In 2016 Brunei enacted the Secured Transactions Order, supplemented by Regulations, which have codified taking security in Brunei and provided for a collateral registry system. It has the express aim of improving access to credit in the country and was clearly influenced by the World Bank Ease of Doing Business Ranking. It is no wonder then that Brunei was indicated as one of the economies doing most to improve doing business in the Doing Business Report 2017 (p.25).
The registry is created under Articles 5-6 of the Order, and Article 7 provides that the register is to be electronic and maintain a register of personal property security. The Secured Transactions Regulations provide further details on searching the register and set out the small fees required to search the register.
Brunei has adopted a unitary approach to taking security. The Order applies to “every transaction that in substance creates security interests, without regard to its form and without regard to the person who has title to the collateral”. It expressly includes conditional sale agreements, hire-purchase agreements, operating and financial leases and outright assignments of intangibles (Article 2(1) emphasis added).
A security agreement is effective according to its terms unless provided for otherwise in the Order or other written law (Article 10). Article 11 goes on to set out the requirements for describing collateral in a security agreement, which includes as sufficient a statement that security is to be taken in all the debtor’s present and after-acquired property. However, after-acquired property cannot include consumer goods (Article 14).
The Order sets out the perfection requirements which is when the security interest is created and when it is either registered (by a financing statement), possession is taken, or secured party has control (Article 12). Registration can be valid for a maximum of 10 years (Article 51) and then would require a renewal (Article 52).
The Order provides that the security interests continue in the collateral if transferred (unless expressly authorised) and to the proceeds (Article 15). However, a buyer or lessee will take free of the security interest if it is unperfected (Article 43), or if it is perfected will take free of the interest if sold in the ordinary course of business unless they knew that it was a breach of a security agreement (Article 44). Furthermore, there is continuous perfection of the security interests in proceeds if they are of a kind in the description of the original collateral or cash (Article 16). Where the proceeds do not come under that, they only have temporary perfection and an amendment to the register will need to be made within 10 days for security to continue to be perfected (Article 17).
The priority rules are set out in Article 22. It provides for perfected securities to have priority over unperfected securities; that the first registration, possession taking or control will have priority over other perfected securities; or unperfected securities will be priorities in time of creation. Priority can be subordinated (Article 24) and a security interest will have the same priority in respect of all (including future) advances (Article 25).
The Secured Transaction Order is available here. There has been a minor amendment to the text which is available here.
The Secured Transaction Regulations are available here.