Security Agreement (Kenya)
SECURITY AGREEMENT
Movable Property Security Rights Act No. 13 of 2017 | Law of Contract Act Cap. 23
THIS SECURITY AGREEMENT is made on [Agreement Date]
BETWEEN:
(1) [Secured Party Name] (ID/BRS: [Secured Party ID Number]), of [Secured Party Address] (the "Secured Party"); and
(2) [Grantor Name] (ID/BRS: [Grantor ID Number]; KRA PIN: [Grantor KRA PIN]), of [Grantor Address] (the "Grantor").
The Secured Party and the Grantor are together referred to as the "Parties".
1. SECURED OBLIGATION
1.1 This Agreement secures the following obligation (the "Secured Obligation"): [Underlying Agreement Description].
1.2 The maximum secured amount is [Maximum Secured Amount].
1.3 This Agreement is a security agreement within the meaning of Section 2 of the Movable Property Security Rights Act No. 13 of 2017 (the "MPSR Act").
2. GRANT OF SECURITY INTEREST
2.1 As security for the performance of the Secured Obligation, the Grantor grants to the Secured Party a security interest in the following collateral (the "Collateral"): [Collateral Description].
2.2 Collateral type: [Collateral Type].
2.3 After-acquired property: [After Acquired Property]. Where after-acquired property is included, the security interest attaches to each new asset upon the Grantor acquiring rights in it, in accordance with Section 9 of the MPSR Act.
2.4 The Grantor represents and warrants that: (a) it has full right and authority to grant this security interest; (b) the Collateral is free from any prior security interests not disclosed to the Secured Party; and (c) the Grantor will not create any further security interest over the Collateral without the Secured Party's written consent.
3. REGISTRATION AND PERFECTION
3.1 The Secured Party shall register a financing statement with the Collateral Registry administered by the Business Registration Service (BRS) under the MPSR Act in accordance with: [Registration Responsibility].
3.2 The Grantor shall execute any further documents and do all acts reasonably required by the Secured Party to perfect the security interest and maintain its registration.
3.3 The Grantor authorises the Secured Party to file, amend, and continue financing statements in the Collateral Registry without further consent of the Grantor.
4. GRANTOR OBLIGATIONS
4.1 The Grantor shall: (a) keep the Collateral in good repair and condition; (b) insure the Collateral against loss or damage with a reputable insurer for its full replacement value, noting the Secured Party as loss payee; (c) pay all taxes, levies, and charges affecting the Collateral when due; and (d) notify the Secured Party promptly of any damage to, loss of, or claim against the Collateral.
4.2 The Grantor may use and deal with the Collateral in the ordinary course of its business. The Grantor shall not sell, transfer, or otherwise dispose of the Collateral outside the ordinary course of business without the prior written consent of the Secured Party.
5. DEFAULT AND ENFORCEMENT
5.1 Each of the following shall constitute an event of default: (a) failure to perform the Secured Obligation within [Cure Period] of its due date; (b) insolvency of the Grantor under the Insolvency Act No. 18 of 2015; (c) any representation in this Agreement being materially false; (d) the Grantor disposing of Collateral without the Secured Party's consent; (e) loss, damage, or destruction of a material part of the Collateral that is not covered by insurance proceeds.
5.2 Upon an event of default, the Secured Party may: [Enforcement Method], in accordance with Part VII of the MPSR Act No. 13 of 2017.
5.3 The Grantor has the right to redeem the Collateral by paying all amounts due in full at any time before the Secured Party completes disposal of the Collateral under Section 65 of the MPSR Act.
5.4 Proceeds of any enforcement sale shall be applied in the following order: (i) enforcement costs; (ii) the Secured Obligation; (iii) any surplus to the Grantor or to junior security holders under the MPSR Act.
6. GOVERNING LAW AND DISPUTE RESOLUTION
6.1 This Agreement is governed by the laws of Kenya, including the Movable Property Security Rights Act No. 13 of 2017, the Law of Contract Act Cap. 23, and the Insolvency Act No. 18 of 2015.
6.2 Disputes shall be resolved by: [Dispute Resolution].
IN WITNESS WHEREOF, the Parties have signed this Agreement on the date first written above.
Secured Party
________________
Signature
Grantor
________________
Signature
Witness
________________
Signature
What Is a Security Agreement (Kenya)?
A Security Agreement in Kenya governs the relationship between the parties by fixing what each must do.
The Movable Property Security Rights Act No. 13 of 2017 (MPSR Act) is Kenya's principal statute governing security interests in movable property. The MPSR Act, which came into force on 8 May 2017, modernised Kenya's secured transactions framework by establishing the Collateral Registry administered by the Office of the Registrar of Companies under the Business Registration Service (BRS) at the State Department for Trade. The MPSR Act covers security interests in: goods (equipment, inventory, vehicles, livestock, crops); accounts receivable and other financial claims; intellectual property; financial instruments (shares, bonds, negotiable instruments); and proceeds of collateral.
Before the MPSR Act, security over movable property in Kenya was governed by the patchwork of the Chattels Transfer Act Cap. 28, the Hire Purchase Act Cap. 507, and the Bills of Sale Act Cap. 56 — all of which imposed cumbersome registration requirements and afforded limited protection to secured creditors in insolvency. The MPSR Act replaced these statutes with a unified notice-based registration system through the Collateral Registry, accessible via the BRS eCitizen portal.
The Land Act No. 6 of 2012 and the Land Registration Act No. 3 of 2012 govern security interests over immovable property (land) in Kenya. Charges over land are registered at the relevant Land Registry under the Land Registration Act, not with the Collateral Registry. A Security Agreement in the sense addressed by this template covers movable property only; security over land requires a separate charge or mortgage instrument.
The Insolvency Act No. 18 of 2015 governs the treatment of security interests in the insolvency of the grantor. A security interest perfected by registration in the Collateral Registry under the MPSR Act before the onset of insolvency is a perfected security interest that takes priority over unsecured creditors in the distribution of the insolvent estate. An unperfected security interest may be set aside by the insolvency administrator under Section 74 of the Insolvency Act No. 18 of 2015.
The Kenya Revenue Authority (KRA) under the Value Added Tax Act No. 35 of 2013 may treat the enforcement of a security interest — specifically, a sale of the collateral by the secured party — as a taxable supply, triggering VAT obligations. The Income Tax Act Cap. 470 may also apply to any gain realised on the disposal of collateral. Parties to a Security Agreement in Kenya should consider the tax implications of enforcement at the time of drafting.
When Do You Need a Security Agreement (Kenya)?
A Security Agreement in Kenya is required whenever a creditor advances credit to a borrower and requires security over the borrower's movable assets as collateral — rather than, or in addition to, security over land.
A Security Agreement is needed when a Kenyan bank or microfinance institution (MFI) regulated by the Central Bank of Kenya (CBK) under the Microfinance Act No. 19 of 2006 advances a business loan and takes security over the borrower's business equipment, motor vehicles, or inventory. A written Security Agreement perfected by registration with the Collateral Registry under the MPSR Act No. 13 of 2017 is essential to protect the lender's priority in the event of the borrower's insolvency under the Insolvency Act No. 18 of 2015.
A Security Agreement is required when a Kenyan agricultural lender or the Kenya Agricultural Finance Corporation (KAFC) advances credit to a farmer and takes security over the farmer's livestock, crops, or agricultural equipment. The MPSR Act No. 13 of 2017 specifically extends to security interests in agricultural products and livestock, enabling Kenyan smallholder farmers to use their assets as collateral for credit.
A Security Agreement is needed when a Kenyan vehicle financier or hire purchase company advances credit for the purchase of a motor vehicle and retains a security interest in the vehicle until the loan is repaid. The MPSR Act No. 13 of 2017 replaced the Hire Purchase Act Cap. 507 for most commercial vehicle financing transactions, and a registered Security Agreement provides the financier with priority over other creditors in the event of default.
A Security Agreement is required when a Kenyan factoring or invoice discounting company purchases accounts receivable from a business client and registers a security interest in the assigned receivables under the MPSR Act No. 13 of 2017. The MPSR Act's treatment of accounts receivable as eligible collateral has enabled the growth of the factoring sector in Kenya's financial market.
A Security Agreement is needed when a private creditor in Kenya advances a significant loan to a business and wishes to take security over the business's movable assets — equipment, stock, vehicles — in addition to or instead of a personal guarantee. The Security Agreement, perfected by Collateral Registry registration, gives the creditor a secured claim that ranks above unsecured creditors in any subsequent insolvency of the debtor.
A Security Agreement is required when a Kenyan company issues a debenture over its assets in favour of a debenture holder. While a debenture instrument is executed under the Companies Act No. 17 of 2015, the underlying security interest in movable assets must be registered with the Collateral Registry under the MPSR Act No. 13 of 2017 to be perfected.
What to Include in Your Security Agreement (Kenya)
A Kenya Security Agreement under the Movable Property Security Rights Act No. 13 of 2017 and the Law of Contract Act Cap. 23 must contain the following essential elements to be valid, enforceable, and effective against third parties.
Parties: Full legal names, addresses, and identifying numbers of the secured party (creditor) and the grantor (debtor). For companies, the Business Registration Service (BRS) number and registered office under the Companies Act No. 17 of 2015. For individuals, the National Identity Card (NIC) number and KRA PIN under the Income Tax Act Cap. 470.
Description of the Secured Obligation: The underlying obligation secured by the agreement — typically a loan agreement, a credit facility, a guarantee obligation, or a trade debt. Reference should be made to the principal agreement (for example, the Loan Agreement dated [date]) with a statement of the maximum secured amount.
Description of Collateral: A description of the movable property over which the security interest is granted, sufficient to identify the collateral under Section 6 of the MPSR Act No. 13 of 2017. Collateral may be described by item (make, model, serial number for equipment or vehicles), by category (all inventory held by the grantor at the business address), by formula (all receivables arising from contracts with named customers), or as a general description (all of the grantor's business assets). A general description covering all of the grantor's assets is permissible under the MPSR Act and is commonly used in commercial lending.
Creation and Attachment: The Security Agreement must be signed by the grantor (and ideally by the secured party) to create a valid security interest under Section 8 of the MPSR Act. The security interest attaches to the collateral when the grantor has rights in the collateral, value has been given (the loan has been advanced), and the Security Agreement has been signed — all three conditions under Section 9 of the MPSR Act.
Perfection by Registration: To be effective against third parties — including the grantor's other creditors and an insolvency administrator — the security interest must be registered with the Collateral Registry through the BRS eCitizen portal under Section 11 of the MPSR Act No. 13 of 2017. The registration notice must describe the grantor, the secured party, and the collateral, and payment of the prescribed registration fee (currently KES 1,000 per financing statement) must be made. Registration is valid for the period stated in the financing statement.
Rights and Obligations of the Grantor: The grantor's right to use, sell, or deal with the collateral in the ordinary course of business (unless restricted by the Security Agreement), the grantor's obligation to maintain and insure the collateral, and the prohibition on disposing of the collateral outside ordinary course dealings without the secured party's consent.
Default and Enforcement: Events of default (non-payment, insolvency, breach of maintenance obligations, unauthorised disposal of collateral), the enforcement procedures available to the secured party under Part VII of the MPSR Act No. 13 of 2017 — including repossession of collateral, sale of collateral by public auction or private treaty, and application of proceeds — and the grantor's rights including a right to redeem the collateral before sale.
Governing Law: The agreement is governed by the laws of Kenya, including the MPSR Act No. 13 of 2017, the Law of Contract Act Cap. 23, and the Insolvency Act No. 18 of 2015. The forms-legal.com Kenya Security Agreement template includes all mandatory elements required under the MPSR Act No. 13 of 2017 and provides a clear framework for Collateral Registry registration and enforcement.
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howpublished = {\url{https://forms-legal.com/kenya/financial/agreements/security-agreement-kenya}},
note = {Free legal document template}
}Also available for these jurisdictions:
Frequently Asked Questions
The Collateral Registry is Kenya's central electronic registry for security interests in movable property, established under the Movable Property Security Rights Act No. 13 of 2017 and administered by the Business Registration Service (BRS) at the State Department for Trade. The Collateral Registry operates through the BRS eCitizen portal and allows secured parties to register financing statements that give public notice of their security interest in a grantor's movable assets. Registration in the Collateral Registry is critical for two reasons. First, it determines the priority of competing security interests — under Section 17 of the MPSR Act, a perfected security interest (one that is registered) takes priority over unperfected security interests and over the general unsecured creditors of the grantor. Second, it protects the secured party's interest in the grantor's insolvency — under the Insolvency Act No. 18 of 2015, a registered security interest survives the insolvency of the grantor and entitles the secured party to enforce the security against the collateral ahead of other creditors. A Security Agreement that is not registered with the Collateral Registry may still be enforceable between the parties but affords no priority over third parties.
When a grantor defaults under a Kenya Security Agreement, the secured party may enforce the security interest under Part VII of the Movable Property Security Rights Act No. 13 of 2017 through the following steps. First, the secured party must give written notice of default to the grantor specifying the event of default and, where applicable, providing an opportunity to cure. After the cure period expires (if any), the secured party may take possession of the collateral — either peacefully (without breaching the peace) or through a court order under Section 58 of the MPSR Act. Once in possession, the secured party may sell the collateral by public auction or by private contract, provided the sale is commercially reasonable under Section 62 of the MPSR Act. The proceeds of sale are applied first to the costs of enforcement, then to the secured obligation, and any surplus must be remitted to the grantor or to junior secured parties. The secured party must account to the grantor for the sale proceeds. The MPSR Act does not permit the secured party to simply retain the collateral in satisfaction of the debt without following the disposal procedure, unless the grantor consents in writing after the default.
Yes. The Movable Property Security Rights Act No. 13 of 2017 expressly permits a Security Agreement in Kenya to cover after-acquired property — that is, assets that the grantor acquires after the Security Agreement is signed. Section 6 of the MPSR Act allows the collateral to be described as property that the grantor acquires in the future, provided the description in the Security Agreement is sufficiently specific. A security interest in after-acquired property attaches to the collateral as soon as the grantor acquires rights in the new asset and all other attachment conditions under Section 9 are met, without requiring any further agreement or registration. The financing statement registered with the Collateral Registry should describe after-acquired property if the secured party intends to cover future assets. This is particularly important for inventory financing and accounts receivable financing in Kenya, where the specific collateral changes constantly but the secured party needs continuous security over the entire stock or receivables pool.
Under the Movable Property Security Rights Act No. 13 of 2017, the priority of competing security interests in the same collateral in Kenya is determined primarily by the time of registration with the Collateral Registry, not the time of attachment or the time of the Security Agreement. This is the 'first to file' rule under Section 17 of the MPSR Act: a secured party who registers first in the Collateral Registry takes priority over later-registering secured parties, even if the later party's security interest attached to the collateral first. There are exceptions: a purchase money security interest (PMSI) — a security interest taken by a seller or financier who supplies the value that enables the grantor to acquire the collateral — has superpriority over prior registered security interests in the same collateral under Section 21 of the MPSR Act, provided the PMSI is registered before the grantor takes possession of the collateral. Lenders in Kenya should conduct a Collateral Registry search before advancing credit to verify that no prior security interests encumber the proposed collateral.
A Security Agreement over movable property in Kenya is generally subject to stamp duty under the Stamp Duty Act Cap. 480 as an instrument creating a charge or security over property. The applicable stamp duty rate for a Security Agreement (as a deed of security or charge on property other than land) is prescribed in the First Schedule to the Stamp Duty Act and is typically a nominal amount for lower-value instruments, with a graduated scale for higher-value secured obligations. The instrument must be stamped within 30 days of execution at a Kenya Revenue Authority (KRA) Stamp Duty office or through the KRA iTax portal. An unstamped Security Agreement is inadmissible as evidence in any civil proceedings in Kenya under Section 19 of the Stamp Duty Act Cap. 480, which can severely prejudice enforcement. Note that stamp duty for a Security Agreement is separate from the Collateral Registry registration fee payable to the Business Registration Service under the MPSR Act No. 13 of 2017.
When the grantor of a Security Agreement in Kenya becomes insolvent and is subject to insolvency proceedings under the Insolvency Act No. 18 of 2015, a perfected security interest (registered with the Collateral Registry under the MPSR Act No. 13 of 2017 before the onset of insolvency) is generally preserved and enforceable by the secured party. The secured party is a secured creditor in the insolvency and has priority over unsecured creditors to the extent of the value of the collateral. An insolvency administrator cannot set aside a validly perfected security interest unless it was created as a fraudulent preference under Section 74 of the Insolvency Act — that is, the security was given within the prescribed period before insolvency to prefer the secured creditor over other creditors without a legitimate commercial rationale. An unperfected security interest may be set aside or lose priority to the insolvency administrator under the MPSR Act. Secured parties should monitor their Collateral Registry registrations and renew them before expiry to maintain perfection status.
This template is provided for informational purposes only and does not constitute legal advice. Laws vary by jurisdiction and change over time. Consult a qualified attorney for advice specific to your situation.Full disclaimer
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