Afghanistan's Agenda for Action - Economic Growth - usaid

Afghanistan’s Agenda for Action: Developing the Trade & Business Environment – August 2007interest is perfected within 20 days of the date theborrower obtains the collateral. 90An unsecured creditor may obtain priority overunperfected security interests by becoming an“execution creditor” before perfection of the securityinterest or before the secured lender has knowledge ofthe existence of the execution creditor. 91 An executioncreditor is an unsecured creditor who has taken thenecessary steps to have the collateral seized pursuantto an order of the court .92Chapter 8-The Central Charge RegistryChapter 8 of the law creates the central chargeregistry, known as the “Registry,” for the purpose ofregistration of security interests. 93 This will operateunder the control of the Ministry of Commerce andIndustry. 94 Work will need to commence immediatelyon the preparation of the necessary regulationsgoverning maintenance and operations of the Registryto include the duties of the Chief Registrar; the feespayable for registry services and the manner ofpayment of the fees; prescribing the form, content, andmanner of use of registration notices to be used toregister security interests; and the form, content, andthe manner of use of any other notice mentioned in thelaw. 95Chapter 9-Default, Enforcement, Execution and LegalMeansOne of the remedies found in secured transaction lawsin effect in various countries is the right to proceedwithout judicial process if it can be done withoutbreach of the peace. This remedy was not consideredappropriate in Albania because of the need to maintainpublic order and peace in a country that had enduredvarious crises in the decade that led up to enactment ofthe secured transaction law in that country in 1999.Therefore, the Albanian law does not contain any suchself help provisions.90 Id. at § 4.9.91 Id. at § 5.1.92 Id. at ch. 2, art. 4 (“Definitions”).93Id. at ch. 8, § 1.1.94 Id. at ch. 8, § 1.2.95 Id. at ch. 8 art. 2 (“Regulations of Securing Charges”).Current circumstances are different in Afghanistan. Thecircumstances make it appropriate to provide forenforcement of security agreements without courtinvolvement. As discussed below, the businesscommunity, including both commercial lenders andborrowers, does not presently consider the courts tobe of any use in resolving commercial disputes.Accordingly, the Afghanistan draft provides for self helpby allowing the secured lender, after default and a 30-day notice, to enforce its rights without courtinvolvement. 96Where the collateral is an account, after default, thesecured lender may notify the account debtor (which isthe person who owes the borrower money giving riseto the account receivable) to pay the secured lenderdirectly the amount of the account owed to theborrower. 97When the collateral is of a kind that cannot readily bemoved from the borrower’s premises or is of a kindfor which adequate storage facilities are not readilyavailable, the collateral may be seized without removingit from the borrower’s premises and may be disposedof on the borrower’s premises. 98 Any surplus afterapplying the proceeds from the sale must be paid toany other holder of a subordinate security interest whohas notified the secured lender of its interest prior todistribution, with any balance to be paid to theborrower. 99The collateral may be disposed of by public auction orprivate sale so long as the sale is conducted in acommercially reasonable manner. 100 The securedlender may purchase the collateral only at a public saleand only then for a price that is close to thecommercial value of the collateral. 101 In addition to theprocess of sale of the collateral, matters may beresolved by the secured lender proposing to take thecollateral in satisfaction of the debt. The borrower and96 Id. at ch. 9, § 2.2.97 Id. at ch. 9 at § 3.1 (“Collection of Accounts, Instrumentsand Security”).98 Id. at ch. 9, § 9.1 (“Seizure and Sale of Collateral onPremises”).99 Id. at § 9.4.100Id. at ch. 9, art. 6 (“Method of Disposal”).101 Id.53