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Secured Transactions


Last modified: 01/07/2021 04:27 PM |


by: i:0#.w|bnmof\amry_wahid

Introduction to Secured Transactions 

The enactment of the Secured Transactions Order, 2016 ("STO") and the accompanying Secured Transactions Regulations ("STR")(collectively referred to the as "the Legislation") is a significant, comprehensive reform of personal property law that introduces a single approach to dealing with personal property (movable assets) where the main proposition is– "is the personal property transaction one that is recognised under the STO?"

The legal framework established by the STO is two-fold.

Firstly, it provides for rules on the creation, perfection, priority and enforcement of security interests[1] on personal properties[2] (movable assets).  This legal framework aims to improve standards of disclosure of information by borrowers and lenders.  It provides a credit enforcement framework, whereby a lender is not obliged to initiate court proceedings in order to exercise his  right to take possession of collateral that is subject to a security interest, in the event of a default.

Secondly, it establishes a Collateral Registry in BDCB. The Collateral Registry is a national electronic register that lists out security interests over personal properties, it flags that a secured party is claiming a security interest against the personal property of a debtor.

The existence of the Collateral Registry in Brunei Darussalam aims to ease the access of credit to individuals and businesses, particularly the Macro, Small and Medium Enterprises (MSMEs) by enhancing their ability to leverage their personal properties (movable assets) as another alternative source of funding for their working capital. 

The Collateral Registry is a credit management tool that can be used by lenders, including banks and finance companies, to identify any potential competing security interests in the same personal property/collateral.

[1] Security interest is a legal term on personal property (movable asset) that has been pledged, usually to obtain loan.  Under the STO, "security interest" means a property right in personal property that is created by agreement and secures payment or other performance of an obligation, regardless of whether the parties have denominated it as a security interest, and includes the right of a seller in an instalment sale or a sale with retained title, but it does not include a personal right against a guarantor or other person liable for the payment of the secured obligation.

[2] Personal Property (movable asset) is basically any sort of personal property, includes goods, chattel paper, documents of title, intangibles, investment securities, money and negotiable instruments, and that is not land, buildings and fixtures.