The Law on Movable Collaterals in Ethiopia: What You Need to Know

A security right in a movable property is established through a security agreement. The security agreement must be in writing and signed by the grantor and the secured creditor. The security agreement must also identify the secured obligation and provide a reasonable description of the collateral.

There are three ways for a security right in a movable property to be effective against third parties:
(1) When a notice is registered with the Collateral Registry by the secured creditor.
(2) When the secured creditor has possession of the corporeal asset.
(3) When the secured creditor has acquired control over the right to payment of funds credited to a deposit account or electronic security.

The Collateral Registry is an electronic system that stores information about security rights in movable properties. The Collateral Registry is accessible to the public, and it provides a way for secured creditors to register their security rights and verify the existence of security rights in movable properties.

The secured creditor has priority over other creditors with respect to the collateral. The priority of competing security rights is determined in accordance with the order of registration.

A person may at any time subordinate the priority of its right in favor of any competing claimant. Subordination does not affect the right of competing claimants other than the person subordinating its priority and the beneficiary of the subordination.

In the event of nonperformance, after the obligation becomes due, a secured creditor is entitled to possess the collateral without the involvement of the court. The secured creditor may only possess the collateral if the grantor has consented to this under the security agreement or if the grantor does not object during the possession of the collateral. If the grantor objects to the possession of the collateral, the secured creditor may possess the collateral with the assistance of the police based on the order of the Collateral Registry Office.

The Movable Property Security Right Proclamation No. 1147/2019 is a positive shift in Ethiopian law because it provides a modern and comprehensive legal regime for security rights in movable properties. The Proclamation will help facilitate access to credit for businesses and individuals, and it will also help protect the rights of secured creditors.

Disclaimer: The views and opinions expressed do not reflect the official policy or position of DABLO. The writing is not intended to be, and should not be used as, a substitute for taking legal advice in any specific situation.

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