DOING BUSINESS IN OHADA MEMBER COUNTRIES WITH WHICH SECURITIES ? 
 
- Pledging of partnership rights and transferable securities
- Pledging of stocks
- Possessory lien 
- Surety-bonds



Ohada Law thoroughly updated the laws on securities in force in most of the member countries which were tailored on the basis of the 1804 French Civil Code and remained unmodified until then, except in Senegal.

 


The modification of rules governing concurrence bonds 


- Among the modifications in the rules governing surety bonds 

-- More stringent rules have been laid down to govern surety bonds, notably to protect the guarantors' consent: 

. as a general requirement (ex: the maximum amount guaranteed, including the accessories of the debt, shall be indicated in figures and letters, under penalty of seeing the surety bond being declared nul and void)

. or as a specific requirement (as the consent of the illiterate guarantors) (article 4).

-- Surety bonds are henceforth joint and several unless otherwise expressly provided for in the parties' agreement (article 10).

-- The creditor in favour of whom a surety bond was issued is henceforth obliged to provide the guarantor with some informations on the debtor under penalty of losing his recourse against thesaid guarantor.

- The inclusion of autonomous guarantees (letters of guaranty)

- Letters of guaranty of international standards have been introduced. The requirements as to their issuing are rather strict (natural persons are prohibited to issue such guaranties).
 


Modification of the rules relating to corporeal securities 

The rules governing corporeal securities, whether relating to personalty or immovable property, have been thoroughly updated. 

- Among the modifications in corporeal securities relating to personalty are :

- the inclusion of the possessory lien (before provided for in specific, scattered laws), as a security of general scope which is to be enforced pursuant to similar rules as the ones governing pledges ;

- the updating of the terms and conditions relating to the pledging of some intangible properties (example : the pledging of claims governed by precise rules enabling the pledgee to enforce the pledge in the best interests of all the parties concerned) ;

- the inclusion of additional pledges (such as, on the one hand the ones relating to shares, on the other hand pledges of stocks), to standard pledges without dispossession (pledges of professional equipment and motor vehicles, of business). It is to be emphasized that the numerous warrants existing previously (farm produce warrants, petroleum warrants etc.) have been replace by a single warrantage scheme in the framework of which pledging is facilitated by the issuing of an endorsable note recording the claim and the security. 

Moreover, there has been an important streamlining and updating of the liens, thus : 

- the list of general liens existing in the Civil Code has been streamlined and their number reduced, and general liens securing very important amounts (Treasury, Customs, Social Security institutions) must henceforth be registered in the Trade and Personal Property Credit Register if they are to be demurrable to third parties;

- the list of special liens has also been streamlined (those no longer in use have been eliminated) and in the event of conflict between these special liens over the same personalty, preference is given to the first to levy a distress.

Among the modifications in the coporeal securities relating to immovable property : the repeal of the rule according to which there was not time-limit for the validity of mortage registration. 

Among the modifications in the distribution and classification of securities : the classification of securities have been rationalized with on the one hand securities related to immovable property and on the other hand those relating to personalty. 

The Tables hereunder give a summarized presentation of the main securities provided for in Ohada Uniform Law.





SURETY BONDS

WHAT TYPE OF SECURITY ?  PROPERTY TO WHICH THE PLEDGE IS ATTACHED  THE DEBTS SECURED 

Collateral security granted by a third party to secure the fulfilment of a debtor's obligations 






- Simple personal security and personal security with a material pledge : all the guarantor's assets 

- Collateral security: the asset(s) made available to secure the debt. 
 

The debts existing before the constitution of the surety bond in principal, interest, costs and accessories within the limits of the maximum amount secured mentioned (art. 4. 2 and 9. 1)
FORMALITIES AS TO THE CONSTITUTION OF THE SURETY BOND 
DURATION AND EXPIRY OF THE SURETY BOND
THE RIGHTS OF THE CREDITOR BENEFITING FROM THE SURETY BOND

A written document including a handwritten indication by the guarantor of the maximum amount secured (art. 4. 2 et 9.1 )









Specified or unspecified duration (according to the indications of the instrument)











- Simple personal security and personal security with a material pledge : in the event of default of the debtor, possibility to demand that the payment be made by the guarantor on all his/her assets, starting with the one(s) made available to secure the debt in the second case.

- Collateral security : possibility to proceed only with the liquidation sale of the asset(s) made available to secure the debt, in the event of default of the debtor. 

ENFORCEMENT OF THE SURETY BOND 

The guarantor may be asked to pay only if he has been informed of the debtor's default, after an unsuccessful formal notice to the latter (art. 13. 2)


LETTERS OF GUARANTY

WHAT TYPE OF SECURITY ? 

THE DEBTS SECURED 
FORMALITIES AS TO THE ISSUING OF THE LETTER OF GUARANTY
Collateral security granted by a third person to secure the payment of a debtor's obligation upon first call. 




The ones mentioned in the letter of guaran-ty .







A written document entailing the items listed in article 30 under penalty of being declared void. 

NB. Natural persons are prohibited to issue letters of guaranty under penalty of seeing the latter declared void (art. 29. 1). 


DURATION AND EXPIRY OF THE LETTER OF GUARANTY
THE RIGHTS OF THE BENEFICIARY OF A LETTER OF GUARANTY
ENFORCEMENT OF THE LETTER OF GUARANTY

The ones mentioned in the letter of guaranty (art. 30 and 38)



Right to call for the payment by the gua-rantor of the amounts due by the debtor on presentation of some documents agreed upon (art. 34. 1).



Call for payment by the guarantor on the basis of the list of documents agreed upon (art. 34) 



THE PLEDGING OF PARTNERSHIP RIGHTS AND TRANSFERABLE SECURITIES


WHAT TYPE OF SECURITY ? 

PROPERTY TO WHICH THE PLEDGE IS ATTACHED 
THE DEBTS SECURED 

Transferable guarantee granted by the debtor or a third party on partnership rights or transferable securities to fulfil the debtor's obligations if he fails to do so .


The partnership rights or transferable securities concerned 


The ones mentioned in the pledging agreement. 
FORMALITIES AS TO THE CONSTITUTION OF THE PLEDGE 
DURATION AND EXPIRY OF THE PLEDGE'S ENTRY
THE SECURED CREDITOR'S RIGHTS


- The pledge shall be constituted by a duly registered notarial or private deed (depending on the requirements of national law) which shall entail, under penalty of being declared void the items listed in article 65 (art. 65).

- The pledging agreement takes effect only after registration in the Trade and Personal Property Credit Register (art. 67.1) 

- The pledging agreement shall also be notified to the commercial company or corporate body which issued the partnership rights or transferable securities (art. 67.2). 



Registration upholds the secured creditor's rights for 5 years with effect from the date of registration. It shall cease to be effective unless renewal was requested before the expiry of this period (art. 68). 










The secured creditor enjoys :

- a right of pursuit and a right to sale enabling him to proceed with the liquidation sale of the pledged partnership rights or transferable securities or to have them assigned to him in conformity with the provisions of article 68, 

- a preferential right on the proceeds from their sale, to be exercised according to his rank mentioned in article 149 (art. 68). 



ENFORCEMENT OF THE SECURITY 

Where payment is not made by the debtor, the secured creditor is entitled to exercise his right of pursuit and proceed with the liquidation sale of the pledged partnership rights or transferable securities 8 days after notice to the debtor. He may also request in court that they be assigned to him up to the amount of his debt following an estimate as determined by an expert (art. 68). 



THE PLEDGING OF BUSINESS 

WHAT TYPE OF SECURITY ? 

PROPERTY TO WHICH THE PLEDGE IS ATTACHED 
THE DEBTS SECURED 

Transferable guarantee granted by the debtor or a third party on a business to fulfil the debtor's obligations if he fails to do so. 


The business with its branches concerned where this applies  The ones mentioned in the pledging agreement (art. 72). Registration secures 2 years of interest at the same degree as the principal (art. 90.1). 
FORMALITIES AS TO THE CONSTITUTION OF THE PLEDGE 
DURATION AND EXPIRY OF THE PLEDGE'S ENTRY
THE SECURED CREDITOR'S RIGHTS

- The pledge shall be constituted by a duly registered notarial or private deed (depending on the requirements of national law) which shall entail, under penalty of being declared void the items listed in article 70 (art. 70).

The pledging agreement takes effect only after its registration in the Trade and Personal Property Credit Register (art. 72.1). 

Specific mentions and registration is required in the event of extension of the pledge :

- to items other than the ones automatically included in it 

- or to branches (art. 77 and 78). The pledging agreement shall be notified to the lessor of the building housing the business pledged (art. 81). 


Registration upholds the secured creditor's rights for 5 years with effect from the date of registration. It shall cease to be effective unless renewal was requested before the expiry of this period (art. 83). 


















The secured creditor enjoys : 

- a right of pursuit and a right to sale the business pledged (art. 89), 

- a preferential right on the proceeds from its sale, to be exercised according to his rank men-tioned in article 149 (art. 90.2), 

- a right to make a higher bid exercised according to the rules governing the sales of business (art. 88). 










ENFORCEMENT OF THE SECURITY 

Where payment is not made by the debtor, the secured creditor is entitled to exercise his right of pursuit and proceed with the liquidation sale of the pledged business 8 days after notice to the debtor. He may also request in court that it be assigned to him up to the amount of his debt following an estimate as determined by an expert (art. 89). 


THE PLEDGING OF PROFESSIONAL EQUIPMENT OR MOTOR VEHICLES
 

WHAT TYPE OF SECURITY ? 

PROPERTY TO WHICH THE PLEDGE IS ATTACHED 
THE DEBTS SECURED 

Transferable guarantee granted by the purchaser of equipment or motor vehicles or a third party on such equipment or motor vehicles to fulfil the purchaser's/debtor's obligations if he fails to do so.
 

The professional equipment or motor vehicle(s) concerned. 



The ones mentioned in the pledging agreement. 

FORMALITIES AS TO THE CONSTITUTION OF THE PLEDGE 
DURATION AND EXPIRY OF THE PLEDGE'S ENTRY
THE SECURED CREDITOR'S RIGHTS

- The pledge shall be constituted by a duly registered notarial or private deed (depending on the requirements of national law) which shall entail, under penalty of being declared void the items listed in article 94 (art. 94). 

- The pledging agreement takes effect only after its registration in the Trade and Personal Property Credit Register (art. 95.1) 

- Motor vehicles under declaration of placement on the road and administrative registration : the pledging agreement shall also be mentioned on the adminis-trative document thereof (art. 96.2). 


Registration upholds the secured creditor's rights for 5 years with effect from the date of registration. It shall cease to be effective unless renewal was requested before the expiry of this period (art. 95.2). 












The secured creditor enjoys : 

- a right of pursuit and a right to sale enabling him to proceed with the liquidation sale of the pledged professional equipment or motor vehicles or to have them assigned to him in conformity with the provisions of article 98.1, 

- a preferential right on the proceeds from their sale to be exercised according to his rank mentioned in article 149 (art. 99.2), 





ENFORCEMENT OF THE SECURITY 

Where payment is not made by the debtor, the secured creditor is entitled to exercise his right of pursuit and proceed with the liquidation sale of the pledged professional equipment or motor vehicles 8 days after notice to the debtor. He may also request in court that they/it be assigned to him up to the amount of his debt following an estimate as determined by an expert (art. 98). 




THE PLEDGING OF STOCKS 

WHAT TYPE OF SECURITY ? 

PROPERTY TO WHICH THE PLEDGE IS ATTACHED 
THE DEBTS SECURED 

Transferable guarantee granted by the debtor or a third party on stocks to fulfil the debtor's obligations if he fails to do so. 



The stocks concerned 




The ones mentioned in the pledging agreement. 

FORMALITIES AS TO THE CONSTITUTION OF THE PLEDGE 
DURATION AND EXPIRY OF THE PLEDGE'S ENTRY
THE SECURED CREDITOR'S RIGHTS

- The pledge shall be constituted by a duly registered notarial or private deed (depending on the requirements of national law) which shall entail, under penalty of being declared void the items listed in article 101 (art. 101). 

- The pledging agreement takes effect only after its registration in the Trade and Personal Property Credit Register (art. 108)
 

Registration upholds the secured creditor's rights for 1 year with effect from the date of registration. It shall cease to be effective unless renewal was requested before the expiry of this period (art. 102.2). 








The secured creditor enjoys : 

- a right of pursuit and a right to sale enabling him to proceed with the liquidation sale of the pledged stocks or to have them assigned to him in conformity with the provisions of art. 105.1,

- a preferential right on the proceeds from their sale to be exercised according to his rank mentioned in article 149 (art. 105.2). 


ENFORCEMENT OF THE SECURITY 

Where payment is not made by the debtor, the secured creditor is entitled to exercise his right of pursuit and proceed with the liquidation sale of the pledged stocks 8 days after notice to the debtor. He may also request in court that they be assigned to him up to the amount of his debt following an estimate as determined by an expert (art.105).


PLEDGES

WHAT TYPE OF SECURITY ? 

PROPERTY TO WHICH THE PLEDGE IS ATTACHED 
THE DEBTS SECURED 

Transferable guarantee granted by the debtor or a third party on a property to fulfil the debtor's obligations if he fails to do so. 


The property concerned handed over to the pledgee or an agreed third party 

The ones mentioned in the pledging agreement. 
FORMALITIES AS TO THE CONSTITUTION OF THE PLEDGE 
DURATION AND EXPIRY OF THE PLEDGE
THE PLEDGEE'S RIGHTS
- The pledge shall be constituted by a duly registered deed (according to the requirements of national law) (art. 49).

- The pledge shall be fully effective only if the pledged property is handed over to the pledgee or a third party agreed upon (art. 48).




 


The effects of the pledge shall cease with full payment of the debt. 













The pledgee enjoys :

- a right of pursuit and a right to sale enabling him to proceed with the liquidation sale of the pledged property or to have it assigned to him in compliance with the provisions of article 56.1, 

- a preferential right on the proceeds from its sale to be exercised according to his rank mentioned in article 149 (art. 57). 

- Depending of the type of property under pledge, a right to collect the earnings thereof


ENFORCEMENT OF THE SECURITY 

Where payment is not made by the debtor, the pledgee is entitled to exercise his right of pursuit and proceed with the liquidation sale of the pledged property 8 days after notice to the debtor. He may also request in court that it be assigned to him up to the amount of his debt following an estimate as determined by an expert (art. 56.1). 


CONTRACTUAL MORTGAGES 

WHAT TYPE OF SECURITY ? 

PROPERTY TO WHICH THE MORTGAGE IS ATTACHED 
THE DEBTS SECURED 

Security granted by the debtor or a third party on an immovable property to fulfil the debtor's obligations if he fails to do so. 


The property concerned 



The ones mentioned in the mortgage deed. 

FORMALITIES AS TO THE CONSTITUTION OF THE MORTGAGE 
DURATION AND EXPIRY OF THE MORTGAGE 
THE MORTGAGEE 'S RIGHTS

- The mortgage shall be constituted by a duly registered notarial or private deed (depending on the requirements of national law) (art. 127.2) which shall be registered in the Land Register (art. 122.1).

- Registration of the mortgage deed shall be notified by extrajudicial act to the owner, owner of the soil and subsoil or lessor when the mortgage was granted on such real property rights as usufruct, land surface rights, long lease or building lease (art. 122. 4). 


Registration preserves the mortgagee's right up to the date fixed by contract. Its effect shall cease if it is not renewed for a specified duration before the expiry of the period concerned (art. 123). 









The mortgagee enjoys : 

- a right of pursuit to be exercised against the debtor or any third holder of the property mortgaged according to the rules governing forclosure (art. 146.2),

- a preferential right on the proceeds from its sale, to be exercised according to his rank mentioned in article 148 (art. 117.3), 


ENFORCEMENT OF THE MORTGAGE 

Where payment is not made by the debtor, the mortgagee is entitled to exercise his right of pursuit as stated hereabove.



THE POSSESSORY LIEN

WHAT TYPE OF SECURITY ? 

PROPERTY TO WHICH THE SECURITY IS ATTACHED 
THE DEBTS SECURED 

Transferable security enbling the creditor legitimately holding his debtor's asset to keep on holding it until full payment of his debt. 



The asset(s) legitimately held by the creditor. 


There must be a link between the debt(s) resulting from the business transactions between the creditor and the debtor and the asset(s) held. 
FORMALITIES AS TO THE CONSTITUTION OF THE SECURITY
DURATION AND EXPIRY OF THE SECURITY
THE CREDITOR'S RIGHTS

None, but there must be a link between the debt(s) and the asset(s) held as mentioned before. 



The time during which the asset(s) is/are held by the creditor. 


Right to hold the asset(s) as long as he is not fully paid or granted a security (art. 41 § 1) 
ENFORCEMENT OF THE SECURITY 

A right of pursuit and a preferential right on the proceeds from the sale of the asset(s) may be exercised by the creditor pursuant to the rules governing pledges where he receives neither payment nor security, after notification to the debtor (art. 43).



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