A number of the Pacific Islands have a fully centralized, fully electronic registry, which operates on a notice filing system. An important goal of the reforms was to promote increased investor and creditor confidence by having greater uniformity across the Pacific jurisdictions
More information is available in this report by the Asian Development Bank
Federated States of Micronesia
The Federated States of Micronesia (FSM) enacted the Secured Transactions Act 2006. This new Act represents a unified law that allows movable property to be the subject of security interests for loans, allowing access to finance for small and medium sized businesses. The Act explains that the type of movable property that can be used includes “personal property, including tangible and intangible property, of any nature, farm products, fixtures, timber to be cut, and minerals to be extracted…includes collateral that arises in the future and collateral located in or outside of the Federated States of Micronesia…includes goods subject to consignment. …includes accounts and chattel paper that have been sold, leased goods, and proceeds of collateral”
Additionally, security agreements are not subject to onerous formalities, and they can be created informally without any need to notarize. Additionally, the FSM created a notice-based filing office within the Department of Economic Affairs to register the security interests and protect the priority of creditors.
The Republic of the Marshall Islands enacted the Secured Transactions Act 2007. This is a unified act that allows for any present or future movable property to be used to secure an obligation, whether present, future, monetary or non-monetary. In order to create a valid security interest, all that is needed is a security agreement with a general description of the assets in question, as long as the description reasonable identifies the assets.
Additionally, the Marshall Islands created a notice-based online filing system to register any security interests created. The filing system allows prospective creditors to check whether prospective debtor’s assets are subject to any prior security interests, and it also allows for creditors to register their security interests.
Tonga enacted the Personal Property Security Act 2010. The act is a unified law that covers all security interests created in movable property. The Act explains that any personal property may be used as the subject of a security interest, whether this property is intangible, tangible, present, future, inside Tonga or outside it.
The act takes a functional approach, as Article 5 explains that the scope of the act covers “all transactions where the effect is to secure an obligation with collateral, including pledge, hire-purchase, conditional sale, company charge, chattel mortgage, assignment, and the like”.
Additionally, Tonga introduced an online filing system for all debtors and creditors to register their security interests. The register also allows creditors to search their prospective debtor’s assets and ensure they are not subject to a prior security interest.
Vanuatu enacted the Personal Property Securities Act 2008. This is a unified law that governs security interests created in assets that are personal movable property.
The Act takes a functional approach, as all transactions that substantially amount to creating a security interest will be treated as such, regardless of their form. Article 3 explains that “for the purposes of this act security interest means an interest in personal property created or provided for by a transaction that in substance secures payment or performance of an obligation, without regard to the form of the transaction” Article 3 explains that this includes but is not limited to: “charge, floating charge, chattel mortgage, conditional sale agreement (including an agreement to sell subject to retention of title), hire purchase agreement, pledge, security trust deed, trust receipt, consignment, lease, an assignment, or an asset
arrangement subject to conditions, that secures payment or performance of an obligation”.
Additionally, Vanuatu created an online filing system, which can be used to search assets to check whether they are subject to any existing security interests, or to register a new security interest.
The Solomon Islands enacted the Secured Transactions Act 2008. This is a unified act that covers all security interests created in movable property, including “movable thing[s] of any nature, intangible[s] of any nature and any fixtures”. In order to create a valid security interest, only a general description of the assets in question is necessary.
This Act takes a functional approach, as it covers all transactions that in substance amount to transactions that secure obligations by using certain assets, regardless of the form or language used in that transaction.
The Solomon Islands additionally created a public online filing system. This is a simple register that can be used to search assets to check whether they are subject to any existing security interests, or to register a new security interest. This register is particularly important because security interests are only enforceable against third parties in three situations: firstly, if they are registered in the filing system; secondly, if there is possession of the asset in question; or thirdly, if there is control over the asset in question. Registration is therefore the least onerous, non-possessory method of perfecting the security interest.
Palau enacted the Secured Transactions Act 2012, with the help of the Asian Development Bank. This Act allows for movable property to be used as the subject of security interests.
The law takes a functional approach, as it covers all transactions that in substance amount to transactions that secure obligations by using certain assets, regardless of the form or language used in that transaction.
Along with the Act, an online filing system was created, along with some regulations on its use. This is a simple register that can be used to search assets to check whether they are subject to any existing security interests, or to register a new security interest.
The Cook Islands recently underwent reform. The Personal Property Securities Act 2019 improved the secured transaction framework. Under the act, virtually all personal property can be used to secure obligations, including future assets, tangibles and intangibles. The transaction can secure a variety of obligations, monetary or non monetary, existing or future. In order to create a security interest, there must be a written security agreement with a general description of the property in question. The security interest can then be perfected by being registered, or by the creditor taking possession or control of the asset. If an asset is perfected, then the creditor’s priority is protected.
The act takes a functional approach, as any transaction which in substance amounts to securing an obligation with personal property is governed by the act and the rules within it, regardless of the form of the transaction. The act explicitly refers to transactions that are governed by the act despite their form, including hire-purchase agreements, floating charges or assignment.
The act also created an online, unified registry for all security interests based on personal property.
The relevant statute governing secured transactions in Samoa is the Personal Property Security Act 2013. The 2013 Act provided for movable property to be used as the subject of security interests. This act repealed the old 1975 Chattels Transfer Act. The Act introduces a wide scope of movable property that can be used as security for an obligation, including tangibles, intangibles, present or future property. The Act does not apply to immovable property, which is still governed by the old law. The Act gives a lot of freedom to the parties, as there is no constrictive format the security agreement must have. Rather, parties may set their own terms including defining what default is. The PPSA takes a functional approach, and it apples to all transactions that substantially amount to creating a security interest over movable personal property. This includes hire-purchase agreements, retention of title clauses and bills of sale.
In 2015, the law was amended to make provision for an online, centralised, public register. The Personal Property Securities Amendment Act 2015 regulates the register and its use. This register allows for priority to be ascertained, but it only requires basic information about the security in question, such as a general description of the asset.
The enforcement of personal securities in Samoa is not exhaustively governed by the PPSA. Rather, the act explicitly states that all other debt enforcement laws in Samoa still apply as enforcement mechanisms, as well as the provisions under the Act. The Act provides flexibility, as it allows for the asset used to secure obligations to be seized and sold in any way, as long as the creditor acts in a commercially reasonable manner. However, the PPSA contains an obligation for the creditor to give notice of the sale to the debtor, who has a right to buy back the asset at any time before its sale by virtue of the PPSA.
Last Checked August 2020
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