FEDERAL NEGARIT GAZETA

OF THE FEDERAL DEMOCRATIC REPUBLIC OF ETHIOPIA

25th Year No.76
ADDIS ABABA 7th August, 2019

Content

Proclamation No. 1147/2019
Movable Property Security Right Proclamation
Page 11380

PROCLAMATION NO. 1147/2019

A PROCLAMATION TO PROVIDE FOR MOVABLE PROPERTY SECURITY RIGHT

WHEREAS, modern secured transactions system enables individuals and entities to use their movable assets as security for credit generating new productive capital, expands investments, creates more job opportunity, increases production and productivity, fosters access to and usage of financial products and services, creates opportunity to expand banking services to rural areas;

WHEREAS, it is necessary to provide for the creation of security right in movable property, ensure their publicity and effectiveness through efficient enforcement mechanisms;

WHEREAS, establishing single comprehensive electronic registration regime for secured transactions in movable property to determine priority right among competing claimants is necessary;

NOW, THEREFOR, in accordance with Article 55(1) of the Federal Democratic Republic of Ethiopia Constitution, it is hereby proclaimed as follows:

PART ONE

GENERAL PROVISIONS

1. Short Title

This Proclamation may be cited as “Movable Property Security Right Proclamation No. 1147/2019.”

2. Definitions

In this Proclamation, unless the context otherwise requires:

1/ “accessory to immovable” means a corporeal asset that despite the fact that it is physically affixed to an immovable is treated as movable property;

2/ “acquisition security right” means a security right in a corporeal asset or intellectual property, which secures the obligation to pay any unpaid portion of the purchase price of the asset or other credit extended to enable the grantor to acquire right in the asset to the extent the credit is used for that purpose;

3/ “business” means a business specified under the Commercial Code of Ethiopia;

4/ “certificated security” means a document evidencing ownership of share or bond registered in the name of the holder or issued to a bearer;

5/ “Collateral Registry” means an electronic system for receiving, storing and making accessible to the public information about security right and non-consensual right in movable property;

6/ “Collateral Registry Office” means an office established to manage the Collateral Registry;

Unit Price 52.70
Negarit G P.O.Box 80001

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Federal Negarit Gazette No.76, 7th August 2019....page 11382

7/ “competing claimant” means a creditor of a grantor or other person with right in the collateral that may be in competition with the right of a secured creditor in the same collateral;

8/ “consumer goods” means goods primarily used or intended to be used by the grantor for personal, family or household consumption;

9/ “control agreement” means:
a) with respect to electronic securities means an agreement in writing among the issuer, the grantor and the secured creditor, according to which the issuer agrees to follow instruction from the secured creditor with respect to the securities without further consent from the grantor; or b) with respect to right to payment of funds credited to a deposit account means an agreement in writing among the financial institution, the grantor and the secured creditor, according to which the financial institution agrees to follow instruction from the secured creditor with respect to the payment of funds credited to the deposit account without further consent from the grantor;

10/ “corporeal asset” means any type of goods including money, negotiable instrument, negotiable documents and certificated securities;

11/ “debtor” means a person that owes payment or other performance of a secured obligation, whether or not that person is the grantor of the security right securing payment or other performance of that obligation, including a guarantor of a secured obligation; ```

12/ “debtor of the receivable” means a person that owes payment of a receivable, including a guarantor or other person secondarily liable for payment of the receivable;

13/ “deposit account” means an account maintained by a financial institution authorized to receive deposit from the public;

14/ “equipment” means a corporeal asset other than inventory or consumer goods that is primarily used or intended to be used by the grantor in the operation of its business;

15/ “electronic securities” means shares and bonds registered and transferable electronically but not represented by a certificate;

16/ “farm products” include but not limited to crops grown, growing or to be grown; forest, timber and other wood products; livestock, born or unborn, bees and poultry and the produce and progeny thereof; supplies used or produced in a farming operation; or products of crops or livestock in their unmanufactured states.

17/ “financial lease” means a type of leasing by which a lessor provides a lessee against payment of mutually agreed installments over a specified period with the use of specified capital goods under which the lessor shall retain full ownership right on the capital goods during the period of the lease agreement, and, subject to agreement between the two parties, the lessee may have an option to purchase the capital good outright after the termination of the lease period at an agreed price.

18/ “future asset” means a movable property, which does not exist or which the grantor does not have right in or the power to encumber at the time the security agreement is concluded;

19/ “future advance” means an additional credit where the secured creditor provides in the future to the debtor under the existing credit agreement;

20/ “grantor” means a person that creates a security right to secure either its own obligation or that of another person; a buyer or other transferee, lessee, or licensee of the collateral that acquires its right subject to a security right;

21/ “hire-purchase” means a type of leasing by which a lessor provides a lessee with the use of a specified capital goods, against payment of mutually agreed instalments over a specified period under which, with each lease payment, an equal percentage of the ownership is transferred to the lessee and, upon effecting of the last payment, the ownership of the capital goods shall automatically be transferred to the lessee;

22/ “incorporeal asset” means all types of movable property other than corporeal assets that shall include receivables, deposit accounts, intellectual property right;

23/ “intellectual property” means will have a meaning that is given to it in the intellectual property law;

24/ “inventory” means corporeal assets held by the grantor for sale or lease in the ordinary course of the grantor’s business, including raw and semi-processed materials;

25/ “mass or product” means corporeal assets that are so physically associated or united with other corporeal assets that they have lost their separate identity;

26/ “money” means bank notes and coins which are legal tender issued and minted by the National Bank of Ethiopia; and notes and coins which are legal tender in any country outside Ethiopia as to which the National Bank of Ethiopia has declared to be acceptable for payment in Ethiopia;

27/ “moveable property” includes inventories, agricultural products, incorporeal assets, corporeal assets, the right to use land unless prohibited by pertinent laws; a security right under a hire-purchase agreement, security trust deed, trust receipt, commercial consignment, mortgage of a business, sale with ownership reserved, sale with right of redemption, security rights in certificated securities, and security rights in warehouse receipts, motor vehicle, trailer, agricultural machinery, construction machinery, industrial machinery, and other properties excluding land, house and building;

28/ “negotiable document” includes a document, such as a bill of lading, waybill, voucher or a warehouse receipt for goods warehoused that represents a right to delivery of corporeal assets and may be transferred by negotiation;

29/ “negotiable instrument” includes a bill of exchange, promissory note and other instruments except check issued to bearer, specified name or order;

Federal Negarit Gazeta No.76, 7th August 2019....page 11386

30/ “non-consensual creditor” means a creditor that has obtained a right in the collateral, on the basis of a court order or applicable law;

31/ “notice” includes an initial notice, an amendment notice or a cancellation notice submitted to the Collateral Registry by the secured creditor or other authorized person under this Proclamation;

32/ “operating lease” means a type of leasing for a period of time not exceeding two years, by which a lessor provides a lessee against payment of mutually agreed rent with the use of specified capital goods that the lessor has at hand;

33/ “prior law” means the law in force before the entry into force of this Proclamation;

34/ “prior security right” means a right covered by a security agreement entered into before the entry into force of this Proclamation;

35/ “possession” means the actual possession of a corporeal asset by a person or its representative, or constructive possession by an independent person that acknowledges holding it for that person;

36/ “proceeds” means whatever is received in respect of the collateral, including what is received as a result of sale or other disposition or collection, lease or licence of the collateral, fruits, insurance proceeds, claims arising from defects in, damage to or loss of the collateral, and proceeds of proceeds;

37/ “receivable” means a right to payment of a monetary obligation, excluding a right to payment evidenced by a negotiable instrument, a right to payment of funds credited to a deposit account and a right to payment under security;

38/ “recognized market” means a market in which prices are stated publicly and/or presumed to be commercially reasonable;

39/ “registrant” means the person who submits the prescribed registry notice form to the Collateral Registry;

40/ “Registrar” means a person to be appointed by the government to supervise and administer the operations of the Collateral Registry;

41/ “records” means the information in all registered notices stored by the Collateral Registry, consisting of the records that are publicly accessible and the records that have been archived;

42/ “secured creditor” means a person that has a security right or non-consensual creditor.

43/ “security agreement” means an agreement, regardless of whether the parties have denominated it as a security agreement, between a grantor and a secured creditor that provides for the creation of a security right;

44/ “security right” means a property right in movable property that is created by an agreement to secure payment or other performance of an obligation, regardless of whether the parties have denominated it as a security right, and regardless of the type of property, the status of the grantor or secured creditor, or the nature of the secured obligation;

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45/ “serial number” means the serial number located on the chassis or body frame;

46/ “serial-numbered collateral” means a motor vehicle, trailer, agricultural machinery, construction machinery or industrial machinery and others that have a serial number permanently marked on or attached by the manufacturer;

47/ “person” means natural or legal person.

48/ a expression in the masculine gender includes the feminine.

Scope of Application

1/ This Proclamation shall apply to rights in movable property created by agreement that secure payment of credit or other performance of an obligation.

2/ This Proclamation shall not apply to:

a) security right in securities traded on exchanges;

b) a mortgage of a ship with all accessories required for its use subject to the Maritime Code;

c) an interest in an aircraft subject to the registration by the Ethiopian Civil Aviation Authority; and

d) except as otherwise provided in this Proclamation, a lien or other interest given by law; and

e) security right in proceeds of collateral if the proceeds are a type of asset that is outside the scope of this Proclamation to the extent that other laws applies to security right in those types of asset and governs the matters addressed in this Proclamation. ```

(Note: The left-hand column contains text in Amharic script. As per instructions, only the English text is transcribed. The Amharic content is omitted since it is not in the original language requested for transcription — which is specified as "the document's ORIGINAL language", and the visible English portion is the primary content being preserved. If the Amharic was intended to be included, please clarify.)

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Federal Negarit Gazette No.76, 7th August 2019...page 11389

PART TWO
CREATION OF A SECURITY RIGHT

Creation of a Security Right by Agreement and its Elements

1/ A security right shall be created by a security agreement, provided that the grantor has right in the asset to be encumbered or the power to encumber it.

2/ A lessee under a hire-purchase may create a security right in capital goods but the maximum amount realizable under the security right is limited to the goods value in excess of the amount owed to the lessor.

3/ Notwithstanding to Sub-article (1) of this Article, security agreement may provide for the creation of a security right in a future asset,

4/ A security right may encumber and continue in an accessory to movable or immovable, and a security right is not extinguished by an affixation of the accessory to movable or immovable property.

5/ A security agreement shall be evidenced by a writing that is signed by the grantor, and:

a) identify the secured creditor and the grantor;

b) describe the secured obligation; and

c) describe the collateral as provided in Article 6.

Federal Negarit Gazette No.76, 7th August 2019...page 11390

Obligations That may be Secured

A security right may secure one or more obligations of any type, present or future, determined or determinable, conditional or unconditional, fixed or fluctuating.

Description of Collateral and Secured Obligation

1/ The collateral and secured obligation shall be described in the security agreement in a manner that reasonably allows their identification.

2/ A description shall reasonably identify the collateral by specific listing, category, a type of collateral, or quantity.

3/ The secured obligation may be described as all obligation currently owed and to be incurred in the future, generically or specifically, including by a reference to the maximum amount secured by the security right.

Right to Proceeds

1/ A security right in an asset shall extend to its identifiable proceeds.

2/ Where proceeds in the form of funds credited to a deposit account or money are commingled with other assets of the same kind:

a) the security right extends to the commingled assets, notwithstanding that the proceeds have ceased to be identifiable;

b) the security right in the commingled assets is limited to the amount of the proceeds immediately before they were commingled; and ```

```markdown c) if at any time after the commingling, the amount of the commingled funds or money is less than the amount of the proceeds immediately before they were commingled, the security right in the commingled funds or money is limited to the available balance at the time of the claim.

Corporeal Assets Commingled in a Mass or Product

A security right in a corporeal asset that is commingled in a mass of assets of the same kind or product extends to the mass or product.

Contractual Limitations on the Creation of a Security Right

1/ A security right in a receivable is effective as between the grantor and the secured creditor and as against the debtor of the receivable despite an agreement limiting the grantor’s right to create a security right entered into between the grantor and the debtor of the receivable or any subsequent secured creditor;

2/ Nothing in Sub Article (1) of this Article affects any obligation or liability of the grantor for breach of the agreement referred to in that Article, but the other party to the agreement may not:

a) avoid the contract giving rise to the receivable or the security agreement on the sole ground of the breach of that agreement; or

b) raise against the secured creditor any claim the party may have against the grantor as a result of that breach.
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Federal Negarit Gazette No 76, 7th August 2019, page 11392

3/ This Article applies only to receivables arising from:

a) a contract for the supply or lease of goods or services other than financial services; b) a construction contract or a contract for the sale or lease of immovable property; and c) a contract for the sale, lease or licence of intellectual property.

4/ A security right in a right to payment of funds credited to a deposit account is effective notwithstanding an agreement between the grantor and the financial institution limiting in any way the grantor’s right to create a security right.

10. Personal or Property Rights Securing or Supporting Payment or Other Performance

1/ A secured creditor with a security right in an incorporeal asset or a negotiable instrument has the benefit of any personal or property right that secures or supports payment or other performance of the collateral without a new act of transfer.

2/ If the right referred to in Sub Article (1) of this Article is transferable only with a new act of transfer, the grantor is obliged to transfer the benefit of that right to the secured creditor.

11. Corporeal Assets Covered by Negotiable Documents

A security right in a negotiable document extends to the corporeal asset covered by the document.
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12. Corporeal Assets with Respect to Which Intellectual Property is Used

A security right in a corporeal asset with respect to which intellectual property is used shall not extend to the intellectual property and a security right in the intellectual property shall not extend to the corporeal asset.

PART THREE
EFFECTIVENESS OF A SECURITY RIGHT AGAINST THIRD-PARTY

Methods of Effectiveness of Security Right Against Third-Party

A security right in movable property shall be effective against third parties if:

1/ a notice with respect to the security right is registered in the Collateral Registry by the secured creditor;

2/ the secured creditor has possession of the corporeal asset that is money, negotiable instruments, negotiable documents and certificated securities or subject to Article 56 or.

3/ the secured creditor has acquired control over the right to payment of funds credited to a deposit account or an electronic security.

Effectiveness of Security Right in Proceeds, Mass’s and Product’s Against Third-Party

1/ If a security right in an asset is effective against third parties, a security right in any proceeds of that asset arising under Article 7 is effective against third parties without any further act by the grantor or the secured creditor if the proceeds are in the form of money, receivables, negotiable instruments or rights to payment of funds credited to a deposit account. ```

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Federal Negarit Gazette No.76, 7th August 2019, page 11394

2/ If a security right in an asset is effective against third parties, a security right arising under Article 7 in any type of proceeds other than the types of proceeds referred to in Sub Article (1) of this Article is effective against third parties:

a) for ten working days after the proceeds arise; and b) thereafter, only if the security right in the proceeds is made effective against third parties by one of the methods applicable to the relevant type of collateral before the expiry of ten working days.

3/ If a security right in a corporeal asset is effective against third parties, a security right in a mass or product to which the security right extends under Article 8 is effective against third parties without any further act.

Changes in the Methods of Security Right for Achieving Third-Party Effectiveness
A security right continues to be effective against third parties despite a change in the methods for achieving third-party effectiveness, provided that there is no time gap when the security right is not effective against third parties.
Transfer of a Security Right
1/ If the secured creditor transfers a security right or a part of it, it may register an amendment notice to reflect the transfer.
2/ A transfer of a security right is effective whether or not an amendment notice has been registered.
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Right to Payment of Funds Credited to a Deposit Account

The secured creditor acquires control over a right to payment of funds credited to a deposit account:

1/ upon the creation of the security right in favour of the financial institution;

2/ upon the conclusion of a control agreement; or

3/ when the secured creditor becomes the deposit account holder.

Negotiable Document and Corporeal Assets Covered by that Document

1/ If a security right in a negotiable document is effective against third parties, the security right that extends to the corporeal asset covered by the document is also effective against third parties.

2/ During the period when a negotiable document covers a corporeal asset, a security right in the asset may also be made effective against third parties by the secured creditor’s possession of the document.

Electronic Securities

The secured creditor acquires control over an electronic security upon:

1) the notation of the security right or entry of the name of the secured creditor in the books maintained by or on behalf of the issuer for the purpose of recording the name of the holder of the securities; or

2) the conclusion of a control agreement.

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Federal Negarit Gazette No.76, 7th August 2019, page 11396

PART FOUR

COLLATERAL REGISTRY

20. Establishment of the Collateral Registry Office

The Collateral Registry Office shall be established by regulation.

21. Establishment of the Collateral Registry

The Collateral Registry shall be established for the purposes of receiving, storing and making information accessible to the public in registered notices with respect to security right and right of non-consensual creditors.

22. Grantor’s Authorization for Registration Security Right

1/ Registration of notices in the collateral registry will be conducted by the secured creditor or an authorized representative.

2/ Registration of an initial notice is ineffective unless authorized by the grantor in writing.

3/ Registration of an amendment notice that adds collateral not covered in the security agreement is ineffective unless authorized by the grantor in writing.

4/ Registration of an amendment notice that adds a grantor is ineffective unless authorized by the additional grantor in writing.

5/ A written security agreement is sufficient to constitute authorization by the grantor for the registration of a notice.

6/ In accordance with sub-article (5) of this Article, the Collateral Registry may not require evidence of the existence of the grantor’s authorization.
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Note: The left column contains text in Amharic script, which is not transcribed here as per the instruction to preserve only the document's own text in its original language — and since the right column contains English content, it is fully transcribed. The Amharic text is present but not rendered in this transcription.

One Notice Sufficient for Security Rights Under Multiple Security Agreements

The registration of a single notice may relate to security rights created by the grantor under one or more than one security agreements with the same secured creditor.

Public Access

1/ Any person may submit a notice to the Collateral Registry, if that person has established a user account with the Registry; and has paid fee that shall be prescribed by directive.

2/ An amendment or cancellation notice may only be submitted through the user account and by the person that is authorized to submit such notice under this Part.

3/ Any person may submit a search request to the Collateral Registry, if that person uses the prescribed search request form.

4/ If access is refused, the Collateral Registry shall communicate the reason to the registrant or searcher without delay.

Rejection of the Registration of a Notice or a Search Request

1/ The Collateral Registry shall reject the registration of a notice or a search if no information is entered in one or more of the required designated fields.

2/ Except as provided in Sub Article (1) of this Article, the Collateral Registry may not reject the registration of a notice or a search request.

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Federal Negarit Gazette No.76, 7th August 2019.....page 11398

3/ If the registration of a notice or a search request is rejected, the Collateral Registry shall communicate the reason to the registrant or searcher without delay.

No Verification by the Collateral Registry Office

The Collateral Registry Office may not conduct any scrutiny of the content of a notice or search request.

Information Required in an Initial Notice

1/ An initial notice shall contain the following information in the relevant designated field:

a) the identifier and name of the grantor in accordance with Article 28;

b) the identifier of the secured creditor or its representative in accordance with Article 29;

c) an address of the grantor and the secured creditor;

d) a description of the collateral in accordance with Article 30;

e) the period of effectiveness of the registration; and

f) any other information to be prescribed in the directive collected for statistical purpose only.

2/ If there is more than one grantor or secured creditor, the required information shall be entered separately for each grantor or secured creditor.

Grantor Identifier

1/ Where the grantor is a natural person:

a) the grantor identifier is the unique identification number as prescribed in the directive; an ```

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Federal Negarit Gazette No.76, 7th August 2019, page 11399

b) the grantor name is the name as it appears in the most recent relevant official document issued to a citizen of Ethiopia or valid passport in case of natural persons who are not citizens of Ethiopia.

2/ Where the grantor is a legal person:
a) the grantor identifier is the unique identification number as prescribed in the directive, and b) the grantor name is the name that appears in the most recent document or law constituting the legal person.

Secured Creditor Identifier
1/ Where the secured creditor is a natural person, the secured creditor identifier is the name of the secured creditor or its representative as prescribed in the directive.
2/ Where the secured creditor is a legal person, the secured creditor identifier is the name of the secured creditor or its representative as prescribed in the directive.
Description of Collateral
1/ The assets encumbered or to be encumbered shall be described in a notice in a manner that reasonably allows their identification.
2/ A description that indicates that the collateral consist of all of the grantor’s movable property of all of the grantor’s movable property within a particular category or a description by quantity or computational formula satisfies the standard of Sub Article (1) of this Article. ```