On 2 July 2010 the commencement notice for the Companies Act 2009 (Companies Act) and Companies (Insolvency and Receivership) Act 2009 was gazetted. The Companies Act repeals the former Companies Act [Cap 175] (Old Companies Act) including some outdated companies law provisions. The new companies legislation is designed to be more relevant to the Solomon Islands; it more closely reflects the commercial realities of the Solomon Islands including its focus on small closely held companies and is designed to support an electronic (and paper) registry to encourage wide use in the provinces.

Overhaul of Company Charges Regime

The commencement of the Companies Act ‘effectively’ repeals the company charge provisions contained in Part III of the Old Companies Act to create a single electronic securities regime in the Solomon Islands. This new securities regime is governed by the Secured Transactions Act 2008 (ST Act).

The ST Act no longer employs the concept of a ‘charge’. Rather, a creditor's interest is called a "security interest”. Under section 209 of the Companies Act, any reference to a “company charge” or “charge” in any Solomon Islands written law is replaced with “security interest” as defined in the ST Act.

Interestingly, the ST Act is based on secured transaction legislation currently in place in the United States (which has already created a level of uncertainty in the region and beyond).  

Key elements of the new securities regime under the ST Act

In a nutshell, some of the key concepts and elements of the ST Act include:

• the regulation, creation and registration of transactions securing interests in moveable property (which is defined broadly to include a moveable thing of any nature, intangible of any nature and any fixtures);
  
  
• the notions of “attachment” and “perfection”. Attachment generally occurs when the security interest is effective between the creditor and the debtor (usually governed by the agreement in place). Perfection occurs when the creditor establishes his or her "priority" in relation to other creditors of the debtor in the same collateral (i.e. optimisation of the security interest) which  generally occurs by filing a notice;
  
  
• a notice of a security interest in collateral, whether created prior to or under the ST Act, which must be electronically registered with the Filing Office (generally the first to file will have priority unless another perfection event apples);
  
  
• a five year registration time limit (so creditors should create a system for tracking the life of a registered security interest); and
  
  
• the rights of a registered security interest holder to enforce their interest on default of an obligation under Part IV of the ST Act (generally, the creditor has the right to repossess and dispose of the property on default).

What Now?

Creditors in the Solomon Islands should be actively reviewing all existing security interests and associated documentation to ensure:

• compliance with the ST Act (including a correct description of the collateral to be secured); and
  
  
• registration under the ST Act (if this has not already occurred).

Creditors need to ensure existing fixed and floating charge documentation is amended to reflect the new concepts under the ST Act. Please contact us if you need assistance in this regard.

This article has been prepared for the general information of clients and contacts of PLN Lawyers Sydney and the affiliated firms of the Pacific Legal Network. While it deals with and comments on the law in specific areas it is not intended nor should it be used, as a substitute for specific legal advice as legal counsel may only be given in response to inquiries regarding particular situations.

PLN Banknote July 2010