions. That might partially explain why there were only 654 registrations in the Guatemala registry in 2009. Former Yugoslav Republic of Macedonia In FYR Macedonia the use of movable property as The basic information required for registration includes security is governed by the 2003 Law on Contractual registrant’s contact information (if the registrant is not a Pledge (developed with World Bank support). The party to the security agreement, evidence of authorization Registry of Pledges on Movable Property and Rights is part of a system of electronic registries combined in the 20 Publicity of security rights: setting standards for charges registries, Central Registry. European Bank for Reconstruction and Development (EBRD), January 2008. 21 www.rgm.gob.gt 22 National Law Center for Inter-American Free Trade (NLCIFT), 19 http://www.justice.government.bg/new/Pages/Registers/Default.aspx. Novedades, Volume 17, Number 3, September 2010. 10 MAKING SECURITY INTERESTS PUBLIC: REGISTRATION MECHANISMS IN 35 JURISDICTIONS by the secured party), debtor and secured creditor amount secured by the security interest, and a speci�c or contact information, general or speci�c description of the general description of the collateral. collateral, and maximum amount of the obligation. Registrations with the collateral registry generally lapse Once the information is entered into the database, on expiration of the selected period or a statutory �xed the system automatically assigns a date and time of period of registration. Registrations can be renewed registration. Renewals and terminations can also be before the expiration date. The registry generates a performed through the electronic system. If the parties unique number for each registration so that it can be do not agree on other terms, registration will be valid for retrieved with certainty. �ve years, renewable for another three years. Survey results Finally, the system provides broad access of the database Notice registries tend to provide a standard form for to the general public allowing for searches and issuing of registration of a security interest in movable property a certi�cate with the data recorded by the registry. There whereas document registries, such as those in Bulgaria, is no need to justify the party’s interest in searching. Kosovo, and FYR Macedonia, might or might not provide a form in addition to requiring documents. Registration among jurisdictions Jurisdictions that adhere to notice registration and surveyed global best practices have more registrations than do International standards other jurisdictions of similar size and economic base. Use of a standard form or online template is implicit in Many registrations translate into a signi�cant number notice-based registrations that conform to global best of loans granted by creditors. In nearly all cases, online practices. registration is an option. In modern collateral registries the form usually contains Even jurisdictions that require document registration the debtor’s name or numeric identi�er, the debtor’s might permit online registration in some cases. Spain, address, the name and address of the secured party, the for example, introduced electronic registration system Figure 1: Electronic databases increase the number of registrations and activities in East Europe and Central Asia Percentage increase in registrations indexed to the first year of the registry’s existence Romania 2001-07 First year of electronic registry 1,000 Kosovo 2008-09 Bosnia and Herzegovina 2004-09 500 Serbia 2005-09 Albania 2001-07 Slovak Republic 2003-08 100 Year prior to 1 2 3 4 5 6 creation of registry Years since creation of the registry Source: Doing Business 2011. SECTION 2: FINDINGS & BEST PRACTICES 11 Box 1: Amendments and Terminations collateral registry that covers all types of movable assets other than those covered by international conventions. Countries with many registrations, such as New Zealand, It permits searching and registration exclusively Romania, and the United States, also had signi�cant terminations and amendments—showing the great dynamism online, has low fees that cover only the operational of such registries. costs of the registry, and requires no documentation in support of the registered notice. Such good features and ef�cient structure, among other factors, are for movable collateral in 2002. But most registrants reflected in the numbers of registrations. New Zealand still submit paper registration because of burdensome is among the jurisdictions researched—one with the documentation requirements, which makes the use of most registrations, having 649,188 registrations in the online system as complex as a paper submission. 2005 and 418,938 registrations in 2009. Nevertheless As a result, fewer online registrations than expected the New Zealand and Canadian registries include occurred between 2003 and 2009, and the cost borne by liens on vehicles whereas US registries, for example, government to maintain this feature was extremely high do not. Further, the China registry surveyed only relative to the small number of online registrations. includes security interests related to receivables. These factors need to be borne in mind when analyzing the underlying data. A meaningful comparison can only Number of registrations be made when taking into account these factors and There has been an increase in registrations in most comparing economies of the same size. jurisdictions with electronic databases (Figure 1). Though the trend of registrations has risen, other Registration costs factors may affect numbers in the short term. The International standards global �nancial crisis of 2008-09 coincided with a dip According to global practices, registration fees23 should in the number of registrations in more than 80 percent be limited to the level required to cover the costs of of responding jurisdictions. (See Annex 2 for more operating the registry.24 information). Though it is not certain that the �nancial crisis was the main cause of the decline, the variation When �xing flat fees, it is necessary to develop across regions and registries suggests that there was some projections of the number of expected transactions and sort of influence on the number of registrations caused expected revenue. But doing so requires determining the by the crisis in some regions. business model adopted. For instance, the registry might share a platform with another service line (i.e. combining The number of registrations is a function of many the website of the collateral registry with the company’s factors, including the functioning of the registry, the registry), having revenues from different sources. robustness of the legal framework, the level of economic activity in the jurisdiction, its population and size, Because most of the costs of operating an online notice banking practices and customs of lending institutions. registry are �xed, the volume of registrations is one important factor in determining the fee that must be New Zealand has ef�cient registration and a strong charged to permit recovery of operating costs of the registry, legal framework. It has a modern law that covers all though other factors may be taken into account by case. security devices that use movable property, provides for creation and attachment of security interests, sets 23 Registration fees should be assessed per notice, and should be set to recover only the costs of operation and capital replacement. (Secured a clear priority scheme, establishes the registry, and Transactions Systems and Collateral Registries, 2010). 24 See recommendation 54 (i) of the UNCITRAL Legislative Guide on provides for swift enforcement. It also has a modern Secured Transactions. 12 MAKING SECURITY INTERESTS PUBLIC: REGISTRATION MECHANISMS IN 35 JURISDICTIONS A large jurisdiction with a high volume of registrations and whether the collateral consists of general property will need less revenue per registration than a small one or special properties. In Bosnia and Herzegovina and with fewer registrations. New Zealand, with 418,938 Serbia the fees are reasonable and seem not to have registrations in 2009, can charge USD2, while the Solomon affected registrations. Islands, with 6,439 registrations, needs to charge USD27. Both have similar �xed costs, with fully electronic registries. In Canada registration fees are set at the provincial But New Zealand has a population of 4.3 million people level. Still, in all provinces, they are calculated based while the Solomon Islands have about 0.5 million and on the duration of the registration. In British Columbia, less economic activity. So New Zealand can charge less to for instance, the registration fee is about USD5 per maintain the registry. year of registration, up to 25 years. In Nova Scotia the registration fee is about USD31 per year of registration. Costs of operation of a document registry include many variables other than �xed costs. These include the cost Registration fees in the United States are also different of receiving, handling, and archiving documents, as well among states, but the average is about USD10. Because as the salaries and training of staff which examine the registrations have a �xed duration of �ve years, there is documents. Costs of operation increase based on the not much variability, but in some cases variations may number of registrations and projections. occur. In Texas, electronic registration costs USD5; and for paper-based, USD15 for registration up to two pages, One additional cost associated with the registration is and USD30 for three or more pages. Texas had 289,000 the cost of preparation and delivery of the registration. registrations in 2007, indicating that the fees are not a This can be signi�cant, for instance, where registries signi�cant barrier to registration. require documents such as the security agreement or loan agreement to be notarized and delivered to In Senegal, on the other hand, the fee structure seems the registry. Costs of preparation and presentation to be a barrier, as suggested by the low volume of can essentially be eliminated by providing for online registrations. The registration fee is a percentage of the registration or by simplifying the registration process secured debt that may vary from 1% to 5%. The low when on paper or by fax. number of 1,492 new registrations in 2009 appears to be at least partially attributable to the substantial cost Survey results to users of the fees, though the fact that the collateral Among jurisdictions that charge for registration, more registry is a paper-based registry may also contribute to than 60 percent use a flat fee. Jurisdictions with flat fees the low level of usage. for registration include Albania, Kosovo, and Vanuatu. Some jurisdictions with notice registries do not charge flat fees, but treat fees more like taxes on transactions Centralized registry based on secured obligations. Fees can be prohibitive, depending on the amount secured. information The record of the registry should be centralized and Other jurisdictions have gradual fee structures that contain all registrations with respect to security interests vary by various factors. Serbia bases registration fees registered.25 This means that the most ef�cient registry on the amount of secured obligations and number of system will be the one that centralizes information items of collateral. In Bosnia and Herzegovina the fee for registration depends on the duration of the security 25 See recommendation 54 (e) of the UNCITRAL Legislative Guide on interest, the number of debtors and secured parties, Secured Transactions and Article 44 of the OAS Model Law on Secured Transactions. SECTION 2: FINDINGS & BEST PRACTICES 13 in one place for security interests of different types of Registrations of security interests over all present and collateral and transactions, from different locations future assets, when allowed in the speci�c jurisdiction, and geographical areas and different types of debtors are also commonly registered. including both individuals and businesses. China is a classic case of disunity in a registration system. There, registration of security interests in By types of assets for which notices of accounts receivable is done at the Credit Reference security interest are registered Center, which is a unit of the People’s Bank of China. International standards Interests in other movable assets (except for vehicles, A registry structure that is fragmented by type of asset aircraft and ocean-going vessels) are registered in with no centralized database linking them together separate and unlinked registries of the Administration prevents potential lenders or buyers from relying on a of Industry and Commerce at one of four levels of single search when the searcher is interested in more government, the choice of which depends on a number than one type of asset. However, there are some types of arcane factors. The result is that searching (except of assets for which there are legitimate arguments for for security interests in receivables) is very dif�cult and unreliable to the extent that it is virtually never done. separate registries. Where there are functional and transparent registries for security interests in major classes of property (e.g. motor vehicles or securities) By geographical coverage of collateral when a reform is done, it is often less complex and more registry easily accepted if those classes are carved out and the International standards existing registeries are allowed to continue operating. By de�nition, movable property may be moved from Motor vehicles are, in many jurisdictions, registered in a one location to another, including a sale from the owner separate registry, usually under the control of the Traf�c to a person in a different locale. In order to ensure Department or equivalent body. Security interests in that a search of the collateral registry includes security aircraft, ships, investment securities and intellectual interests in all property, regardless of whether it has property are also, due to their speci�city and relevent been moved or sold to a different location, the registry special laws or protocols to international conventions, should be geographically uni�ed; that is, there should often registered in separate or special registries. be one database that includes registrations of security interest for the whole jurisdiction. That may be done Survey results either with a single registry of�ce for the jurisdiction Survey results show that whereas some jurisdictions have or through an electronic database that aggregates input fragmented registration systems, with different types of from remote branches. collateral registries for different types of assets (such as separate registries for registrations of security interests in Survey results accounts receivable, machinery, vehicles and intellectual Of the jurisdictions surveyed, a vast majority have property), others have a single collateral registry that an electronic system with a single database for the accepts registrations of security interests for all or almost entire jurisdiction. In some jurisdictions such as the all types of assets. United States and Canada, however, the registries are centralized at the state and provincial level — not Of the jurisdictions surveyed, one-third permit ideal, but a vast improvement over the earlier county- registration of interests in all or nearly all types of assets. level registry approach used in the United States New Zealand, Romania, and Canada are among them. under the earlier version of its uniform law. In the 14 MAKING SECURITY INTERESTS PUBLIC: REGISTRATION MECHANISMS IN 35 JURISDICTIONS United States, the common justi�cation of location of through registration, might not be apparent to a third party. registries at the state, rather than the federal level is Such interests include long-term operating leases and the that states are sovereign entities and that the federal sale of accounts receivable and secured sales contracts. government has not pre-empted this body of law. Also, in the United States and Canada, the problem of Survey results decentralization of registries is mitigated through the Among the jurisdictions surveyed, about one-third compilation of the information by private companies provide for registration of security interests in the which sell multi-state searches to potential secured movable assets of incorporated debtors in their creditors and buyers of movables. Companies Registries, including Hong Kong SAR China, Ireland, and Malaysia. In many of these cases, By types of debtors and types of legal lenders to unincorporated enterprises and individuals have no adequate means of assuring their priority in interests movable assets due to a lack of a speci�c registry for International standards security interests granted by them. A collateral registry should permit registration of notice of a security interest by any type of debtor without respect to In some surveyed jurisdictions, registration of the particular form of legal interest. Potential lenders or security interests is fragmented according to the legal buyers should be able to rely on a single search to �nd all form of the transaction. That is, they have different security interests that identify a debtor, independently of publicity rules for different legal mechanisms that the debtor’s legal structure (e.g. natural persons or juridical secure an obligation (pledge, sale with retained persons) or the particular form of the secured party’s legal title, enterprise mortgage, etc.). In some other interest in the collateral (e.g. chattel mortgage, charge, jurisdictions, some legal interests in movable assets non-possessory pledge, retained title, etc.). are publicized by registration, while other types are not. This is the case of Finland where only security The most common case of fragmentation according interests over the enterprise are publicized (in the to debtor type happens in the jurisdictions that enterprise mortgage registry). In other cases, some adopted the traditional common law system wherein types of legal interest in movables are registered (e.g. security interests in movable collateral of incorporated non-possessory pledges or chattel mortgages), while companies are registered in the Companies Registry, other types are not registered (e.g. different forms of and security interests of unincorporated debtors are sale with retained title). This is the case of economies either registered in a different registry (e.g. Bill of Sale such as Bangladesh and Jamaica. Registry) or are not registered at all. According to international best practices, a uni�ed database should exist with complete information relating to any The search process registration effected against the movable property of a debtor regardless if the debtor is a juridical person or a International standards natural person or of the legal form of the security interest. Information in the collateral registry should be They all should be registered in the general collateral accessible to the public, whether directly or through registry. Best practices, furthermore, call for inclusion in registry staff. Ideally, the registry database should be the registry of notice of some other type of guarantees that accessible from any location, including outside the might not be considered security interests because of their jurisdiction, by users who have internet access and legal form. These other types of guarantees, if not published SECTION 2: FINDINGS & BEST PRACTICES 15 through access points for individuals who do not have a normalized version of the name. Normalization their own means of access to the internet.26 rules may include steps such as removal of case differences, removal of punctuation and diacriticals, The registry system should be designed to permit concatenation of free-standing characters, removal the database to be searched according to the debtor’s of words or abbreviations that indicate the type identity (e.g. complete name or national identi�cation of legal enterprise, and compression of remaining number) or by the registration number assigned by the words into a character string. Searches by name registry to each registration. Some jurisdictions also often will produce results that include registrations provide for indexing and searching for registrations for more than the targeted debtor, but they will of security interest by serial numbered assets (such as always produce all registrations that include the vehicles, agricultural or industrial equipment). correct debtor name. Where more than the targeted The most ef�cient system would allow for searches registrations are returned, the searcher must use based on any of the three criteria mentioned. other data in the registered notices (such as address or birth date) to eliminate the excess results. The most common and most important search criterion is the identity of the debtor. The options Still regarding the searching process, it should either for searching by debtor are the debtor’s name or a be free of charge, or fees should be kept to a minimum unique numeric identi�er. Though either of these level to help cover the maintenance of the electronic options is viable, a unique numeric identi�er is a more platform. Excessive fees for searches will signi�cantly precise search criterion than a name, provided that the deter utilization of the registry. numeric identi�er is unique, permanent and publicly Survey results available. 27 Different options may be used in the same system for different types of debtors, since some The survey results show an increase in the volume types of debtors may have a viable numeric identi�er, of searches in the majority of the jurisdictions with while others do not. For example, citizens may have a an electronic database capable of centralizing the national identi�cation number on which searches may information (Figure 2). The volume is also much be done, while registered legal entities may not have a higher in jurisdictions that count with an electronic permanent registration number, so must be searched database than in those without it. This might imply according to name. that potential lenders rely more on such systems for searching since they usually count with much more The critical factor to a successful search process is precise information. to have clear and objective rules that can be applied Another interesting aspect regarding the number of by an IT system without registry staff intervention searches is the ratio of the number of searches to the to produce absolutely predictable results. Those number of new registrations. Where there is rough rules must be published so that searchers know parity in those numbers, it is an indication that how to search and can rely on the results in every users value the registry as a risk management and case. The search rules generally call for identifying prudent lending tool to assure priority. It means they only exact matches for debtor types that have a are searching before making lending decisions and unique numeric identifier. Where names must be registering. Where the ratio is low, it is an indication used, the rules generally provide for searching on that users register only because it is part of a process. They do not search before making decisions and 26 See Articles 45 and 46 of the OAS Model Law on Secured Transactions. 27 See recommendation 54 (h) of the UNCITRAL Legislative Guide on take more risks than creditors that use the search Secured Transactions. 16 MAKING SECURITY INTERESTS PUBLIC: REGISTRATION MECHANISMS IN 35 JURISDICTIONS Figure 2: Registries with electronic database equal high volume of searches Volume of searches Bosnia and 450,000 3,000,000 New Zealand Herzegovina 400,000 2,500,000 Canada Bulgaria 350,000 (British Columbia) 300,000 2,000,000 Ireland 250,000 Serbia 1,500,000 200,000 U.S. (Texas) 150,000 1,000,000 100,000 500,000 50,000 0 0 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 This scale applies to New Zealand and Canada Source: Collateral Registry surveys. function as a prudent lending technique. Jurisdictions In jurisdictions such as Albania and Kosovo, there such as New Zealand (almost 6 times more searches are signi�cantly fewer searches than registrations, than registrations) and British Columbia, Canada implying that the registry is not considered an (almost 3 times more searches than registrations) important factor in lending decisions (Figure 3). present a high ratio of searches to registrations, which means the registry is being used as a risk Most of the surveyed jurisdictions keep the search management mechanism (i.e., to determine if there costs quite reasonable or free, at least for searches done are prior encumbrances of prospective collateral). online by users. New Zealand’s registry, for instance, Figure 3: Ratios of searches to registrations Higher ratio indicates registry is used as risk management mechanism 7 Ratio searches/ registration (2009) 6 5 4 3 2 1 0 New Zealand Canada (British Columbia) Macedonia, FYR Vanuatu U.S (Texas) China (CRC only) Bosnia & Herzegovina Bulgaria Canada (Nova Scotia) Solomon Islands Albania Serbia Kosovo Source: Collateral Registry surveys. SECTION 2: FINDINGS & BEST PRACTICES 17 charges a fee of only USD0.70 per search and Ireland’s effective to users and governments. The main features registry also has a reasonable fee varying from that are considered as best practices were selected and USD3.40 to USD4.80 per search. In the Solomon compared with the reality of the institutions surveyed. Islands and Vanuatu searches are free of charge. The table below (Table 2) shows which features these are and the following table (Table 3) shows how the surveyed registries conformed or failed to conform to the following best practices. Summary of the main features of a modern collateral registry As illustrated in this paper, registries should provide for ef�cient registration and searching (online searches and payments, instant registration, etc.), and be cost Table 2: Main features of an ef�cient movable collateral registry Feature Description 1. Notice based system No documents need to be submitted, and the registry does not verify the legality of the transaction. 2. Electronic database No paper archive. 3. Online system for registrations, Functioning 24/7 (except for system updates) and no restrictions on who can do registrations and amendments, renewals, searches. cancellations and searching 4. Indexing and searching according Searchers may search by a unique debtor ID number or debtor name, by a registration number or by a to debtor identity, registration serial number if looking for serial-numbered collateral. number and serial number 5. Centralized registry All information is available in one single database for the whole jurisdiction, regardless of the type of asset, type of debtor, type of security interest mechanism used to create the collateral. If a jurisdiction has different branches of the registry, such branches must be linked into one database. 6. All types of assets accepted for The law governing registration should not exclude any types of movable assets from registration. registration 7. Reasonable fees for registrations The registry charges a reasonable flat fee (to cover the costs administering the registry only) for and searches registrations and for searches (charging for searches is optional). 8. Registration done by secured Secured creditor or its representative is responsible for registering. No restrictions on who can �le. creditors or their representatives 9. Liability The registrar is liable only for errors caused by malfunction or unavailability of the registry system. 10. Limited discretion The registrar should not be in charge of verifying information and rejecting or accepting applications, unless mandatory information is missing. 18 MAKING SECURITY INTERESTS PUBLIC: REGISTRATION MECHANISMS IN 35 JURISDICTIONS Table 3: Conformity of the surveyed jurisdictions to best practices Canada (British Columbia) Bosnia and Herzegovina Hong Kong SAR, China Canada (Nova Scotia) Bangladesh Guatemala Cambodia Australia Bulgaria Jamaica Albania Finland Croatia Ireland Jordan France China Feature 1. Notice registration system N N N Y N Y Y Y Y N Y N N N N N N 2. Electronic database Y Y Y Y Y Y Y Y Y Y Y Y Y Y Y Y Y 3. Online system for registrations/ N Y Y Y N Y Y Y Y N N Y Y N N N N searches 4. Indexing for searches Y Y Y Y Y Y Y Y Y Y N Y Y Y Y Y Y 5. Centralized registry Y Y Y Y Y Y N N Y Y N Y Y Y Y N Y 6. Single registry for all type of assets Y Y Y Y Y Y Y Y N Y N Y Y Y Y Y N 7. Flat and reasonable fees Y Y Y Y Y Y Y Y Y Y Y N/A N Y Y Y N 8. No restrictions to �le Y Y N Y Y Y N N N Y N N N N N N Y 9. Debtors are legal/natural persons Y N N Y Y Y Y Y Y Y Y Y Y N N N Y 10. No liability of the registrar Y Y Y Y Y Y Y Y N Y N Y N Y Y Y N Macedonia, FYR Solomon Islands New Zealand U.S. (Texas) Singapore Mauritius Romania Malaysia Vanuatu Slovakia Rwanda Senegal Kosovo Macau Serbia Kenya Spain Feature 1. Notice registration system N N N N Y Y Y Y N N N Y Y N N Y Y 2. Electronic database Y Y Y Y Y Y Y Y Y N Y Y Y Y Y Y Y 3. Online system for registrations/ N Y Y N N N Y N Y N N Y Y Y Y Y Y searches 4. Indexing for searches N Y Y N Y Y Y Y Y N Y Y Y Y Y Y Y 5. Centralized registry Y Y Y Y N Y Y Y Y N Y Y Y Y Y N Y 6. Single registry for all type of assets N Y Y N Y Y Y Y Y Y Y Y Y Y Y Y Y 7. Flat and reasonable fees Y Y Y Y Y N Y Y Y N Y Y Y Y Y N Y 8. No restrictions to �le N Y Y N Y N Y N Y Y N N N N Y Y Y 9. Debtors are legal/natural persons N Y Y Y N Y Y Y Y N/A Y N Y Y N Y Y 10. No liability of the registrar N N N Y N Y Y Y Y N/A Y Y Y Y N Y Y N/A means no information has been provided by the Registry. ANNEX I 19 Annex i Documents/certi�cation needed for �ling The table below refers to jurisdictions that adopted a “document registration system� and the speci�c documentation required by such registries. Does the �ling of the registry form require added documents/certi�cation? Jurisdiction Required documentation Albania Notarization; proof of payment of stamp duty Australia Copy of the original loan; Copy of the original security agreement; Proof of payment of stamp duty a Bangladesh Copy of the original loan; Copy of the original security agreement; Proof of payment of stamp duty Croatia Copy of the original loan; Copy of the original security agreement; Notarization; Proof of payment of stamp duty France Copy of the original loan; Copy of the original security agreement; Notarization; Proof of payment of stamp duty Guatemala Copy of original security agreement Hong Kong SAR, China Copy of the original security agreement Ireland Copy of the original security agreement Jamaica Copy of the original loan; Copy of the original security agreement; Notarization Jordan Copy of the original loan; Copy of the original security agreement; Notarization; Proof of payment of stamp duty Kenya Copy of the original security agreement; Notarization; Proof of payment of stamp duty Kosovo Copy of the original security agreement; Proof of payment of stamp duty Macau Copy of the original security agreement; Notarization. Macedonia, FYR Copy of the original loan; Copy of the original security agreement; Notarization Rwanda Copy of the original security agreement; Notarization Senegal Copy of the original security agreement; Copy of the original loan; Notarization Serbia Copy of the original security agreement Slovakia Copy of the original security agreement Spain Copy of the original security agreement; Original loan agreement; Notarization a The Personal Property Securities Act 2009 (Cth) (PPS Act), which creates a new and comprehensive regime for personal property securities in Australia, became law on 14 December 2009 and took effect in 2012. The legislation streamlines existing laws relating to security interests and governs the creation of security interests, the priority regime applicable to security interests, the enforcement of security interests and the conflict of law rules applying to security interests. Source: Collateral Registry Survey. 20 ANNEX II Annex ii Number of registrations per year Country 2009 2008 2007 2006 2005 F T A F T A F T A F T A F T A Albania 4,105 163 – 5,002 239 – 9,860 99 – 3,550 102 7,002 89 Australia 159,505 70,681 17,142 160,712 70,505 3,867 165,033 63,350 3,750 146,390 61,972 4,438 130,672 58,903 3,147 Bosnia and 11,973 – 13,650 – – 10,686 – 10,225 – – 11,182 – – Herzegovina Bulgaria 40,595 9,096 6,617 39,435 9,276 4,393 40,741 8,812 4,018 36,159 8,529 3,939 31,403 7,839 4,385 Cambodia 237 81 19 953 8 38 – – – – – – – – – Canada 287,113 249,122 35,354 353,820 225,679 35,643 382,740 221,145 28,751 366,453 213,518 28,872 357,784 218,568 28,813 (British Columbia) Canada 72,738 5,575 5,575 84,415 5,948 5,948 87,514 6,469 6,469 82,759 5,520 5,520 84,660 6,368 6,368 (Nova Scotia) China 66,675 7,390 10,920 24,991 2,394 6,384 7,587 205 1,684 – – – – – – Croatia 77,595 4,261 – 141,662 2,649 – 90,272 803 – 18,888 32 – – – – Finland 3,970 1,167 826 4,679 1,194 873 4,851 1,113 764 4,324 1,097 745 4,251 989 859 Guatemala 654 – – – – – – – – – – – – – – Hong Kong 31,390 25,995 – 41,822 25,494 – 32,315 22,324 – 31,890 26,572 – 31,892 23,308 – SAR, China Ireland 6,996 4,097 – 10,281 4,444 – 12,715 4,467 – 12,539 3,504 – 10,464 2,999 – Jamaica 758 266 – 839 214 – 947 256 – 810 223 – 648 227 – Kosovo 16,711 – – 1,764 – – – – – – – – – – Macau 463 407 476 433 – 446 351 – 389 275 – 417 212 – Macedonia, 4,346 – – 8,234 – – 6,549 – – 4,651 – – 3,114 – – FYR Malaysia 22,947 16,596 – 25,066 14,848 – 22,760 12,764 – 20,814 11,535 – 22,351 10,117 – New Zealand 418,938 293,675 531,506 480,998 362,087 634,060 574,042 419,323 534,662 612,773 420,808 490,013 649,188 394,504 450,347 Norway 193,345 167,088 762 182,520 171,663 812 193,895 180,786 716 180,133 172,563 799 176,752 169,212 762 Romania – 114,380 67,628 – 134,320 72,023 – 117,638 57,107 – 78,837 41,492 – 60,642 28,141 Senegal 1,492 – 1,438 – – 1,395 – – 1,289 – – – – – Serbia 24,059 2,518 2,858 16,971 1,980 850 11,801 1,437 296 7,344 688 205 4,346 70 52 Singapore 8,848 7,511 116 11,473 8,144 110 11,588 6,383 79 8,917 5,380 491 8,305 5,769 94 Slovakia 16,050 – – 24,823 – – 23,314 – – 20,462 – – 15,342 – – Solomon 6,439 – – – – – – – – – – – – – Islands U.S. (Texas) 188,629 66,067 32,300 231,724 75,415 34,254 259,225 76,328 35,475 243,707 71,579 39,041 236,132 67,933 31,767 Vanuatu 1,111 – – – – – – – – – – – – – – F= Total New Filings/Registrations: New security interest recorded over an asset between the parties to a security agreement T= Terminations: The security agreement is terminated (e.g. by the enforcement of the security interest by the creditor, payment of the debt by the debtor, etc.) A= Amendments: Changes (e.g. type of Security, type of asset, etc.) made to a previous registered security interest Source: Collateral Registry Survey. ANNEX II 21 Country 2004 2003 2002 2001 2000 F T A F T A F T A F T A F T A Albania 4,302 59 4,033 60 2,888 62 – 1,874 5 – – – – Australia 108,838 52,189 3,629 93,417 45,045 2,823 73,739 42,144 2,288 56,895 36,948 1,735 50,242 34,073 2,299 Bosnia and 1,920 – – – – – – – – – – – – – – Herzegovina Bulgaria 26,459 7,730 3,666 23,654 7,325 2,667 18,025 6,291 1,893 17,130 4,659 1,562 12,954 2,967 793 Cambodia – – – – – – – – – – – – – – – Canada 354,744 222,288 31,305 366,224 218,033 31,777 370,355 214,305 31,647 352,370 199,861 31,227 340,836 182,520 24,720 (British Columbia) Canada 84,875 8,687 8,687 89,070 6,751 6,751 – – – – – – – – – (Nova Scotia) China – – – – – – – – – – – – – – – Croatia – – – – – – – – – – – – – – – Finland 4,282 745 1,029 4,311 776 1,072 4,102 764 884 3,983 689 518 4,365 572 961 Guatemala – – – – – – – – – – – – – – – Hong Kong – 15,569 – 20,305 16,298 – 22,441 18,631 – 22,875 19,512 – 21,570 19,379 – SAR, China Ireland 9,616 4,425 – 8,384 4,221 – 7,132 3,181 – 6,906 3,519 – 8,013 2,433 – Jamaica 623 283 – 631 211 – 134 359 – – 43 – – – – Kosovo – – – – – – – – – – – – – – Macau 331 118 – 300 49 – 98 17 – 31 10 – 6 3 – Macedonia, 2,581 – – 1,444 – – 978 – – 1,376 – – 960 – – FYR Malaysia 16,991 7,364 – 15,455 7,028 – 13,922 6,254 – 13,921 6,090 – – 5,385 – New Zealand 493,628 332,003 377,319 469,681 340,714 350,205 350,838 126,681 208,298 – – – – – – Norway 179,901 169,697 812 171,148 173,192 1,107 188,803 176,785 1,184 182,434 173,239 1,017 170,529 169,428 1,157 Romania – 53,207 8,943 – 65 3,591 – 5 – 4 – – – – Senegal – – – – – – – – – – – – – – – Serbia – – – – – – – – – – – – – – – Singapore 6,917 5,123 105 6,453 4,545 91 – – – – – – – – – Slovakia 7,464 – – 10,382 – – – – – – – – – – – Solomon – – – – – – – – – – – – – – – Islands U.S. (Texas) 239,547 62,534 34,352 234,029 61,376 35,783 245,707 60,092 34,823 249,569 54,945 33,172 254,665 53,452 40,274 Vanuatu – – – – – – – – – – – – – – – F= Total New Filings/Registrations: New security interest recorded over an asset between the parties to a security agreement T= Terminations: The security agreement is terminated (e.g.: by the enforcement of the security interest by the creditor, payment of the debt by the debtor, etc.) A= Amendments: Changes (e.g.: type of Security, type of asset, etc.) made to a previous registered security interest Source: Collateral Registry Survey. 22 ANNEX III Annex iii Types of Assets on which a security interest may be registered in each jurisdiction (British Columbia) Hong Kong SAR, (Nova Scotia) Bangladesh Guatemala Cambodia Bulgaria Jamaica Albania Canada Canada Finland Ireland Jordan Bosnia France China China Type of asset Universal Security over Y Y Y N Y Y Y N Y N/A Y Y Y Y N Present and Future Machinery and equipment Y Y Y Y Y Y Y N N Y Y Y Y Y N Motor vehicles Y Y Y Y Y Y Y N N Y N Y Y Y Y Agricultural products Y Y Y Y Y Y Y N N Y Y N Y Y N Crops and other Y Y Y N Y Y Y N N Y Y N Y Y N agricultural yields Livestock Y Y Y Y Y Y Y N N Y Y N Y Y N Investment property Y Y N N Y Y Y N N Y N Y Y Y N Documents of rights, Y Y Y N Y Y Y N N N Y N Y Y N �nancial instruments Intellectual property Y Y Y N Y Y Y N N N Y Y Y Y N A single account receivable Y Y Y Y Y Y Y Y N N Y Y Y Y Y Multiple accounts Y Y Y Y Y Y Y Y N N Y Y Y Y Y receivable Inventory Y Y Y Y Y Y Y N N N Y Y Y Y Y Membership and Y N Y N Y Y Y N N Y Y N N N Y partnership interests Future Y Y Y Y Y Y Y N N N Y N Y Y N Y=Yes N=No N/A=Not Informed Source: Collateral Registry Survey. ANNEX III 23 Macedonia, FYR Solomon Islands New Zealand U.S. (Texas) Singapore Mauritius Romania Malaysia Vanuatu Senegal Norway Kosovo Serbia Kenya Spain Type of asset Universal Security over Y N N Y Y Y N Y N Y Y N/A N Y Y Present and Future Machinery and equipment Y Y Y Y Y Y Y Y Y Y Y Y N Y Y Motor vehicles Y Y Y Y Y Y Y Y Y Y Y Y Y N Y Agricultural products Y Y N Y Y Y Y Y Y Y Y Y Y Y Y Crops and other Y Y N Y Y Y N Y Y Y Y Y Y Y Y agricultural yields Livestock Y Y N Y Y Y Y Y N Y Y Y Y Y Y Investment property Y Y Y Y Y Y N Y N N Y Y N Y Y Documents of rights, Y N N Y Y Y N Y N N Y Y Y Y Y �nancial instruments Intellectual property Y N Y Y Y Y Y Y N Y Y Y Y Y N A single account receivable Y N N Y Y Y N Y N Y Y Y N Y Y Multiple accounts Y N N Y Y Y Y Y N Y Y Y N Y Y receivable Inventory Y N N Y Y Y Y Y N Y Y Y Y Y Y Membership and N Y N Y Y Y N Y Y Y Y N/A N Y N partnership interests Future Y Y N N Y Y Y Y N Y Y Y Y Y Y Y=Yes N=No N/A=Not Informed Source: Collateral Registry Survey. 24 ANNEX IV Annex iv Annual Jurisdiction Report Display – Year 2010 The table below refers to data on some of the collateral registries operating in the different states of the United States of America for informational purposes. Number (or %) Number (or %) of Do you currently Number of of notices �led Search requests searches conducted accept �lings notices �led electronically processed online by end electronically? California 194,974 95,818 223,279 221,429 Yes Colorado 56,834 56% 5,677 0 Yes Delaware 89,498 52,719 147,369 147,369 Yes Florida 81,946 0 Unknown Unknown No Georgia 193,468 4% 9,814 9,814 Yes Idaho 80,435 82% 42,924 98% Yes Indiana 60,937 77.60% 35,240 34,945 Yes Kansas 40,036 34,000 31,195 29,862 Yes Massachusetts 38,819 26,344 1,598 0 Yes Michigan 79,285 56.90% 85,161 98.30% Yes Minnesota 98,947 43,079 20,136 20,136 Yes Missouri 69,761 86.60% Unknown Unknown Yes Montana 18,883 9,041 23,395 21,734 Yes Nebraska 100,302 69,164 118,964 117,110 Yes Nevada 20,695 58.30% 7,756 96.80% Yes New York 120,788 75,535 6,180,058 6,169,218 Yes North Dakota 30,767 1,423 38,616 15,920 Yes Ohio 70,278 43,274 1,570 0 Yes Oregon 25,973 0 2,985 0 No Pennsylvania 59,962 38,206 84,084 82,442 Yes Rhode Island 6,202 1,768 1,816 369 Yes Texas 194,736 72.10% 394,965 99.50% Yes Utah 15,059 10,099 1,328 1,189 Yes Virginia 40,491 0 7,509 0 Yes Washington 44,216 70% 214,301 98% Yes Wisconsin 68,710 82% 1,748,940 1,748,880 Yes Source: International Association of Commercial Administrators (http://www.iacc.org/iacareg/ARJDisplay.php?year=2010). ANNEX V 25 Annex v Survey COLLATERAL REGISTRY SURVEY www.doingbusiness.org Dear Sir/ Madame, The World Bank Group is launching a global survey of legally-established registries that register security interests (a.k.a. charges, pledges) in movable property. The goal is to better understand these institutions so that we can improve our advisory services and policy advice related to secured lending. This project is a joint effort by the IFC’s Global Secured Transactions and Collateral Registries program and the Doing Business project. Since its inception in 2004, Doing Business has informed 270 reforms around the world, making it easier for small and medium sized entrepreneurs to do business. In 2008/09, for instance, eight jurisdictions reformed its secured transactions legislation. Doing Business 2010: Reforming through Dif�cult Times was launched on September 9, 2009. This year’s report received a record number of 2,517 media citations within one month of publication, including coverage from all major global, regional and local media outlets including TV, print, broadcast and web. The positive feedback from governments around the world who are using the Doing Business reports as an input for policy debate about regulatory reform is only possible thanks to the generous contribution of over 8,000 experts, in 183 jurisdictions. For further information about the report, please visit our website on www.doingbusiness.org. The main IFC’s Secured Transactions and Collateral Registries program objective is to increase access to credit to �rms, especially SMEs, by developing the appropriate legal and institutional framework to allow and facilitate the use of movable assets as collateral for loans. To achieve this objective, our advisory projects are built on three structural pillars: 1. Legal Framework: Advice to governments, law and policy makers, and �nancial sector players on the necessary improvements to the legal and regulatory infrastructure for secured lending. 2. Registry: Provision of technical advice to the government and other stakeholders for the creation of new collateral registries or the improvement of the existing ones. 3. Capacity Building: Training and awareness-building among public stakeholders on compliance with new laws and regulations. Awareness-building among creditors on the use of the new system in place and training of creditors on asset based lending techniques. 26 ANNEX V We have found that global data are extremely useful in developing a consensus around good practices and to support reform efforts in countries trying to strengthen their �nancial infrastructure, such as the institutional, legal and regulatory environment for movable collateral. The information you provide will help our reform efforts as well as our research on the secured lending �eld. Please take a few minutes of your time to respond to this survey. We will aggregate the data that we obtain without mentioning speci�c countries unless the institution is willing to have the information published. If this is the case, we will mention your contribution in the Doing Business 2011 report as well as on its website. We would appreciate if you could return the completed survey by April 10th, 2010 to Ms. Betina Tirelli Hennig at bhennig@ifc.org and Ms. Silvia Solidoro at ssolidoro@ifc.org. Please make sure to complete your name and address, so we can mail you a complimentary copy of the report. If you have any questions, do not hesitate to contact us. Thank you again for your invaluable contribution to the World Bank’s work. With best regards, Santiago Croci Alejandro Alvarez de la Campa Email: scroci@worldbank.org Email : aalvarez1@ifc.org Phone: +1 202 473 7172 Phone: + 1 202 458 0075 ANNEX V 27 Collateral Registry Survey Thank you for taking the time to �ll out this questionnaire. If you have received this survey but do not feel that you are the correct person to �ll it out, we would greatly appreciate if you could provide us with the contact details of someone working at the registry or a person familiar with its procedures. 1. PARTICIPANT CONTACT INFORMATION AT THE REGISTRY Publish First Name Last Name Position Agency name Address Telephone E-mail Website … … … 2. INFORMATION ON THE REGISTRY IN: ___________________________ Note: throughout the survey we are only interested in information relating to transactions performed between a company and a bank or �nancial institution. 1. Please list the registries for security rights over movable property and indicate whether they are operational (e.g. road vehicles, enterprise charges, universal registry of movable property): Registry for security rights on movable property (Please list the registries and specify if they only cover speci�c Is the registery Is the registery Have you visited or assets) provided by law? operational? worked at the registry? Yes No Yes No Yes No … … … … … … … … … … … … … … … … … … … … … … … … … … … … … … Any clari�cations/additional comments: 28 ANNEX V For the below questions please consider the following registry or “�ling of�ce� for notices of security interest granted by companies that approximates the most to a universal registry of movable property: REGISTRY: 2. Year registry founded and of�cial name of the registry 3. Number of full-time registry employees Specify the number of full-time employees working on security interests in movable property (collateral registry, charges registry, etc.) 4. The day-to-day operations of the registry are performed by: An of�ce of the executive branch of the government … By private parties … By NGOs … Courts … 5. Which Ministry or Institution in the government has oversight responsibility for the registry? 6. If the registry is not a government agency, is it independent or owned Independent: (name) … by another institution or group? Owned by other: (name) … ANNEX V 29 3. TYPES/CATEGORIES OF MOVABLE PROPERTY RECORDED AS SECURITY INTEREST AT THE REGISTRY. Please indicate which of the following types of movable collateral can be �led with your registry and also indicate the estimate percentage of �lings in 2009. For the below, security interest granted by companies that approximates the most to a universal registry of movable property. Accepted at % of total number of registry �lings in 2009 (Please round estimated % of Type of collateral Yes No �lings to nearest 10%) 1. Universal security over all present and future assets … … 2. Machinery and equipment … … 3. Motor vehicles … … 4. Agricultural products … … 5. Crops and other agricultural yields (plants and trees on land) … … 6. Livestock, etc. … … 7. Investment property (stocks and securities, options and futures, derivative products, etc.) … … 8. Documents of rights, �nancial instruments (bank notes and drafts, commercial bills, etc.) … … 9. Intellectual property (e.g. patent rights, trademarks) … … 10. A single account receivable … … 11. Multiple accounts receivables … … 12. Inventory (i.e., goods for sale) … … 13. Membership and partnership interests in business entities and cooperative shares … … 14. Future (e.g. future crops, future acquisitions of collateral described in the agreement, … … and unborn livestock) 15. Other. Please Specify: … … 4. DATA GATHERED AT THE REGISTRY: REGISTRATIONS, AMENDMENTS, EXTENSIONS, SEARCHES AND TERMINATIONS PER YEAR. Please help us gather current data as provided below from the registry. Please consider the following de�nitions to help you �ll the table: New �lings: New security interest recorded over an asset between the parties to a security agreement. Amendments: Changes (e.g. type of security, type of asset, etc.) made to a previous registered security interest. Continuation: A previously recorded security interest is extended beyond the original agreed time for repayment of the debt. Searches: Made on-line or in person (if recorded by the registry) of the database. Terminations: The security agreement is terminated (e.g. by the enforcement of the security interest by the creditor, payment of the debt by the debtor, etc.) 30 ANNEX V Total new �lings / Continuation / Terminations / Year registrations Amendments Extensions Searches discharges 2009 2008 2007 2006 2005 2004 2003 2002 2001 2000 5. REGISTRY REGULATIONS Yes No 1. Are there any restrictions on who can register a security interest? … … If yes, please explain: 2. Does registration require the physical presence of the parties to the security agreement? … … 3. Does the registry provide a standard form for the registration of a security interest in movable property? … … If yes, please explain below the basic information needed in the form: 4. Can the registration information include a generic description of collateral or state the nature of encumbered property? … … If no, please explain: 5. Does the �ling of the registry form require added documentation/certi�cation such as: a. Copy of the original security agreement. … … b. Copy of the original loan … … c. Notarization … … d. Stamp taxes … … 6. Is the registry internally computerized? If yes, does this mean that: … … a. Once the paper-based registration form is accepted, the data is uploaded in an electronic data base? … … b. Is the database searchable by debtor’s (name of legal entity: the company) name? … … c. All the registry branches in the country are electronically linked? … … d. Paper-based documents are not stored in the registry once the information is uploaded in the database? … … e. If there are different registries by type of assets (e.g. vehicles) or interest (e.g. �xed/floating charges), are the … … databases linked between themselves? Any clari�cations/comments: ANNEX V 31 Yes No 7. Does the registry accept paper-based registration forms? If yes, can they be delivered: … … a. In person … … b. By regular mail … … c. By fax … … 8. Does the registry provide for electronic registration? … … If yes, could you please provide the website address: 9. Can anyone perform a registration search either in person at the registry or on-line? … … If no, please explain: 10. Is there a fee to register a security interest? If yes, is it: … … a. A flat fee? Please indicate the amount: … … b. A percentage of the value of the secured debt? Please indicate the percentage: … … c. Other? Please explain: … … 11. Is there a fee to search for a security interest? If yes, is it: … … a. A flat fee? Please indicate the amount: … … b. A percentage of the value of the secured debt? Please indicate the percentage: … … c. Other? Please explain: … … 12. Is the registry responsible for verifying the authenticity or legality of the security right or registered agreement? … … If yes, please explain the procedure: 13. Is the registrar liable for misinformation given to the registry regarding a security agreement? … … 14. Is there a statutory registration period (e.g. registration will be valid for 5 years) regarding security interest over movables … … that needs to be renewed? If yes, please explain: Any clari�cations/comments: THANK YOU FOR COMPLETING THE SURVEY! 32 MAKING SECURITY INTERESTS PUBLIC: REGISTRATION MECHANISMS IN 35 JURISDICTIONS Contact Information IFC 2121 Pennsylvania Ave., NW Washington, DC 20433, USA ifc.org 04/2012