Securing a credit transaction and the ease of recovery when it becomes due has always been one of the challenges confronting businesses in Ghana. To ease the challenge, collateral registry was set up in Ghana under the Borrowers and Lenders Act, 2020 (Act 1052) to address this challenge.

Before the enactment of Act 1052, the only available remedy for a Lender to realize a security interest was to issue a writ or court proceedings for an order of the court to dispose the security. However, with the advent of Act 1052, a Lender can realize a security interest without going to court.

Below is the step by step procedure to realize a security interest without a court order.

DEMAND NOTICE

Upon default the Lender is under the obligation to send a demand notice to the borrower to remedy the default within a period of 30 days. The borrower is expected to pay or negotiate with the Lender the outstanding debt within the notice period.

MEMORANDUM OF NO OBJECTION

Upon expiration of the notice period and the Borrower hasn't remedy the default, the Lender will be at liberty to start the process of realizing the security interest in the property. The Lender will then register its intention to realize the security interest with the Registrar at the collateral registry. The Registrar of the collateral registry will then issue a document called memorandum of no objection to the lender.

NOTICE TO THE BORROW

After the issuance of the Memorandum of No Objection from the Registrar, the Lender shall then notify the borrower of their intention to take possession of the charged property and sell it.

Once the notice is served on the Borrower, the Lender shall then have the legal right to take possession of the security and sell to satisfy any outstanding debt or obligation of the Borrower.

ORDER FOR WARRANT FOR POSSESSION

In the event the Lender is unable to peacefully take possession of the security, the Lender may apply to court for the court to issue warrant for police protection to enable the Lender take possession of the property. Once the order is granted, the police can lawfully assist the Lender to take possession of the property.

DISPOSING OFF THE PROPERTY

The Lender who has possession of the property is at liberty to dispose of the property to satisfy the debt. The lender can dispose off the property either through Auction, Private sale or Public tender.

Whichever the option the lender decides to choose, the borrower needs to be notified. Any amount realized from the sale can be used to offset any outstanding debt.

Duration

On the average it may take a period of Three (3) to Six (6) months to complete the entire process. However, some of the processes may take longer depending on the complexity of the case.

It is worth to note that the above procedure is only available to a Lender who have registered his/her security interest at the collateral registry.

The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.