The challenge of determing priority of collateral interests in securities held by non-company investors—the case of Zambia

Certainty and predictability as to the ranking of collateral interests in the same intermediated listed securities is one of the factors influencing the decision of the lender to advance loans to borrowers against a collateral interest in the borrower‘s securities. The study assesses the legal framework for the public distribution of securities so as to establish whether or not it makes adequate provision for perfection and ranking of competing collateral interests in the same securities held by non-company securities. The study employs the doctrinal approach to evaluating legal rules. The main findings of the study were that (a) non-company entities could hold and pledge or mortgage their securities, and that (b) even though non-company entities could hold and pledge their positions, the regulatory framework does not make provision for rules to govern perfection and priority of competing collateral interests in the same securities, (c) that although the Companies Act perfection and priority rules governing mortgaging and charging of company-held securities could, for all intent and purposes of the former, be extended to perfection and ranking of pledges, they could not competently be extended to non-company securities holders. The study makes recommendation for enactment of Personal Property Security legislation (PPSA) which makes express provision for rules to govern perfection and priority of competing collateral interests in non-company held securities. The study further recommends adoption and domestication of Geneva Securities Convention perfection and priority rules as a possible way of supplementing the PPSA.