Trends in the legal framework governing securities over movable assetsOctober 27, 2022
As part of moves to improve Angola’s investment environment, the government has enacted a new law that makes securing credit through securities of movable assets attractive for lenders. Chindalena Lourenço, partner at Fatima Freitas Advogados, discusses the changes brought by the new law.
ANGOLA’S LEGAL FRAMEWORK: One of the most important items for local and foreign lenders when considering financing a project or a company is the securities available and the inherent legal risk.
Angola holds a very developed legal framework mostly in line with the European standards and the government has been enacting several laws and regulations to create a friendly and attractive environment for investment and financing. This is the case of the current private investment law, as well as the foreign exchange regulations, which have been increasingly becoming more flexible and favourable for foreign investors and the transfer of funds abroad.
The most recent expression of this trend is Law no. 11/ 21, of 22 April 2021 (Law No. 11/21). Until now, the legal framework applicable to securities over movable assets was mainly established in the ancient civil code and commercial code, which raised significant difficulties regarding this type of security and often provided for solutions that were not adequate to the current needs of world trade. The new law introduces significant changes to the applicable legal regime and makes securities of movable assets an interesting way for lenders to secure their credit.
CHANGES TO THE LEGAL REGIME: Law No. 11/21 applies to a broad range of securities over movable assets, including inter alia pledges on tangible and intangible movable assets, movable-assets mortgages, pledge of shares and debt securities, pledge of bank accounts, pledge of receivables, assignment of credits by way of security, fiduciary transfer, the sale with retention of ownership, etc. The new law also applies, adapted where appropriate, to definitive contractual assignments of credits and financial leasing.
The new law provides for registration of these securities on an online platform managed by a Central Registry Office – Central de Registo de Garantias Mobiliárias (CRGM), which is still facing some practical difficulties and therefore is not yet totally operational. This registration is a requirement for the security agreements to become effective against third parties. In turn, physical dispossession of the movable assets is no longer required. The agreements are still valid and effective between the parties on the date of signing or other effective dates established in the relevant agreements or in case of physical dispossession in the traditional terms. The priority of conventional, judicial and legal guarantees is determined by the date on which each became enforceable against third parties. We note that registration has a maximum duration of five years, renewable. We also note that the law has defined minimum requirements for the agreements.
Another innovation of this law is that it provides for judicial and extrajudicial enforcement, including appropriation and private sale of the pledged asset under certain terms and conditions.
Security interests may be created over one or more movable assets, whether they be present or future, determined or determinable, tangible or intangible, fungible or non-fungible, provided that they can be transferred for consideration at the moment the security is created. Mineral and petroleum resources to be extracted may be encumbered by the holder of the right solely for the purposes of financing said exploration or extraction.
Presidential Decree No. 114/21, of 29 April 2021, which came into effect on the same day, created the CRGM, which is an electronic public service that centralises, for the purposes of dissemination, all information on the registration of securities created on movable assets, also establishing the procedure for registration, alteration and consultation. Under this statute, in the case of securities created over assets subject to registration with a specific Registry Office (such as aircraft mortgages, pledges of shares, etc.) the service responsible for such registration must notify these securities and the CRGM will register them in the Central Registry and disseminate this information. In the case of assets that are not subject to registration, the relevant parties must promote their registration on the IT platform managed by the CRGM.
In our view, the new law is a significant improvement when compared to the previous legal framework and sets additional grounds to improve the local companies and foreign investors’ access to asset-based finance.