Registration Of Security Under The Secured Transactions In Movable Assets Act, 2017 And Implications For Secured Loan Transactions

1.0 Introduction

The Secured Transaction in Movable Assets Act 2017 ("STMA") was enacted into law in 2017 to provide a comprehensive legal framework for the creation, registration and enforcement of security interests over movable assets. It was also aimed at improving access to credit for micro, small and medium-sized enterprises ("SMEs") by allowing them to use their movable assets, such as inventory, equipment and receivables, as collateral for loans. The security interest is registrable at the National Collateral Registry ("NCR"). The NCR is an electronic public database that contains information on security interests in movable property. The STMA exempts instruments registrable with the NCR from stamp duty in order to make it cheaper for SMEs to use their movable assets as security for loans. Prior to the passing of the STMA into law, the creation, registration and enforcement of security for corporate entities/businesses was already covered by the then Companies and Allied Matters Act, 2004 ("CAMA 2004"), which has now been repealed and replaced by the Companies and Allied Matters Act, 2020 (as amended) ("CAMA 2020").

The STMA effectively created a second regime for the registration of security interests in movable assets for SMEs, which operates alongside the existing registration framework under CAMA with limited exceptions. This raises questions such as whether dual registration is required under the CAMA and STMA to protect a lender's interest, and the priority of security interests registered under the CAMA and the STMA, and whether stamping is required to tender a document in evidence in respect of security registered with the NCR.

This article examines the STMA's framework for registering security interests in comparison with the CAMA. It assesses their combined impact on secured lending in Nigeria and identifies the gaps and overlaps that arise from operating these two parallel registration systems.

2.0 The types of assets the security over which need to be registered at the NCR

Section 2(1)(a) of the STMA stipulates that the Act applies to all security interests in movable assets created by an agreement that secures payment or the performance of an obligation. The term "movable assets" is defined under the STMA to mean "tangible or intangible property other than real property".¹

This definition is broad and covers a wide range of assets, beyond what was contemplated before the enactment of the STMA the security over which need to be registered at the NCR. Examples of movable assets the security over which is registrable at the NCR include:

1. Tangible movable assets: These are physical items that can be moved or transferred from one place to another such as machinery and equipment (factory machinery, tools, vehicles and other industrial equipment), goods (such as inventory, consumer products, manufactured products, and raw materials).
2. Intangible Movable Assets: These assets, though lacking a physical presence, hold significant value the security over which is also registrable at the NCR. These include accounts receivables, bank accounts, negotiable instruments, intellectual property, securities etc.

There are, however, certain types of property interests and assets that are specifically excluded from the scope of application of the NCR. These include:

1. Right of Set-Off: A right of set-off allows one party to reduce or cancel a debt by offsetting it against a claim owed by the other party. Such rights are not registrable at the NCR;²
2. Interests in Land: The STMA does not apply to the creation of security interests over land. However, security over account receivables arising from land transactions can still be registered at the NCR;³ and
3. Interests in Ships and Aircraft: While ships and aircraft qualify as movable assets, the STMA specifically excludes security interests in these assets from registration with the NCR. This exclusion is due to the fact that ships and aircraft are subject to specialised legislation and registration systems that govern security interests in these types of property.⁴

3.0 Distinction between the Security Interests Covered Under the CAMA 2020 and the STMA

Section 222 of the CAMA 2020 outlines the types of security interests registrable with the Corporate Affairs Commission ("CAC"). These include charges securing debentures, charges on uncalled share capital, any charge documented in an instrument that would require registration as a bill of sale if made by an individual, charges over land or interests in land (excluding rent), charges over book debts, floating charges over company assets, undertakings and unpaid share calls, and charges over ships, aircraft, shares in ships, goodwill, and intellectual property.

As discussed in paragraph 2.0 above, the STMA applies to all security interests in movable assets created by agreement to secure the payment of a debt or the performance of an obligation with the exception of the rights of setoff, interests in land (except for interests in account receivables), or security interests in movable property that are already governed by other laws with their own registries (such as those relating to ships and aircraft).⁵

In summary, while both the CAMA 2020 and the STMA regulate security interests in tangible and intangible movable assets, there are differences in the scope of applications of both laws. For instance, the CAMA 2020 has a broader scope which extends to security interests in real property and assets subject to specialised registries (such as ships and aircraft), while the STMA is limited to movable assets (tangible and intangible) and excludes land, setoff rights, and assets already governed by other sector-specific laws.

4.0 Conflicts Arising from the Operation of the Dual Security Registration System

The concurrent operation of the CAMA 2020 and the STMA gives rise to practical legal issues. For example, there is uncertainty over the priority of competing security interests registered at both the CAC and the NCR as the STMA indicates that priority is governed by the date of security registration, while the CAMA 2020 provides that ranking of registrable charges is governed by the date of creation, provided that it is registered within 90 days from the date of creation.

Another contentious area is the express indication by the STMA that provisions of Stamp Duties Act (now repealed and replaced by the Nigeria Tax Act 2025 (the "NTA") shall not apply to any secured transactions covered by the STMA.⁶ This is particularly confusing in relation to transactions that also requires concurrent registration with the CAC and the NCR. In addition, most creditors who have possessory interest over some tangible moveable assets to which a possessory security interest has been created in their favour, also do not consider registration with the NCR as being absolutely efficient. This is given the fact that they already have possession of the assets.

We have provided a detailed analysis of these issues and proposed some workable recommendations to provide the necessary clarity on the applicability of the STMA alongside other applicable laws in relation to the registration of security interests.

Footnotes

1 Section 63 (1) of the STMA.

2 Section 2 (a) of the STMA.

3 Section 2 (b) of the STMA.

4 Section 2 (c) of the STMA.

5 Section 2 of the STMA

6 Section 54 of the STMA

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