ADVOKS GLOBAL · KENYA
Central Depositories Act
42. Charging or mortgaging of securities
Edition: 2023-12-11 · In force
42. Charging or mortgaging of securities
(1)Where a book-entry security is charged by a depositor (in this section referred to as "the chargor") in favour of any person (in this section referred to as "the chargee") the chargee or his nominee shall create a security interest or cause to be created such security interest in the security which is the subject of the charge, as the case may be, in accordance with this section.(2)Except as provided in this Act or the CMA rules, no security interest may be created in book-entry securities.(3)A security interest in book-entry securities to secure the payment of a debt or liability may be created in favour of any chargee by an instrument of charge in the form prescribed under the CDS rules executed by the chargor:Provided that any security interest in a book-entry security subsequent to any charge, created by the chargor in favour of any other person shall be void.(4)Upon receipt of the instrument of charge, the central depository agent shall forthwith register the instrument in a register of charges maintained by the central depository.(5)Where a charge over a deposited security has been discharged or released, the central depository or the central depository agent, as the case may be, shall, upon receipt of a notice in writing from the chargee confirming the same, transfer the deposited security into the securities account of the chargor.(6)This section shall not apply to floating charges:Provided that nothing in this section shall affect the validity and operation of floating charges on book-entries created under common law.(7)Nothing in this section shall be construed in law to require the central depository to monitor, protect, enforce or give effect to any agreement or memorandum made between the chargor and the chargee in respect of the charge, but the central depository or its central depository agent, as the case may be, may require the chargor or chargee to provide such supporting documents evidencing the charge upon creation of the security interest by way of the charge.