The Companies Office of Jamaica (COJ) is advising the public, particularly financial institutions, that effective January 1, 2015, all loans, pre-existing or new, which are being entered on the Security Interests in Personal Property (SIPP) Registry will attract a registration fee.

Implemented by the COJ in January 2014, the SIPP registry is a repository of information on non-real estate assets being tendered as collateral for securing loans under the SIPP Act.

These include motor vehicles, stocks and securities, agricultural products, crops and other agricultural yields, (eg plants, trees and land) machinery and equipment, accounts receivable and futures, for example, future crops, future acquisition of security interests, and unborn livestock.

In addition, owners of creative works, innovators and inventors, are now able to leverage their intellectual property, such as copyright, patents and trademarks to be used as collateral in securing loans.

Currently, a $1,000 fee is charged for each notice of a new loan granted by a financial institution, which it registers on the SIPP Registry, while pre-existing loans are registered free of cost.

Chief executive officer of the COJ, Judith Ramlogan, has told JIS News that December 31, 2014 will officially mark the expiration of the one-year transitional period for people to register pre-existing loans on the SIPP Registry free of cost.

She said that financial institutions will have to pay $1,000 for each pre-existing loan notice that is entered after that date. The pre-existing loan notices were charges against property that existed prior to January 2014.

“Now, for companies, those charges were registered with the COJ because each company has a charges register where the borrowings of the company are noted as well as the collateral used to secure the loan, so those notices of moveable property would now have to be registered with the SIPP Registry,” Ramlogan explained.

In terms of the process, the CEO noted that financial institutions will register notices of loans granted and the associated assets used as collateral. The availability of this information in a central database will enable the institutions to verify any previous use of the potential collateral, and establish priority with regards to other claimants on the same asset.

“So, the registry is really noting the types of collateral used and it is open to the public. It is a searchable registry so anybody, who is interested in using an item as collateral could look at the registry to make sure that the item has not been used as collateral before or …the loan it was covering could support another loan,” she pointed out.

She told JIS News that the SIPP Act does not force people or entities to register a notice, but noted that it is in the creditor’s best interest to do so in case of default of the borrower.

“So, how it works is that a borrower might have collateral such as livestock, for example, a herd of cows, and uses the herd as security for a loan with ‘financial institution A’. ‘Financial institution A’ would have priority but would have to show that by registering a notice on the registry. If the entity does not do that and the person goes to ‘financial institution B’ and uses the same herd of cows as collateral, then ‘finance house B’ would be entitled to priority when it came to that heard of cows, because there would be no notice anywhere that ‘finance house A’ would have any interest or entitlement to the herd of cows in case the borrower defaulted,” Ramlogan explained.

The CEO noted also that the Act gives borrowers and lenders more flexibility because they can use personal or moveable property as collateral “as opposed to in the past where you could only use real property such as house, land, motor vehicle and buildings”.

“The Act reduces the lender”s risk because there are clearly defined rules as to what happens in the event of default…. and the registry is cheap, quick and effective because anybody can go on and do a search of the registry, as there are no fees to search or to see whether collateral has been used and for what purpose any kind of moveable property has been used,” Ramlogan pointed out.

On the matter of amending a notice, she said that the process attracts a $500 fee.

“There is room for amending a notice… so, say the borrower borrowed $20 million from finance house A and then he went back to borrow another $10 million, then it would just be amending that notice since it is the same borrower and lender and the same collateral,” she explained.

“If the collateral is used with different finance houses and different secured creditors, each secure creditor would have to file a notice, even though the same collateral is being used,” Ramlogan added.

Explaining the online registration process, acting deputy CEO and director of operations at the COJ, Inger Hainsley-Bennett, advised people to go to the website at www.nsippregistry.gov.jm and create a new client account, which is free of cost.

She noted, too, that creditors should input details relating to the debtor and the collateral being used, including pictures and serial numbers where applicable.

Hainsley-Bennett said that since the establishment of the registry, over 120,000 notices have been registered with 90 per cent of that amount being pre-existing notices.

“So, we have persons utilising the service of putting on pre-existing loans and information relating to collateral on the registry… so usage is occurring and we are seeing that the amount of notices being registered is also trending upwards,” Hainsley-Bennett said.

The COJ also reminded that there will not be any extension to the transitional period and individuals must utilise the service, particularly to register pre-existing loans, which remains free of cost until December 31, 2014.

— JIS