Beruflich Dokumente
Kultur Dokumente
March 2008
SEDF
A multi-donor facility managed by the
International Finance Corporation of the
World Bank Group
Disclaimer
The Organizations (i.e., IBRD, IFC and MIGA), through FIAS, endeavour,
using their best efforts in the time available, to provide high quality services
hereunder and have relied on information provided to them by a wide range of
other sources. However, they do not make any representations or warranties
regarding the completeness or accuracy of the information included this
report, or the results which would be achieved by following its
recommendations.
About FIAS
For almost 21 years, FIAS has advised more than 130 member country
governments on how to improve their investment climate for both foreign and
domestic investors and maximize its impact on poverty reduction. FIAS is a
joint service of the International Finance Corporation, the Multilateral
Investment Guarantee Agency and the World Bank. We receive funding from
these institutions and through contributions from donors and clients.
About SEDF
Although the ST Act was enacted in 2006, it has not become operational as the
STRO has not been established, nor has any entity been designated to perform
the function of registering notices. Therefore, Nepal does not currently have a
mechanism for the registration of security interests in movable properties and
determining priority in a security giver’s collateral. In the absence of such
mechanism, lenders find it risky to accept movable property as collateral for
loans. This limits access to capital by individuals and small and medium
enterprises which may not have adequate real estate to offer as collateral.
Transition Period
Nepal currently has no equivalent to the ST Act, yet lenders have in the past
extended credit to borrowers secured by movable property. It is anticipated
that these existing secured transactions will be brought into compliance with
the new ST Act by filing notice of them in the Registry to be established. The
issues presented by these circumstances are: 1) how these pre-exising interests
will be treated under the Act with regard to priority; 2) how lenders will
“transition” their existing loan portfolios into compliance with the Act; and 3)
how much time lenders should have to enter their existing interests in movable
property into the registry system. The Act answers each of these issues, but in
a way that could have detrimental impacts on the marketplace.
While the intent may be good, this transition language may cause great harm
in the marketplace. Consider the following example:
Given the problem illustrated by this example, during the transition period any
lender will be even more wary of extending credit secured by movable assets
than under the current non-system. Under the current non-system, even if
there are multiple security interests against the same security giver’s property,
a lender has a fair chance of being the first party to seek self-help against the
security giver, thereby rewarding the vigilant lender. This is not the case
under the ST Act. Lenders, aware of the possibility of a “springing interest”
that will grant legal priority to a hidden security holder, will likely be very
hesitant to make loans secured by movable property until the transition period
has passed. Given that the transition period is for a full one year, this could
have severe detrimental impacts in the marketplace, as the availability of
credit could be severely curtailed. The risk to Nepal’s economy is sufficiently
great that the ST Act should be amended to shorten the one-year transition
period to no more than three months.
Confirmation of Filing
In most other jurisdictions, filing of a secured transaction notice causes the
registration office to issue a receipt or acknowledgment in the prescribed form
containing the particulars of the notice. The ST Act does not contain any
provision for the issuance of such receipts or acknowledgments. Further, the
ST Act does not specifically provide for a confirmation of filing, amendment,
continuity or termination by the STRO to the person filing the notice. A print
out of the filed notice with the file number and the date and time of filing
would meet this need. This issue can be addressed in the regulations.
Technical Corrections
There are two technical corrections to language in the Law that are necessary
to avoid potential legal issues after implementation. The first of these is to
amend Section 7(2) to provide that the security holder, not the security giver,
is the appropriate party to file a notice. This is necessary to reflect best
practices used in registries in all other countries, and to prevent a dishonest
The ST Act provides that the STRO can either operate the Registry itself or it
can enter into a contract with a private entity pursuant to which the private
entity would be authorized to implement the Registry and related functions.
Based upon these provisions, there are two separate paths that could be taken.
First, the STRO itself could be staffed and equipped to handle all registry
functions. This is a viable option. However, starting an entirely new
government agency from the ground up is time consuming under any
circumstances, and especially under those that currently prevail in Nepal.
Therefore, a different approach would be needed to quickly and efficiently
deploy the registry.
In this second approach, the STRO would be formed under the Ministry of
Finance, but would only act in an oversight role, while the actual registry
functions would be handled by an existing entity. It should be noted that this
approach met with widespread acceptance amongst the GoN officials and the
stakeholders interviewed.
Four different entities were examined as potential hosts for the Registry
database. All four of these entities currently undertake duties that are at least
partly similar to those contemplated by the ST Act. These entities are:
The other agencies are not feasible options for the registry host. The Office of
the Company Registry’s primary charge has been to register corporate entities
that seek to do business in Nepal. The Company Registry has recently been
assigned numerous additional duties, including those under the recently
enacted Insolvency Act, and is also wrestling with implementing a database to
hold company registration information. Because of these added
responsibilities and its ongoing automation project, officials with the
Company Registrar expressed a reluctance to take on additional duties
associated with the ST Act.
SEBO officials indicated that they did not have the resources to undertake new
duties. They underscored this point by stating that they had plans to
implement technological advances to address current legislative directives, but
lack the funding necessary to carry out these mandates. These officials also
questioned whether the goals of the ST Act were in congruence with SEBO’s
mission to augment and regulate Nepal’s capital markets. However, SEBO
officials did not go so far as to assert a specific lack of desire to take on the ST
Act. Instead, it may be fair to say that while they would prefer not to have this
responsibility, they would accept it if it was assigned to them. The
Assessment Team believes that SEBO would be capable of handling the duties
that would be imposed upon them under the ST Act.
D. Language
In most jurisdictions, the language used for registration is the official national
language. However, Nepal is one of several countries where the language of
commercial transactions is different from the national language. While Nepali
is the nation’s official language, English is pervasive and is used in most
commercial transaction documents.
The private party lenders interviewed universally agreed that English should
be the language of choice for notices filed in the Registry database. There are
certainly practical reasons to adhere to this view, including: commercial
institutions use English in their contracts and loan documents; English is much
easier to type, making on-line filing more accessible; it is much easier to
translate a Nepali surname into English to enter it into the Registry database
than it is to translate an English name into Nepali; foreigners doing business in
The assessment team specifically questioned officials from the Nepal Debt
Recovery Tribunal, an arm of the judicial branch that has jurisdiction over
borrower–lender disputes, on this issue. These officials stated that in the event
of a priority dispute between the parties, print-outs in English would be
admissible to the Court, and that there are no legal requirements that such
evidence should be presented in Nepali.
The following two steps must occur at the outset before other steps may be
taken. They are:
• The GoN must establish the STRO (and appoint a person to the
position of Registrar) and determine that the CIB (or some other entity)
will operate the Registry.
After those actions have been taken, a host of other activities can begin. They
are listed below in sequential order. However, not all are directly dependent
Once the legal framework is in place and after the information technology
system has been developed, CIB must: 1) establish the office space in which to
house the Registry; 2) the select and train the Registry staff; and 3) ensure the
financial viability of the Registry. Each of these is discussed below.
Office Space
Staff
The Act calls for the establishment of a “Secured Transaction Registry Office”
(“STRO”) and for the appointment of a person to serve as the “Registrar,”
with such person having the job title of “Gazetted Officer of Class II or
equivalent rank.” There are no other explicit requirements pertaining to
staffing within the Act.
Financial Considerations
The following table summarizes the major ongoing expenses associated with
running the Registry:
Bandwidth 5,760 90
1
See Chapter 2 and 4 of the ST Act
In general terms, the STRO will be responsible for performing the following
functions and duties under the ST Act:
• Keeping the Secured Transactions Registry
• Filing notices of security interests and liens
• Provide information from the records of the STRO to any person who
requests it
• Make an annual report of operations
In carrying out these functions, the ST Act does not provide specific details as
to what the day-to-day functions or duties of the Registrar would be. These
functions and duties may be provided in the implementing regulations to be
framed under section 59 of the ST Act. Importantly, the ST Act does state that
these functions and duties may be performed either by STRO itself, or that the
STRO may outsource any or all the functions of the STRO to a private body.
Such a private body must, however, satisfy the following two criteria provided
for in the ST Act:
• It should have “adequate means, manpower and financial and technical
resources needed for assisting the STRO in its task of registering
notices.”
• It should have “the capacity to gain access to the electronic registry
kept by the STRO according to suitable professional practices.”
2
See clause (a) of sub-section (1) of section 5 (1) of the ST Act.
The ST Act provides that the information from the Registry database can be
supplied through any medium. Therefore, the entity hosting the Registry may
make some or all of this information available on a website accessible by the
public and thereby be in compliance with the ST Act. There is no requirement
that the host entity provide information in paper form.
Transition period
While this issue resides largely outside the scope of implementation of the
Registry itself, it is critical to the overall success of the implementation of the
Secured Transactions Act. The issue pertains to the length of time that lenders
are granted within which they may register notices of pre-existing interests.
Fees
The schedule of fees to be paid are set forth in the ST Act. It is not a common
practice to prescribe the fee in the statute. Instead, the enabling act typically
contains an enabling provision which allows the authorities to prescribe the
fee in regulations. This provides the authorities with the flexibility to revise
the fee without needing Parliament to amend the statute.. If at any stage it is
considered necessary by the Government of Nepal to revise the fee schedule
stated above, an amendment of section 19 of the ST Act by the Parliament
would be needed, which can take considerable time in Nepal.
The reason why the issue of fees is so important is that there exists a direct
nexus between revenues to be derived from the Registry and the business
model to be adopted for operation of the Registry. As discussed in more detail
herein, a public/private partnership should be established, pursuant to which a
private entity will enter into a contract with the GoN to run the day-to-day
functions of the Registry. In order to entice a private entity to act in this
capacity, the revenue earned out of the fee receipts must be sufficient to at
least cover expenses.
In Nepal, unless otherwise prescribed by law, the revenues received by a
public office are deposited in the State treasury and flow into the common
general fund maintained by the government. The expenses associated with
such public office are then met by the yearly budgetary allocation made by the
government. Presumably, this same principle would apply to the fee receipts
under the ST Act if the STRO were to operate the Registry.
Correcting a Name
During the life of a security interest, the name of a business entity security
giver may change due to any number of circumstances (sale, merger, etc.). In
such an event, the notice against that security giver must be updated to reflect
the new name. Subsection 2 of section 9 of ST Act should be amended to
provide that the change in name of the security giver would require the filing
Technical Corrections
The Law contains two provisions that amount to errors in drafting, but that
may have significant legal impacts. These provisions should be amended to
avoid potential legal problems when the law is implemented.
The first of these provisions is Section 7(2), which says in relevant part: “The
security giver himself/herself, or a person authorized by him/her to act on
his/her behalf, may register the original notice. . . .” In reality, the notice
should be filed by the security holder, not the security giver. The party whose
interest is served by filing the notice is the security holder. If the task were
given to the security giver, there is a strong likelihood that notices may not be
filed or that they may be altered by the security giver before being filed. In
every other country that has implemented such laws, the responsibility for
filing belongs to the security holder. Section 7(2) should be amended in
relevant part to read: “The security holder, or a person authorized by him/her
to act on his/her/its behalf, may register the original notice. . . .”
The credibility of each entity within the primary user group of the entity, the
lending community, is also an important consideration and therefore was
examined. This was accomplished by conducting meetings with various
lenders, most of whom have had experience with each of the four candidate
entities, as well as with business people outside of the lending community.
While the information gathered was of necessity anecdotal, the users who
attended meetings represented a fair cross-section of the most common
potential of users of the database, both lenders and borrowers.
Conclusion
Based on this objective analysis, CIB is the entity best situated to host the
Registry. There are three primary reasons for this conclusion:
a) First, the CIB is the only entity that actively seeks to host the Registry.
The Registry is most likely to be successful if it is assigned to an
enthusiastic host.
b) Second, the CIB is a private entity. Given the current political realities
in Nepal, a private entity will be able to start the Registry more quickly
than a governmental entity would, and also carry out its functions more
efficiently. A related issue to consider is that ninety percent of the
equity owners of the CIB are financial institutions, who have a direct
financial interest in the success of the Registry. As such, they are
motivated to see it succeed and will give it the attention it deserves.
c) Finally, the CIB already performs business functions that are closely
related to those that will be undertaken by the Registry host.
Therefore, there will be no need for substantial cultural changes or
acclimatization to entirely new technologies on the part of CIB staff in
order for it to succeed.
The private sector interviewees universally stated that they would use the on-
line electronic system. The business need for a paper-based system is thus
questionable, given that the primary user group would employ the on-line
system. Admittedly, these interviewees represented the larger institutional
lenders in Nepal. While these lenders would be taking the vast bulk of
security interests in Nepal, the section below addresses the needs of small
lenders.
• The user group for and the beneficiaries of this registry consist of
lenders as well as buyers of livestock, crops, equipment etc. In
practice, the database would not receive notices from the general
public, thus minimizing concerns about universal internet access to the
database.
• The Registry office itself could easily establish a dedicated public
workstation with internet connectivity, so that any person who does not
have a computer or internet access could access the registry from that
3
The term “bogus filing” refers to instances where third parties submit phony
notices to a secured transactions registry with the intent to harm another,
typically through the creation of false liens.
The Act establishes the information required in the Notice. In summary, for
an Initial Notice, the following information is required :
• Security giver Name (for an individual Nepali citizen, the
citizenship number suffices as the name)
• Security giver Address
4
Secured Transactions Act, Chapter 2, Section 18, subpart 1 of the Act.
There are two instances where the concept of “authentication” arises in the
operation of a secured transactions registry. The first occurs with regard to the
time that a Notice is filed, and the second involves information that is
withdrawn from the database by the public. Each of these is discussed below.
5
Secured Transactions Act Chapter 2, Section 18, subpart 2
6
The law does not now provide for this, but it is implicit. It is recommended to fix this. See
comments above on the Act, Section 18(2).
While the Act does not require the Registry Office to authenticate the identity
of the person that files a Notice, there is a practical way in which the identity
of a filer may be established for electronic notices.
In order to complete an electronic notice, some method of payment must be
employed. Regular users will establish accounts with the Registry Office,
from which they may pay for services on an ongoing basis. Individual users
will be able to use a credit card or pay via commercial bank for one-time
transactions. In each instance, the software governing the database can be
designed so that the biographical information of the entity paying the filing fee
can be captured in an audit log and linked to the appropriate transaction. The
information maintained in this audit log is not public. However, it is
accessible by anyone in the registration office that has been given the proper
database permissions. That way, if a dispute arises over whether a notice was
submitted fraudulently, the registration office may provide information to the
parties regarding who actually paid for filing the notice. The database system
should be designed such that the audit log is retained as a permanent record.
While it may be counterintuitive, it is nonetheless true that the same level of
filer identity verification is not attainable through a paper-based system. If
paper notices are allowed, a mischievous person could elect to fill out a form
with false information, mail it to the registry via regular post with the filing
fee in cash, and thereby leave no tracking record.
All public information held within the Registry database should be accessible
to the public via the internet. The term “public information” refers to
information the Act requires to be submitted for the various notices. This
includes: security giver name and address, security holder name and address,
and collateral description. Any person may view and print this information as
displayed on the Registry website.
The key consideration with regard to whether any additional authentication
requirements exist is whether Nepali courts will require authentication in order
to admit into evidence information from the Registry database. During an
interview with the Debt Recovery Tribunal, members of the tribunal
confirmed that printouts from the Registry website would be admissible and
that no additional authentication or certification would be required unless the
printout were to be challenged as a forgery, in which case the Registry would
simply be asked to provide a printout.
It is recommended that the software used by the Registry be configured so as
to allow a certified search report to be produced.
There are two components to consider with regard to database capacity of the
Registry. The first concerns anticipated Registry activity as determined by the
number of notices that would be expected on an annual basis. The second
concerns ensuring certain that there is adequate capacity to efficiently run the
software that manages that database.
With regard to estimating the number of notices anticipated on an annual
basis, there is no analogous function in Nepal upon which to base an estimate.
The CIB maintains a database of “borrowers”, where information that could
loosely be called “credit information” holds information on approximately
40,000 borrowers. The CIB further responds to an average of 250-300
requests for information on borrowers from its member institutions each day.
While this information serves as a rough benchmark as to the level of
borrowing activity in Nepal, it is not specific to interests secured by movable
property, and it is reasonable to suspect that some portion of the information
relates to unsecured loans or to interests secured by real estate, personal
guarantees or notation on the title of a vehicle. Therefore, one could
extrapolate that the Secured Transaction Registry, limited as it is in scope to
holding information related to movable property, might initially have fewer
borrowers and experience fewer requests for information.
The Company Registry in Nepal currently has approximately 55,000 corporate
entities. This relatively low number is in line with a developing nation that
does not have significant economic activity. Of more relevance to estimating
the number of notices that the Registry database may enjoy are the results of
survey prepared by the Assessment Team and conducted by the Nepal Rastra
Bank in the summer of 2007. The survey was designed to obtain information
from a variety of lenders as to their anticipated use of the Registry. The full
survey results are set forth in Appendix B at the end of this report.
Given the available information, it does not appear that obtaining adequate
hardware capacity to maintain information in the Registry will be a concern.
By way of comparison, hardware (and associated software) is readily available
in the open market designed to handle registries that serve jurisdictions with
over a million registered corporate entities and tens of millions of secured
transaction registry records.
The exact hardware requirements can be determined once the application
software vendor is selected so that hardware and system software
specifications can fit the needs of the application. . If any additional
individual workstations are needed the host entity to accommodate registry
workload, it will not be more than one or two, and their cost will not be a
significant planning factor.
Three options exist with regard to obtaining the application software needed to
run the Registry database:
• Purchasing a license for off-the-shelf software that exists and contract
with its developer modify it to fit unique Nepalese requirements.
• Acquire a license for the core code of off-the-shelf software and
modify it with local Nepalese developers.
• Build the application software from scratch to detailed specifications.
The quickest and safest means to implement the Registry is to acquire an “off-
the-shelf” software product already in use in jurisdictions that have
implemented a secured transactions law similar to the Act in Nepal. This
approach is both faster and more cost-effective because building software
from scratch requires that all specifications and business requirements must
first be documented, and that such requirements be programmed. Further,
there is less risk of encountering software “bugs” when purchasing a product
that has already been in production.
It is anticipated that such a product can be acquired for approximately
$120,000US, including the cost of related services of a local development firm
such as translation of field labels and instructions.
Staffing
The Act calls for the establishment of a “Secured Transaction Registry Office”
(“STRO”) and for the appointment of a person to serve as the “Registrar,”
with the job title of “Gazetted Officer of Class II or equivalent rank.” There
are no other explicit requirements pertaining to staffing within the Act.
The organizational structure envisioned in the Act calls for the STRO to be
established as a new entity under the auspices of the Ministry of Finance. The
STRO would then enter a contract with a private entity to carry out the day-to-
day functions of the Registry. If this scenario is followed, then the STRO
itself would not require significant staffing; it should be sufficient to utilize
one person part-time, for perhaps two hours per month on average. It may be
Hardware Specifications
Facilities
A solely electronic Registry does not require significant physical facilities for
three reasons. First, there is no need for housing large numbers of staff.
Second, there is no need to establish a permanent repository to hold paper
notices, which over time would require space and storage facilities. Third,
providing internet access to the Registry eliminates the need to establish
branch offices, resulting in substantial cost savings both at the start-up of the
Registry and during ongoing operations.
The primary requirement for housing an electronic registry is that the room in
which the servers are located must be climate-controlled. The facility in
which the Registry is housed must also have ready access to a broadband
internet connection. In addition the facility should satisfy other conditions,
including grounded circuitry, conditioned power, back-up generator with fuel
supply, physical security and access controls, server rack space and automated
fire suppression using a gas suppressant.
Best practices suggest that a disaster recovery plan whereby a copy of the
database is maintained off-site, preferably in a remote geographic location
from Kathmandu in anticipation of a natural disaster (e.g. earthquake).
The Registry should provide access to an internet connection for users who do
not otherwise have access. This can be done through a dedicated workstation
that should be available to the public at either the STRO or at the location of
the private entity (CIB) that houses the Registry. This workstation would have
3 Implementation Plan:
Regulations, Time-line and
Budget
Below is an overall roadmap to follow to bring the Secured Transaction
Registry to fruition. This roadmap includes references to specific milestones
and a time-line for completing critical path tasks.
4. Prepare, GoN, MoF Should be completed as soon as Bid as fixed price contract.
obtain GoN possible. Define all Price should include technical
procurement performance standards for documentation, knowledge
agency software and all related tasks transfer, HW/SW
approval, and such as installation of Nepali specifications, integration of
publish field labels, etc. when received translated labels, etc., on-site
procurement from local IT firm, installation and testing.
documents for specification of HW & system
Est Cost: US$100,000
application SW requirements, installation,
software. on-site testing and debugging,
knowledge transfer to local IT
firm, etc. Preparation and
approval should take 2 to 6
weeks. Publication period
should be at least 30 days.
8. Select local GoN, MoF As soon as possible after end of For tasks associated with
IT firm; publication period. Should be establishment, e.g. translation,
negotiate final no more than 4 weeks. knowledge transfer, & test &
terms & acceptance support,.
execute
Est Cost: US$20,000.
contract.
5. Prepare text CIB, to be Should begin after selection of Cost included in the software
for Web given to software vendor. vendor’s contract.
pages. developer
6. Employ GoN, MoF Approximately concurrent with There will be costs associated
Registrar 7 & 8. with employing and housing
the Registrar for the duration
of the project until revenues
are received.
Est Cost: US$ 5,000
7. Translate Local IT Ongoing through period that Cost included in the local IT
labels, etc. as developer SW vendor is developing firm’s contract.
SW vendor modifications to base code and
sends to local installing translations.
IT developer
16. Training Software 2 weeks concurrent with 13, 14 Costs included in software
of staff vendor, CIB, & 15. vendor’s contract.Outside
registrar consultant will assist using
time covered in 13.
18. STRO,
Regulations Ministries of
must be Finance and
officially Laws
adopted prior
to deployment
19. Deploy
Under this scenario, it will take approximately one year from the time of the
contract between the STRO and the CIB for the system to be ready to deploy.
This is an aggressive schedule, but also a realistic one if an appropriate off-
the-shelf product is selected. Please note that if the STRO is selected to host
the Registry, this timeline is too aggressive as the STRO will not have the
corporate infrastructure in place to facilitate moving so quickly. It is
anticipated that as much as six (6) months might be added to this schedule if
the STRO is assigned the Registry.
Further, assuming that the CIB undertakes the planned upgrade of hardware in
conjuction with a technology partner, and that it will move to a new location
more suited to the new needs of the institution, the other cost categories would
be as follows:
Based on the above, total monthly hardware and software maintenance costs
would amount to NRs17,920 (USD 280).
The recommendation to purchase an off-the-shelf software product will be
discussed later in the report.
Finally, the costs associated with building and maintaining the Capital Reserve
Fund are estimated to be NRs 1,920,000 (USD 30,000) / year, or NRs 160,000
(USD 2,500) / month.
Total operating costs and capital reserve costs for the registry would thus
amount to NRs 215,087 (USD 3,361) per month
Bandwidth 5,760 90
Revenues
The Assessment Team believes that lenders will use the Registry to file
notice of security interests in motor vehicles. Currently, in the absence of a
secured transactions law, the financiers of vehicle purchases have their
security interests in vehicles acknowledged in the ownership / registration
document issued by the motor vehicles registration authority. The motor
vehicle registration authority concurrently mentions the name of the lender in
the registration book (referred as the Blue Book), either as a creditor having a
security interest in the vehicle, or, problematically for the lender, as the owner.
Being designated as an “owner” in the Blue Book constitutes a potential
problem for the lender as certain liabilities can attach to an owner of property
as opposed to a mere lender.
It is neither the purpose nor the function of the Blue Book to record security
interests in vehicles. However, as there was no alternative mechanism for
lenders to register or search for security interests in vehicles, by default it has
served this function. This should change as the filing of notices of security
interests in motor vehicles is covered by the ST Act. Upon further examination
of the law, lenders should determine to use the Registry called for in the ST
Act as opposed to the Blue Book to perfect security interests in motor
vehicles. If lenders use the Registry to record their security interests in motor
vehicles, then there will be substantial additional revenues generated by the
Registry from these filing fees.
Description of collateral
The law provides the Original notice to be filed must contain a description of
the collateral forming subject matter of secured transaction. In case the notice
is related to trees to be felled, minerals to be extracted, or fixtures related to
the collateral, the description of the concerned immovable property must also
be mentioned.
Many jurisdictions which have electronic filing of notices allow filers to
provide collateral descriptions by attaching a separate electronic document to
their notices. In this manner, the filer does not have to retype what might be a
voluminous amount of text into a web form. Not only is this a more efficient
process, but it also greatly reduces the risk of error in collateral descriptions.
This option can be introduced under the regulations to be framed.
In keeping with the notion that a secured transactions registry is a “notice”
system, the ST Act does not require that any of the details of the underlying
transaction be registered, including the maximum monetary amount for which
the security interest may be enforced.
File number
The law requires the Registry to allot a separate file number to every filed
notice, and the Registry database will link this file number with the date and
time of filing. The original notice shall also be filed in the name of the
concerned security giver(s) so that database searches can be made against the
name of the security giver(s). All subsequent notices related to the original
notice shall be filed in such manner that they are connected to each other so
that an entire history related to a single original notice can be reconstructed. A
separate record shall be kept of expired notices.
In case any person feels that any notice registered with the Registry in his
name is inaccurate or wrongfully filed, he may file a correction statement with
the Registry. The correction statement must explicitly state:
• The file number of the original notice in order to identify the notice
containing the concerned particulars;
• Indicate that the notice is a Correction Statement; and
• The grounds on which the filer he feels that record is inaccurate and
indicate the way the record needs to be corrected in order to remove
the inaccuracy.
The mere filing of a correction notice shall have no impact on the
effectiveness of the concerned notice. Instead, it is simply added to the record
for inspection by subsequent searchers.
The STRO may refuse to file any notice or statement in the following
circumstances:
• In case the filing fee payable under the ST Act is not provided;
• In case the security giver's name is not mentioned in relation to an
Original notice;
• In case an amendment does not mention the file number of the original
notice or the security giver's name, or in case the period of validity of
the notice to be amended has already expired;
• In case a statement of continuity does not mention the file number of
the Original notice, or in case a statement of continuity is not
submitted within the period of six months as mentioned in Section 13
of the ST Act.
• In case a termination statement does not mention the file number of the
Original notice.
Except in the circumstances mentioned above, every original notice,
amendment, or statement of continuity or termination statement presented
before the STRO for filing shall be deemed to have been filed even if the
STRO refuses to file the same. When the filing of any document is refused by
STRO, it must furnish a notice of rejection to the would-be filer explicitly
mentioning the reason for such refusal.
No specific remedy is provided in the ST Act to a party whose request to file a
notice has been refused by the STRO. Presumably, this is because the act of
filing a notice is ministerial: there is no discretion on the part of the filing
authority as to whether to file or not so long as the proper fee is paid and
required information is present. Along these lines, the ST Act creates a legal
fiction by containing a “deemed filed” provision for notices. This section of
the law provides that any notice presented to the STRO for filing shall be
deemed to have been filed provided: 1) the fee payable for such notice has
been paid ; or 2) if the STRO accepts any such notice for filing; or 3) where
such notice has not been refused by the STRO. However, no document
presented for filing shall be deemed to have been filed in the case that the
STRO refuses to file the same on the grounds for refusal stated in the ST Act.
The upshot of these provisions is that the STRO is deemed to have filed a
notice unless the notice is specifically rejected in writing.
Finally, the effectiveness of a notice shall not be affected simply by the failure
of the Registry to accurately list that document. However, this shall not be the
case where a person who acquires collateral has given value thereof with
reasonable grounds to believe that no such notice has been filed, commonly
called an “innocent purchaser.” Thus, if the filing office were to mis-index a
notice, there could be severe ramifications in the marketplace. Note that mis-
indexing by the registry is only possible if paper notices are permitted. In a
solely electronic system, the registry does not index notices.
Note: The survey accounts only for estimated number of filings by the eighteen
commercial banks listed below only. It excludes the newer commercial banks as well
as the various financial instiutions present in the country, and will thus underestimate
the actual number of filings.
No. of Annual
Name of Bank 2009 2010 2011 2012 2013
filings (2009
1 Rastriya Banijya Bank 7,518 1,128 1,297 1,491 1,715 1,972
2 Everest Bank Ltd 4,345 652 750 862 991 1,140
3 Nepal Bank Ltd. 2,536 380 437 503 579 665
4 Nepal Bangadesh Bank Ltd 1,850 278 319 367 422 485
5 NCC Bank Ltd 1,811 272 312 359 413 475
6 Nepal Investment Bank Ltd. 1,517 228 262 301 346 398
7 Kumari Bank Ltd. 1,416 212 244 281 323 371
8 NABIL Bank Ltd. 1,327 199 229 263 303 348
9 Nepal SBI Bank Ltd. 1,003 150 173 199 229 263
10 NIC Bank Ltd. 931 140 161 185 212 244
11 Siddartha Bank Ltd 791 119 136 157 180 208
12 Lumbini Bank Ltd. 768 115 132 152 175 201
13 Himalayan Bank Ltd 766 115 132 152 175 201
14 Bank of Kathmandu 601 90 104 119 137 158
15 Macchapuchhre Bank Ltd. 552 83 95 110 126 145
16 Laxmi Bank Ltd 260 39 45 52 59 68
17 Citizen Bank Ltd. 272 41 47 54 62 71
18 Standard Chartered Bank Ltd. 190 29 33 38 43 50
Total (yearly) 28,454 4,268 4,908 5,645 6,491 7,465
Total (monthly) 2,371 356 409 470 541 622
Note: These numbers are based upon very conservative estimates, which actual numbers are expected to
substantially exceed.
1/ Assumes a 15% growth in banks’ loan portfolios and a 20% growth in motor vehicle financing
Note: These numbers are based upon very conservative estimates, which actual numbers are expected to
substantially exceed.
This section analyzes the pros and cons of two options the GoN can adopt for operation of
the secured transactions registry, should the government decide to operate it in the form of
a public-private partnership, as recommended in this report. Those options are: (1) to
operate it as a concession whereby the concessionaire relies on the registry’s fees to fund
the costs of operation and to provide a profit; and (2) to enter a services contract whereby
fees are paid to the government, and the government pays a service provider for its
services.
It is our conclusion that a services contract is the preferred option because it carries fewer
risks for both parties. The advantages of this option can be summarized as follows:
• This option will generate a higher level interest from private firms, and thus will
enable the government to assess several options and make a better choice.
• Private firms would not have to face the financial risk of not knowing if the revenues
from the registry would cover all costs associated with managing the registry.
• The Government would have closer control of the functioning of the registry and
more flexibility to adjust fees accordingly to satisfy both the Registry and the
beneficiaries.
• The costs of the larger responsibility of the Government, as well as the payment of
the service provider, could be funded by the fees of the registry.
The advantages and disadvantages of both the concession and services contract options are
as follow:
There is also the converse risk that the Registry would create windfall revenues for the
concessionaire if revenues significantly exceed projections, constituting an
unnecessary burden on the users of the registry and creating the appearance of unfair
dealing or collusion of the concessionaire with the Government.
Service contract with a Nepali private entity: In this model, the contract with a
private sector service provider provides for compensation on the basis of services
rendered. As with a concession, a detailed business plan would be necessary to
determine all technical and financial requirements of the contract. However in this
option the Government has larger responsibility for the successful functioning of the
registry. A detailed contract should define all the responsibilities of the service
provider and the Government, as well as the costs of meeting those responsibilities, so
that revenues can be controlled to ensure the financial sustainability of the Registry.
The Government will modify the fee level over time to meet its obligations under the
contract with the service provider and to cover its own costs.
Under a full outsourcing model, the government would contract for all aspects of
operation of the filing office, to include provision of user support, training and other filing
office functions. In this scenario, the provider would have to have or acquire expertise in
the function of a secured transactions filing office and would provide the staff for user
support and other operations of the filing office such as reporting, training and public
awareness. There would be no need for a full-time staff within the government, and the
statutory position of registrar could be part-time duty of an existing official in the MoF
that may take only an hour or two per month, based on experience with such an
Under the second - the technology outsourcing - model, the government would establish
the filing office within the government, probably in MoF, staffed by the registrar and
perhaps one other person. The filing office would provide user support, monitor the
operation of the technology system, provide user training and report to the government on
operation of the filing office. The service provider would provide support to the
technology system in the form of managed co-location of servers, off-site back-up of data
and maintenance of hardware and system software.
Procurement Issues:
Regardless of the model selected, the method of procurement of services will be quite
similar. The solicitation will specify in detail the services required in terms of
performance, so a bidder can determine with confidence what is required and what the
costs will be. For example, those terms could include some of the following, depending
on the option selected above: on-line or telephone help-desk availability during the hours
of X to Y on Z days per week; co-location of X servers taking up Y U’s of rack space;
daily running and removal to off-site secure storage of backups of data in a specified
medium; maintenance of hardware and system software, specifying the included tasks
such as swapping out defective drives and installation of system software patches; types of
user help-desk support and hours during which it must be provided; guaranteed up-time of
XX.X%; conditioned power; grounded building circuitry; back-up generator with X hours
of fuel; gaseous fire suppressant system; security measures against natural disaster; access
to servers by registry-authorized maintenance people; and physical safeguards against
intrusion.
Taking into consideration the necessity of an open and transparent procurement process, a
national open tender should be used. For a services contract such as anticipated in this
case, a two stage proposal and evaluation process that conforms to WB Quality and Cost
based selection and Nepali procurement laws and regulations is the appropriate
procurement process. Under this process, the technical proposals of short listed firms are
evaluated for compliance with technical requirements set forth in the Request for
Proposals and scored. Then the financial proposals of bidders whose technical proposals
were found to be compliant are evaluated. The bidder with the highest combined score
from both evaluations is declared the winner and is invited to negotiate the contract.