Financial Institutions (Secured Transactions) Act, 2016

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THE FINANCIAL INSTITUTIONS (SECURED 
TRANSACTIONS) ACT, 2016 
 
 
 
 
 
 
 
CONTENTS 
___________ 
 
  
SECTIONS: 
 
 PART I 
PRELIMINARY 
 
1.  Short title, commencement and application. 
 
2. Definitions. 
 
3. Scope of Act.  
PART II 
CREATION OF SECURITY INTERESTS 
 
 
4.  Right to create a security interest. 
 
5. Effectiveness of a security interest. 
 
6. Security agreement. 
 
7. Security interest in proceeds. 
 
8. Security interest in commingled goods. 
 
9. Security interest in after­acquired property. 
 
10.  Future finance. 
 
11. Security interest in collateral covered by a title document. 
 
12. Security interest in a negotiable instrument. 
 
13.  Security interest in a right to payment of funds credited in a deposit account. 
Updated till 3.8.2022
 
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PART III 
PERFECTION OF SECURITY INTERESTS  
14.  Perfection. 
 
15.  Perfection in after­acquired property, proceeds and commingled goods. 
 
16.  Specialized registry. 
 
17.  Unperfected security Interests. 
 
PART IV 
REGISTRATION 
 
18. Application of this Part. 
 
19.  Secured Transactions Registry. 
      
20. Appointment of registrar, deputy registrars and other officers. 
 
21. Register of security interests. 
 
22. Organization of the register. 
 
23. Financing statement. 
 
24. Modification of a registered financing statement. 
 
25. Filing of security agreement. 
 
26. Termination of a registered financing statement. 
 
27. Effectiveness of filing. 
 
28. Rejection of filing. 
 
29. Verification statement. 
 
30. Ineffectiveness of a registered financing statement and modification statement. 
 
31. Rectification of register. 
 
32. Removal of a registered financing statement. 
 
33. Right to search the register. 
 
34. Outsourcing. 
 
 
 
 
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PART V 
PRIORITY OF SECURITY INTERESTS 
 
CHAPTER I  
GENERAL PRIORITY RULES 
 
35.  Priority of security interests in the same collateral where there is no other way 
of determining priority. 
 
36.   Priority of security interest in proceeds. 
 
37.   Priority extending to future finance. 
 
38.   Priority of security interest in after­acquired property. 
 
39.   Extent of priority. 
 
40.   Subordination. 
 
41.   Right of secured creditor to follow the collateral. 
 
CHAPTER II  
SPECIAL PRIORITY RULES  
42. Priority of security interest based on retention of title arrangement. 
 
43. Priority between secured creditor and bailee providing services in respect of            
 the collateral. 
 
44. Priority between secured creditor and unpaid seller. 
 
45. Priority between secured creditor and a bank having a bankers’ lien. 
 
46. Priority of security interest in a right to payment of funds credited in a 
deposit account. 
 
47. Priority of security interest in collateral covered by title document. 
 
48. Priority between a perfected floating charge and fixed charge over the 
same collateral. 
 
49. Priority of security interest in a negotiable instrument.  
CHAPTER III 
TAKING FREE OF SECURITY INTEREST  
50. Purchaser taking free of security interest. 
 
51. Rights of a lessee and licensee. 
 
52. Transferee of funds held in a deposit account taking free of security interest.  
 
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PART VI   
ASSIGNMENT OF RECEIVABLES 
 
53. Assignment of receivables by way of security and absolute.  
54. Assignment of receivables by way of security.  
55. Absolute assignment of receivables.  
56. Applicability of the Transfer of Property Act, 1882 (IV of 1882). 
 
PART VII 
ENFORCEMENT OF SECURITY INTERESTS  
57.  Modes of enforcement.  
58. Recovery suit.  
59. Other enforcement modes.  
60. Enforcement where collateral is in the nature of property attached to immovable property.  
61. Fresh election of directors on request of the secured creditor. 
 
PART VIII 
RIGHTS AND OBLIGATIONS OF SECURED CREDITOR AND CUSTOMER  
62. Duties of customer in case of a non­possessory security interest. 
 
63. Duties of secured creditor in case of a pledge and security interest in collateral covered by 
a title document. 
 
64. Material information from secured creditor. 
 
          PART IX  
MISCELLANEOUS PROVISIONS  
65. Notice. 
 
66. Provisions of insolvency laws not affected. 
 
67. Protection of action taken in good faith. 
 
68. The provisions of this Act to override other laws. 
 
69. Power to remove difficulties. 
 
70. Power to make rules. 
 
71. Public Servants. 
 
72. Power to make regulations. 
 
73. Transitional provisions.
 
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THE FINANCIAL INSTITUTIONS (SECURED TRANSACTIONS) 
ACT, 2016 
 
ACT NO. XXXI OF 2016 
[28th June, 2016]  
 
An Act to provide for the creation of security interests over movable property and to establish a 
secured transactions registry 
 
WHEREAS it is expedient for the promotion and conduct of banking business to provide for the 
creation of security interests over movable property to secure the obligations owed by a customer to 
a f inancial institution, clarify and expand for the purpose the meaning and scope of movable 
property, provide for the establishment of a secured transactions registry, define, amend and codify 
certain laws relating to security interests over movable property and provide for matters connected 
therewith or incidental thereto. 
 
It is hereby enacted as follows:— 
 
PART I 
PRELIMINARY 
 
1. Short title, commencement  and application . — (1)   This Act may be called the 
Financial Institutions (Secured Transactions) Act, 2016.  
 
(2) It extends to the whole of Pakistan.  
 
(3) It shall come into force upon issuance of the notification by the  1[Commission] under 
sub­section (2) of section 19.  
 
2.  Definitions. —(1) In this Act, unless there is anything repugnant in the subject or context,— 
 
(i) “account debtor” means any person liable, whether under a contract or 
otherwise, to pay any receivables or discharge any obligation in respect of 
receivables; 
 
1[(ia) “acquisition security interest” means a security interest in tangible movable 
property which secures an obligation to pay any unpaid portion of the 
purchase price of that property, or other credit extended to enable the customer 
to acquire rights in the property to the  extent that the credit is used for that 
Purpose;] 
 
(ii) “after­acquired 1[and future] property” means movable property that is 
acquired by a customer after entering into a security agreement, and includes 
future receivables as specified in the explanation to sub­section (4) of section 
53; 
 
(iii)    “agricultural produce” means —  
 
(a) any produce of agriculture or horticulture, including but not limited to 
crops (including growing crops), standing timber, poultry, fish and 
livestock (including unborn offspring); and 
 
1Subs. and ins. by the Financial Institutions (Secured Transactions) (Amendment) Act, 2021 (XXXIII of 2021), ss. 2 -3 
 
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(b) products derived from any produce under clause (i), including but 
not limited to meat, eggs, hides, bones, skins, wool and hair; 
 
(iv)  “assignee” means a person in whose favour the receivables are assigned; 
 
(v)  “assignment of receivables” means a transfer of rights, title, interests and 
benefits of the receivables by the assignor to the assignee; 
 
 (vi)  “assignor” means a person who assigns the receivables; 
 
(vii)  “book­entry security” shall have the same meaning as is assigned to it under 
clause (5) of section 2 of the Central Depositories Act, 1997 (XIX of 1997); 
 
(viii)  “collateral” means the movable property, located in or outside Pakistan, 
that is subject to a security interest; 
 
(ix)  “commingled goods 1[and products]” means a product or mass that is 
produced or manufactured by physically associating or uniting collateral with 
other movable property in such a manner that the identity of the collateral is 
lost in such product or mass; 
 
(x)  “company” shall have the same meaning as is assigned to it under 1[clause 
(17) of sub­section (1) of section 2 of the Companies Act]; 
 
1[(xa)  “Companies Act” means the Companies Act, 2017 (XIX of 2017); 
 
(xb)  “Commission” shall have the same meaning as assigned to it under clause (g) 
of sub-section (l) of section 2 of the Securities and Exchange Commission of 
Pakistan Act, 1997 (XLII of 1997);] 
 
 (xi)  “control” with respect to a deposit account exists — 
 
(a)   automatically upon the creation of the security interest if the 
secured creditor is the depository bank; or 
 
(b)  if the depository bank has entered into a control agreement with 
the customer and the secured creditor; 
 
(xii)   “control agreement” means an agreement in writing  between the secured 
creditor, customer and the depository bank according to which the depository 
bank has agreed to follow instructions from the secured creditor with respect 
to the payment of funds credited in the deposit account without further consent 
from the customer; 
 
(xiii) “customer” shall have the same meaning as is assigned to it under clause (c) 
of section 2 of the Recovery Ordinance and shall be deemed to include an 
entity; 
 
   1Ins. and Subs. by the Financial Institutions (Secured Transactions) (Amendment) Act, 2021 (XXXIII of 2021), s. 3 
 
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 (xiv)  “deposit account” includes a current or a savings account maintained with 
a depository bank to which funds may be credited; 
 
(xv) “depository bank” means the financial institution maintaining a deposit 
account; 
 
(xvi)  “electronic” shall have the same meaning as is assigned to it under clause 
(1) of section 2 of the Electronic Transactions Ordinance, 2002 (Ordinance 
No. Ll of 2002); 
 
(xvii) “entity” means a person other than a company, and includes a natural 
person, a sole propr ietorship, a  partnership or association of persons, a 
non­govenment organization registered under the Voluntary Social Welfare 
Agencies (Registration and Control) Ordinance, 1961 (XLVI of 1961) or any 
other law for the time being in force for the registration of a non­government 
organization, a  cooperative society registered under the Co­op erative 
Societies Act, 1925 (VII of 1925) or any other law for the time being in 
force for the registration of a cooperative society, a society registered under 
the Societies Registration Act, 1860 (XXI of 1860) or any other law for the 
time being in force for the registration of a society, a trust created under 
the Trusts Act, 1882 (II of 1882); and a body corporate established pursuant 
to a law; 
 
(xviii)    “event of default”, in relation to a security agreement, means — 
 
(a) the failure to pay or to otherwise perform the obligation secured 
under the security agreement when due; or 
 
(b)  an event that gives the secured creditor the right to enforce the 
security interest under the security agreement;  
 
(xix)  “exempted property” means movable property as notified by the Federal 
Government for the purposes of sub­section (2) of section 4 notwithstanding 
anything inconsistent therewith contained in the proviso to sub­section (1) of 
section 60 of the Code of Civil Procedure, 1908 (Act V of 1908) or any 
other law for the time being in force, provided that until such notification 
has been issued the proviso to sub­section (1) of section 60 of the Code of 
CiviI Procedure, 1908 (Act V of 1908) shall continue to apply; 
 
1[(xx)  “financing statement” means the prescribed form to be filed in the register 
for the purposes of perfecting one or more security interests;] 
 
1[(xxi)  *  * * * * * *] 
 
(xxii)  “Form 10” means the prescribed form to be filed with the registrar of 
companies for the purposes of entering the particulars of a security interest 
created by a company in the register of mortgages and charges under the  
1 [ Companies Act, 2017 (XIX of 2017)]; 
 
1Subs. and omitted by the Financial Institutions (Secured Transactions) (Amendment) Act, 2021  (XXXIII of 2021), s. 3  
 
 
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(xxiii)   “Form 16” means the prescribed form to be filed with the registrar of 
companies for the purposes of modifying the particulars of a security 
interest created by a company in the register of mortgages and charges 
under the 1[Companies Act, 2017 (XIX of  2017)]; 
 
1[(xxiv)  * * * * * * *] 
 
(xxv)  “immovable property” shall include land, benefits to arise out of land, 
and things attached to the earth, or permanently fastened to anything 
attached to the earth, and shall, no twithstanding anything inconsistent 
therewith contained in the General Clauses Act, 1897 (X of 1897), 
Transfer of Property Act, 1882 (IV of 1882), Registration Act 1908, (XVI 
of 1908) and any other law for the time being in force, exclude property 
attached to immovable prop erty as defined in clause (xxxviii) of this 
sub­section; 
 
(xxvi)  “information system” shall have the same meaning as is assigned to it in 
section 2 (p) of  the Electronic Transactions Ordinance, 2002 (LI of 2002); 
 
(xxvii)  “modification statement” means the prescribed form to be filed in the 
register for the purpo ses of effecting the modification to a registered 
financing statement; 
 
(xxviii)  “motor vehicle” shall have the same meaning as is assigned to it under 
sub­section (23) of section 2 of the Motor Vehicles Ordinance, 1965 (XIX 
of 1965); 
 
(xxix)  “movable property” means any tangible or intangible property other than 
immovable property, including but not limited to receivables; rights 
under letters of credit; rights under trust receipts; securities (including 
Government securities) other than hook­entry securities; right to funds 
credited in a deposit account; title documents; negotiable instruments; 
intellectual property, including patents, trademarks, copy rights, trade 
names, goodwill, royalties; stock in trade; inventory; interest in 
partnership and other form of entity; ornaments; jewellery; stones; 
goods­in­transit; agricultural produ ce; leaves; grass, including growing 
grass; petroleum or minerals that have been extracted; motor vehicles 
and property attached to immovable property as defined in clause 
(xxxviii) of this sub­section; 
 
(xxx)  “negotiable instrument” shall have the same meaning as is assigned to 
it under section 13 of the Negotiable instruments Act, 1881 (XXVI of 
1881); 
 
(xxxi)  “notification” means a notification published in the official Gazette; 
 
1Subs. and Omitted by the Financial Institutions (Secured Transactions) (Amendment) Act, 2021 (XXXIII of 2021), s. 3 
 
 
 
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(xxxii)  “perfection” means the act required to be done in terms of section 14 to 
make a security interest effective against third parties; 
 
1[(xxxiii)  * * * * * * *] 
 
(xxxiv)  “possession” means the actual possession of collateral by a person 
or an agent or employee of that person, or by an independent person 
that acknowledges holding it for that person; 
 
1[(XXXV) “possession of an electronic title document by a person ” means the 
transfer of exclusive control of the electronic title document to that person 
in accordance with the procedures established by the system under which 
the electronic title document is issued;] 
 
  (xxxvi)  “prescribed” means prescribed by rules 1[**] made under this Act; 
 
(xxxvii)  “proceeds” means identifiable or traceable movable property derived from 
collateral including (a) movable prop erty acquired, directly or 
indirectly, upon the sale, lease, licence, exchange, 1[replacement] or any 
other mode of alienation of collateral; (b) natural fruits of the collateral, 
including harvested produce where the collateral is crops or wool, meat 
or offspring where the collateral is livestock;  (c)  any and all amounts, 
revenues  and receivables paid or payable under or in connection with 
the collateral; (d) rights arising out of the collateral, including a right to 
an insurance payment or any other payment as indemnity or 
compensation for loss of, or damage to the collateral; and (e) proceeds 
of proceeds; 
 
(xxxviii) “ property attached to   immovable   property” means the following property 
irrespective of whether it is attached to the earth or permanently fastened to 
anything attached to the earth: 
 
 (a)  plant, equipment or machinery;  
 (b)  fixtures and fittings; 
 (c)  cables or pipelines embedded in the earth or otherwise; 
   and 
 (d)  any other item of property as may be notified by the  
  Federal Government for the purposes of this Act  
  notwithstanding anything inconsistent therewith  
  contained in the General Clauses Act, 1897 (X of 1897), 
  Transfer of Property Act, 1882 (IV of 1882),  
  Registration Act, 1908 (XVI of 1908) and any other law 
  for the time being in force; 
 
(xxxix)  “receivables” means a contractual or non­contractual right to 
receive money, whether such right  is existing, future, accruing, 
conditional or contingent and includes rents; profits; dues;  
 
1Omitted, Subs. and ins. by the Financial Institutions (Secured Transactions) (Amendment) Act, 2021 (XXXIII of 2021), s. 3 
 
Page 10 of 35 
 
a money award by an arbitrator; monies p ayable as salaries of 
employees; dividends; tolls, user­fees or any sum, by whatever name 
called; monies payable under d ecrees; monies payable under 
guarantees; actionable claims and all kinds of actual or contingent 
monetary obligations; and excludes a right to payment of funds 
credited in a deposit account and right to payment under a negotiable 
instrument; 
 
(xl)  “Recovery Ordinance” means the Financial In stitutions (Recovery of 
Finances) Ordinance, 2001 (XLVI of 2001); 
 
(xli)  “register” means the electronic register set up under section 21; 
 
(xlii)  “registrar” means the person in­charge  of the Registry appointed under 
sub­section (1) of section 20 and shall include, unless the context requires 
otherwise, a deputy registrar discharging the functions, duties and powers 
of the registrar pursuant to sub­section (2) of section 20; 
 
(xliii) “registration”— 
 
(a)  in relation to a security interest created by an entity, means that a 
financing statement and modification statements in relation 
thereto, if any, have been registered in the register in respect of 
such security interest in accordance with the provisions of Part 
IV of this Act; or 
 
(b)  in relation to a security interest created by a company, means 
that a Form 10 and Form 16, if any, have been registered in the 
register of mortgages and charges in respect of  such security 
interest in accordance with the provisions of the 1[Companies 
Act, 2017 (XIX of 2017)]; 
 
(xliv)  “registration number” is the number assigned to a registered 
modification statement and termination statement by the register 
pursuant to clause (b) of sub­section (1) of section 22; 
 
(xlv) “Registry” means the Secured Transactions Registry established under 
section 19; 
 
1[(xlvi)  “secured creditor”  means a financial institution or a consortium of 
financial institutions in whose favour a security interest is created by the 
customer and in the case of a security interest that is an absolute 
assignment of receivables, the secured creditor is the assignee;] 
 
(xlvii)  “security agreement” means an agreement, instrument or any other 
document in writing that creates or provides for a security interest in 
favour of a secured creditor; 
 
 
 
 
1Subs. by the Financial Institutions (Secured Transactions) (Amendment) Act, 2021 (XXXIII of 2021), s. 3 
 
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1[(xlviii)  “security interest” means, — 
 
 (a)  a right, title, encumbrance or interest of any kind upon movable 
property created or provided for by a security agreement in relation 
to a transaction that in substance secures the payment or 
performance of a customer’s obligation without regard to the form 
of the transaction or the terminology used by the parties or the 
identity of the person who has title to the movable proper ty, and 
includes any charge, mortgage, hypothecation, fixed charge, 
floating charge, assignment, lien, pledge, assignment of receivables 
by way of security and transactions under which a secured creditor 
retains title such as a finance lease, hire purchase  agreement, sale 
and lease back arrangement, conditional sale agreement and 
retention of title arrangement, having similar effect; and 
 
(b)  an absolute assignment of receivables;] 
 
1[(xlviiia)  “specified” means specified through regulations made by the 
Commission;] 
 
(xlix)  “statement” means the financing statement, modification statement 
and termination statement; 
   
(l)   “termination statement” means the prescribed form to be filed in the 
register for the purposes of rendering a registered financing statement 
and modification statements in relation thereto, if any, ineffective; 
 
1[(li) “title document” means a document in writing evidencing title to goods 
which is, by law or custom, transfe rable by delivery (whether with or 
without endorsement) or control and includes a bill of lading, dock 
warrant, warehouse receipt, railway receipt, airway bill, truck receipts 
or similar record issued by a person in the business of transporting or 
storing goods;] 
 
(lii) “unique registration number” is the number assigned to a registered 
financing statement by the register pursuant to clause (a) of sub­section 
(1) of section 22; 
 
(liii)  “value” means the consideration that a person gives where such person 
acquires the rights — 
 
(a)  in return for a binding commitment to give finance; 
 
(b)  as security for, or satisfaction of, a pre­existing claim, in whole 
or in part;   
 
(c)  in return for a promise or anything given in exchange; and 
 
(liv)  “vehicle registration number” means the number assigned to a motor 
vehicle by the relevant registering authority for the purposes of 
registration of such motor vehicle under the Motor Vehicles Ordinance, 
1965 (XIX of 1965). 
 
 
1Subs. and ins. by the Financial Institutions (Secured Transactions) (Amendment) Act, 2021 (XXXIII of 2021), s. 3 
 
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(2) Words and expressions used but not defined herein shall, unless repugnant to the 
context, have the same meaning as is assigned to them under the Recovery Ordinance. 
 
3.  Scope of Act.— This Act shall not apply to or affect any of the following,  
namely: — 
 
  (a)  a security interest in any immovable property; 
 
 (b)  a security interest in a book­entry security; 
 
 (c)  a security interest created by operation of law, including but not limited to a 
 lien on movable property under the Sale of Goods Act, 1930 (III of 1930) or the 
 Contract Act, 1872 (IX of 1872), except for the purposes of determining 
 priority of such security interests as set forth in Part V of this Act; 
 
 (d)  a security interest in any aircraft as defined in sub­clause (b) of section 2 of 
 the Civil Aviation Ordinance, 1960 (XXXII of 1960); and 
 
 (e)  a security interest in any vessel as defined in sub­section (56) of section 2 of the 
 Merchant Shipping Ordinance, 2001 (LII of 2001). 
 
___________ 
 
PART II 
CREATION OF SECURITY 
INTERESTS 
 
4.  Right to create a security interest. — (1) Subject to sub­section (2), a customer may 
create a security interest to secure its own obligation or that of another person in 
accordance with the provisions of this Act. 
 
(2)  A customer shall not create a security interest in exempted property and, if created, 
such security interest shall be void. 
 
5.  Effectiveness of a security interest.— A security interest created in favour of  a 
secured creditor shall be effective against the customer only if — 
 
  (a)  the customer and the secured creditor have agreed to create a security  
  interest in favour of the secured creditor; 
 
 (b) in the case of a 1[security interest that is perfected by possession of collateral] and 
 security interests created pursuant to sections 11 and 12, the customer has also 
 given possession of the collateral to the secured creditor; 
  
  (c)  the secured creditor has given value to the customer; and 
 
 (d)  the customer has rights in the collateral or the power to transfer rights in the 
 collateral.  
____________________________________________________________________________ 
 1Subs. by the Financial Institutions (Secured Transactions) (Amendment) Act, 2021 (XXXIII of 2021), s. 4. 
 
 
Page 13 of 35 
 
 
6.  Security agreement.—(1) The secured creditor and the customer shall enter into a security 
agreement in terms of sub­section (2) for all security interests other than security interests created 
pursuant to sections 11 and 12. 
 
(2)    A security agreement shall state — 
 
 (a)   the name and address of the secured creditor and customer; 
 
 1[(b)  for all security interests other than an absolute assignment of receivables, the  
 obligations secured by the security interest, in accordance with sub-section (3); 
 
  (c)  a description of the collateral in accordance with sub-section (3); and] 
 
    (d)  the date of its execution. 
 
1[(3) The obligations and the collateral may be described in the security agreement in a manner  
that reasonably allows their identification. 
 
(4) A description of secured obligations that indicates that the security interest secures all 
obligations owed to the secured creditor at any time or that states a maximum amount satisfies the 
standard referred to in sub-section (3). 
 
 (5) A description of collateral that indicates that the collateral consists of all of the              
customer’s movable property, or of all the customer’s movable property within a generic category, 
satisfies the standard referred to in sub-section (3).] 
 
7.  Security interest in proceeds.— (1) A security interest shall extend to the proceeds of the 
collateral, unless the security agreement provides otherwise. 
 
(2) A security interest in proceeds shall be effective against the customer whether or not the 
security agreement contains a description of the proceeds. 
 
8.  Security interest in commingled goods 1[and products]. —(1) A security interest shall 
extend to commingled goods 1[and products], unless the security agreement provides otherwise. 
 
(2) The security interest in the commingled goods 1[and products] shall be limited to the value 
of the collateral immediately before it became part of such commingled goods 1[and products]. 
 
9.  Security interest in after -acquired 1[and future] property.— (1) A security agreement 
may provide for a security interest in after-acquired 1[and future] property. 
 
(2) Unless otherwise provided in a security agreement, the security interest shall attach to after­ 
acquired 1[and future] property on the acquisition by the customer of rights in the after­acquired 1[and 
future] property. 
 
10.  1[Obligations that may be secured].—1[(1) Subject to sub-section (1A), a security interest 
may secure one or more obligations of any type, whether monetary or non-monetary, present or future, 
determined or determinable, conditional or unconditional, or fixed or fluctuating.] 
_______________________________________________________________________________ 
1Subs., Added and Ins. by the Financial Institutions (Secured Transactions) (Amendment) Act, 2021 (XXXIII of 2021), ss. 5-8. 
 
 
Page 14 of 35 
 
1[(1A)] Subject to sub­section (2), a security interest shall not extend to future finance that has 
not been committed to be extended to the customer at the time of the creation of security interest, 
unless the security agreement provides otherwise. 
 
(2)  Section 174 of the Contract Act, 1872 (IX of 1872) shall apply in the case of a 1[security 
interest that is perfected by possession of the collateral or, in the case of collateral covered by a title document, 
by possession of the title document]. 
  
11.  Security interest in collateral covered by a title document.—(1) A security interest may 
be created in collateral covered by a title document by giving possession to the secured creditor of 
the title document duly endorsed in favour of such secured creditor or issued in his name. 
 
(2) A security agreement shall not be required where a security interest in collateral covered 
by a title document is created in accordance with sub­section (1). 
 
Explanation—Collateral shall be covered by a title document where such collateral is in 
the possession of the issuer of the title document.  
 
12. Security interest in a negotiable instrument. — (1) A security interest may be created 
in a negotiable instrument by issuing it in the name of the secured creditor or negotiating it in favour 
of the secured creditor in accordance with the Negotiable Instruments Act, 1881 (XXVI of 1881). 
 
(2) A security agreement shall not be required where a security interest in a negotiable instrument 
is created in accordance with sub­section (1). 
 
(3) If a negotiable instrument is secured by movable property, then, unless otherwise agreed 
between the secured creditor and the customer, such security shall stand automatically transferred to 
and vest in the secured creditor upon creation of the security interest in terms of sub­section (1). 
 
13. Security interest in a right to payment of funds credited in a deposit account.— Where 
the depository bank is not the secured creditor, creation of a security interest in a right to payment of 
funds credited in a deposit  account  shall  not bind or otherwise  impose any obligation  on the 
depository bank with respect to the security interest unless such security interest has been created 
with the prior written consent of such depository bank. 
 
____________________ 
 
PART III 
PERFECTION OF SECURITY 
INTERESTS 
 
1[14.  Perfection.― (l) A security interest in movable property may be perfected by registration 
as provided under this Act. 
 
(2) A security interest in a right to payment of funds credited in a deposit account may also be 
perfected by control. 
 
(3) A security interest in co llateral covered by a title document may also be perfected by 
possession of the title document by the secured creditor. 
 
1Renumbered and Subs.by the Financial Institutions (Secured Transactions) (Amendment) Act, 2021 (XXXIII of  2021), ss. 8-9. 
 
 
Page 15 of 35 
 
(4) A security interest in tangible movable property may also be perfected by possession of the 
property by the secured creditor.  
 Illustrations 
 (a)  Customer A (an entity) entered into a security agreement over shares with Secured 
  Creditor B and delivered possession of the share certificates to Secured Creditor B 
  on the 1st December. A financing statement was registered in the register in respect 
  of the security interest on the 3rd December. The security interest in the shares was 
  perfected by registration on the 3rd December. 
 
 (b)  Customer C (an entity) created a security interest over all present and 
 after―acquired inventory in favour of Secured Creditor D on the 1st January. A 
 financing statement was registered in the register in respect of the security interest 
 on the 3rd Janu ary. The security interest was perfected by registration on the 3rd 
 January.  
 
 (c)  Customer N (an entity) enters into an assignment agreement with Secured Creditor 
 M on the 1st March pursuant to which Customer N assigns receivables under a 
 supply agreement as security in favour of Secured Creditor M. A financing statement 
 was registered in the register in respect of the assignment on the 3rd March. The 
 assignment of receivables by way of security was perfected by registration on the 
 3rd March. 
 
 (d)  Customer G (an entity) leases a car from Secured Creditor H pursuant to a finance 
 lease agreement on the 1st December. Secured Creditor H is registered as the 
 owner of the car. A financing statement was registered in the register in respect of 
 the finance lease on the 2nd December. The finance lease was perfected by 
 registration on the 2nd December. 
 
 (e)  Customer F (a company) created a security interest in a right to payment of funds 
 credited in a deposit account in favour of Secured Creditor G  on the 1st December. 
 The deposit account was maintained with the Depository Bank H. A control 
 agreement was entered into between Customer F, Secured Creditor G and 
 Depository Bank H on the 2nd December. The security interest in a right to payment 
 of funds credited in a deposit account was perfected by control on the 2nd December. 
 
 (f)  Customer H (an entity) created a security interest over all its present and 
 after―acquired movable property (including funds held in deposit accounts) in 
 favour of Secured Creditor P on the 1st March. A financing statement in respect of 
 the security interest was registered in the register on the 4th March. The 
 hypothecation was perfected by registration on the 4th March. In this case, the 
 security interest in a right to payment of funds credited in a deposit account was also 
 perfected by registration. 
 
 (g)  Customer M (a company) created a security interest over its equipment in favour of 
 Secured Creditor N on the 5 th April. The security interest extended to any proceeds 
 received from the sale of the equipment with the Creditor N.A financing statement 
 was registered in the companies’ register of mortgages and charges on the 10th April 
 in respect of the security interest. The security interest was perfected by registration 
 on the 10th April. The Secured Creditor N authorized in writing the sale of the 
 equipment by Customer M on the 5th May which resulted in Customer M receiving 
 a cheque of one hundred thousand rupe es in the form of proceeds arising from the 
 
Page 16 of 35 
 
 sale of such equipment. In this case, Secured Creditor N ’s security interest in the 
 cheque of one hundred thousand rupees (a negotiable instrument) was also perfected 
 by registration on the 10th April.] 
 
15. Perfection in after­acquired 1[and future] property, proceeds and commingled goods 
1[and products] .—(1) A security interest in after­acquired 1[and future]  property, proceeds or  
commingled goods 1[and products], where applicable, shall stand automatically perfected by virtue 
of the perfection of the security interest in the collateral. 
 
(2) Where a security interest is perfected by registration as provided under this Act, 
sub­section (1) shall not apply if the after­acquired 1[and future] property, non­cash proceeds or 
commingled goods 1[and products] , as applicable, is not covered in the registered financing 
statement or Form 10, as applicable.  
 
Explanation. For the purposes of  sub­section (2), non­cash proceeds shall include all 
proceeds other than money, cheques, funds credited in a deposit account or the like. 
 
16. Specialized registry.—A security interest in intellectual property that requires 
registration in a specialized  registry pursuant to any other law currently in force, may, 
notwithstanding  the provisions of such law, be perfected only by registration as provided under this 
Act. 
 
17. Unperfected security Interests. —A security interest that is not perfected shall be void 
against the liquidator, administrator or receiver but shall not prejudice the secured creditor’s right to 
repayment of finance as an unsecured creditor. 
 
___________________ 
 
PART IV 
REGISTRATI ON 
 
18. Application of  this Part. —(1) This Part shall apply only to an entity creating a 
security interest. 
 
(2)     This Part of the Act shall not apply to a company and shall not affect the provisions 
contained in the 1[Companies Act, 2017 (XIX of 2017)] requiring registration of security interests 
created by a company. 
 
19. Secured Transactions Registry. —(1) The Federal Government shall, by notification in 
the official Gazette, establish or cause to be established a registry to be known as the ‘Secured 
Transactions Registry’ for the purposes of registration of security interests created by an entity and 
all matters incidental thereto. 
 
(2) The 1[Commission] shall, by notification in the official Gazette, specify the date from 
which the Registry established under sub­section (1) shall be operational.  
 
1[(3) The head office of the Registry shall be at such place as the Commission may specify and, 
if considered necessary, the Registry may establish branch offices of the Registry at such other places 
as the Commission deems fit for the purposes of facilitating registrati on of security interests created 
by an entity and to perform any or all of the functions of the Registry, as may be determined by the 
Commission.]  
 
________________________________________________________________________________ 
1Ins. and Subs.  by The Fin ancial Institutions (Secured Transactions) (Amendment) Act, 2021 (XXXIII of 2021), s s. 10-12. 
 
Page 17 of 35 
 
(4) The 1[Commission] may, by notification in the official Gazette, define the territorial 
limits within which an office of the Registry may exercise its functions. 
 
(5) The Registry shall have its own seal 1[as approved by the Commission].  
 
1[20. Appointment of registrar, deputy registrars and other officers.―(1) The Commission 
may empower or appoint any officer of the Commission as the  head of the Registry for the purposes 
of managing and controlling the register set up pursuant to section 21 and such other functions as may 
be determined by the Commission. 
 
(2) The Commission may also appoint deputy registrars for each branch office of the Registry 
to perform, under the direction of the registrar, such functions, duties and powers of the registrar 
under this Act as may be notified by the Commission. 
 
(3) The Commission may appoint such other officers with such designations as it may think fit 
for the purposes of this Act, to perform under the direction of the registrar, such functions, duties and 
powers under this Act as may be determined by the Commission.] 
 
21.  Register of security interests.—(1) A register shall be maintained in electronic format 
1[*******]  to record statements in relation to security interests created by an entity. 
 
(2) The register shall be maintained and operated under control and management of  the 
registrar. 
 
(3) The register shall be operated using an automated information system which shall — 
 
(a)  allow a secured creditor to file a statement in terms of sections 23, 24 and 26; 
 
1[(b)  * * * * * * *] 
 
(c)  reject filing of a statement in terms of section 28; 
 
(d)  issue a verification statement in terms of section 29; 
 
(e)  allow a person to search the register in terms of section 33; 
 
(f)  issue search reports under sub­section (3) of section 33; 
 
(g)  allow a secured creditor to pay the prescribed fees, if any, for filing statements 
in the  register; 
 
(h)  allow a person to pay the prescribed fees for searching the register in terms of 
section 33; 
 
(i) allow an entity or any person having rights in the collateral to file an application                    
under sub­section (3) of section 31; and 
 
(j)  allow a person to do such other things as are required or permitted by, or under, 
this Act to be done by a person in relation to the register. 
 
________________________________________________________________________________ 
1Subs., ins. and omitted by The Financial Institutions (Secured Transactions) (Amendment) Act, 2021 (XXXIII of 2021), ss. 1 2-14. 
 
Page 18 of 35 
 
(4) The 1[Commission] may, by way of regulations, 1[specify] requirements for the use of 
the register for any or all acts under sub­section (3). 
 
22.  Organization of the register.—(1) The register shall assign— 
 
(a)  a unique registration number to each registered financing statement; and 
 
(b)  a registration number to each registered modification statement and termination 
statement relating to a registered financing statement under clause (a) in a 
manner that associates them with the unique registration number assigned to 
such registered financing statement.  
 
(2) The register shall index registered financing statements by — 
 
1[ (a)   * * * * * *] 
 
(b)   where the entity is a natural person, the National Identity Card number or 
National Id entity Card for Overseas Pakistanis nu mber, or in the case of a 
foreign national, the passport number; 
 
1[(ba)  in the case of any other entity, as may be specified;] 
 
1[(c)  the vehicle registration number in case of a motor vehicle for which the vehicle 
registration number is given in the financing statement; and] 
 
(d)  the unique registration number. 
 
23.  Financing statement . — (1) The secured creditor may, in respect of a security interest, 
file a financing statement in the register. 
 
(2) The financing statement shall 1[*******] contain the following particulars of a security 
interest: 
(a)  name of the entity;  
(b)   address of the entity;  
(c)  type of the entity; 
(d)  where the entity is a natural person, the National Identity Card number or 
National Id entity Card for Overseas Pakistanis nu mber, or in the case of a 
foreign national, the passport number; 
 
(e)  name and address of the secured creditor; 
 
1[(f)  term of the registration up to a maximum of five years;] 
 
1[(g) maximum amount secured by the security interest unless the financing 
statement relates to an absolute transfer of receivables; and] 
 
 1[(h)  description of the collateral and its proceeds, where applicable: 
 
________________________________________________________________________________ 
1Subs., Omitted  and Ins. by The Financial Institutions (Secured Transactions) (Amendment) Act, 2021 (XXXIII of 2021), ss. 14 -16. 
 
Page 19 of 35 
 
Provided that a description of collateral is s ufficient if it reasonably allows its  identification. 
A description of collateral that is a motor vehicle may, but need not, include its vehicle registration 
number.] 
(i)  1[* * * * * * * * *] 
 
1[(3)  A financing statement may be filed before a security agreement is entered into and 
a financing statement may perfect security interests created by more than one security agreements.] 
 
1[(4)  A financing statement is only effective if it has been authorized in writing by the 
entity and an entity shall be deemed to have authorized the registration of a financing statement that 
describes collateral if the entity enters into a security agreement that covers that collateral.] 
 
24.   Modification of registered financing statement. — (1) The secured creditor may, 
in relation to a registered financing statement, file a modification statement in the register in respect 
of —  
(a) transfer of all or part of the security interest to which the registered financing 
statement relates; 
 
(b) change in description of collateral; 
 
(c) addition or omission of collateral; 
 
(d) change in maximum amount secured by the security interest; 
 
(e) change in name of the entity; 
 
(f) change in address of the entity; 
 
(g) where the entity is a natural person, change in the National Identity Card 
number or National Identify Card for Overseas Pakistanis number, or, in case 
of a foreign national, passport number; 
 
(h) change in type of the entity; 
 
(i)  change in name or address of the secured creditor; 1[*] 
 
 1[(ia)  extension of the term of the registration, in accordance with sub-section (2A); 
or] 
 
(j) any other alteration to the information contained in the registered Financing 
statement. 
 
(2)  The modification statement shall 1[*******] contain the following particulars, 
namely:— 
 
(a)  unique registration number; and 
   
(b) nature of modification to the registered financing statement. 
 
1[(2A)  The term of a registration may for a maximum period of five years from its expiry be 
extended at any time within six months before the then-current expiry date by filing a modification  
______________________________________________________________________ ___________________________ 
1Subs., omitted and added by the Act of The Financial Institutions (Secured Transactions) (Amendment) Act, 2021 (XXXIII of 2021), ss. 16,17. 
 
 
Page 20 of 35 
 
statement to that effect. The term of a registration may be extended in this way more than once.] 
 
(3) The filing of the modification statement by the secured creditor under sub­section (1) shall 
not require authorization in writing by the entity, unless the modification is in respect of an increase in 
the maximum amount secured by the security interest or is in respect of an addition of collateral or 
otherwise increases the exposure of the entity to the secured creditor. 
 
25.   1[* * * * * * *] 
 
26.  Termination of a registered financing statement . —(1) A secured creditor shall, in 
relation to a registered financing statement, file a termination statement in the register within fifteen 
working days from the date of payment or satisfaction, in full, of the obligation to which the registered 
financing statement relates. 
 
(2) The termination statement shall 1[*******] contain the following particulars, namely:— 
 
(a)  unique registration number; and 
 
(b)  date on which the obligation was paid or satisfied, in full. 
 
27.  Effectiveness of filing. — A statement shall stand registered when a unique registration 
number or registration number, as applicable, date and time is assigned to it in the register and such 
statement becomes publicly searchable. 
 
28.  1[Incomplete filings]. A statement shall not be registered, if — 
 
(a)  the particulars required to be entered in a statement are incomplete; or 
 
(b)  the secured creditor has failed to pay the prescribed fee, if any, for filing the 
statement in the register.  
 
29. Verification statement. —(1) In respect of a registered statement, a verification 
statement shall be issued to the secured creditor in such form as may be prescribed by rules and 
contain the following information: 
 
(a)  unique registration number or registration number, as applicable; 
 
(b) particulars as stated in the statement; and 
 
(c)  date and time on which the statement was registered. 
 
(2) The verification statement shall be conclusive evidence that a statement has been 
registered in accordance with the requirements of Part IV of this Act. 
 
30. Ineffectiveness of a registered financing statement and modification statement. —(1) 
A registered financing statement shall be ineffective, if— 
 
 
 
1Omitted and subs. by the Act of The Financial Institutions (Secured Transactions) (Amendment) Act, 2021 (XXXIII of 2021), s s. 18-20. 
 
 
Page 21 of 35 
 
1[(a)  particulars of an entity under clause (a) (for entities other than natural persons) 
or (d) (for natural persons) of sub-section (2) of section 23 are stated incorrectly 
such that a search of the register using the correct particulars would not retrieve 
the registered financing statement;]  
 
(b)  description of the collateral is stated insufficiently 1[*******] provided that the 
registered financing statement shall be ineffective only to the extent of the 
collateral which has been insufficiently described and will  not  render  the  
registered  financing statement  ineffective  with  respect  to  other collateral 
sufficiently described; 1[or] 
 
(c)  1 [*   *  *  *  *  *  *]  
 
1[(d)  the entity has not authorized the filing of a financing statement.] 
 
(2) If the secured creditor fails to file a modification statement in relation to a registered 
financing statement in respect of a change under 1[clause (e) for entities other than natural persons 
or (g) for natural persons] under sub­section (1) of section 24 within ten days of acquiring actual 
knowledge of such change 1 [ * * * ] the registered financing statement shall be ineffective against— 
 
(a) a competing security interest that has been perfected after such change but  
before filing of the modification statement by the secured creditor; and 
 
(b)  a purchaser, lessee or licensee acquiring rights in the collateral after such 
change but before filing of the modification statement by the secured creditor. 
 
(3) A registered modification statement shall be ineffective if it  has been filed without 
the authorization in writing by the entity where such authorization is required under sub­section (3) 
of section 24. 
 
31. Rectification of register. — (1) The entity or any person having rights in the collateral 
covered in a registered financing statement may give a written demand to the secured creditor to 
 
(a)  file a modification statement, if — 
 
(i)  description of the collateral is insufficient or refers to movable property 
that is not collateral under 1[a] security agreement; 
 
(ii) the vehicle registration number is incorrect; 
 
(iii)   the secured creditor has agreed to release part of the collateral and has 
failed to file a modification statement in respect thereof as required under 
sub­section (1) of section 24; or 
 
(iv) there is any other omission or  misstatement of any particular in 1[the] 
registered financing statement that detrimentally affects rights of the 
entity: 
 
   (b)  file a termination statement, if— 
 
(i)  the obligation to which the registered financing statement relates has  
been paid or satisfied, in full, and the secured creditor has failed to file  
 
 
1Omitted and ins. by The Financial Institutions (Secured Transactions) (Amendment) A ct, 2021 (XXXIII of 2021), s. 21 -22. 
 
 
Page 22 of 35 
 
a termination statement within the prescribed period under sub-section 
(1) of section 26; or 
 
(ii) the entity has not entered into a security agreement with the secured 
creditor. 1[* * * * * * *]  
    
(2) A demand under sub­section (1) shall require the secured creditor to file, at its own expense, 
a modification statement or termination statement, as applicable, within fifteen days from the date of 
receiving such demand. 
 
(3) If the secured creditor fails to file a modification statement or termination statement, as 
applicable, within fifteen days of receiving the demand under sub­section (1), the entity or person 
making the demand  may, by filing an application  in writing , request the registrar  to file such  
modification statement or termination statement, as applicable, along with a copy of the written 
demand and response, if any, from the secured creditor.  
 
(4) On receipt of an application under sub­section (3), the registrar shall cause a written 
notice to be sent to the secured creditor calling upon him to show cause, within a time not exceeding 
twenty days from the date of receiving such notice, as to why the modification statement or 
termination statement, as applicable, should not be filed. 
 
(5) The registrar shall, if no cause is  shown, file the modification statement or  
termination statement, as applicable, in the register. 
 
(6) Where cause is shown, the registrar shall inform the entity or person making the 
demand under sub­section (3) in writing that the modification statement or termination statement, 
as applicable, cannot be filed for reasons stated therein. 
 
32. Removal of a registered financing statement. — 1[(1) A registered financing 
statement and any modification statements in relation thereto shall be removed from the register, if,― 
 
(a) the term of the registration has expired without being extended under sub - 
section (2A) of section 24; or 
 
(b) a termina tion statement has been filed in the register in respect of such 
registered financing statement.] 
 
(2) Upon removal from the register, the registered financing statement and any modification 
statements in relation thereto shall not be publicly searchable. 
 
(3) Notwithstanding r emoval from the register, the Registry shall retain records of a 
registered financing statement and any modification statement and termination statement in respect 
thereof for a period of ten years from the date on which the termination statement was filed pursuant 
to section 26 or section 31. 
 
33.  Right to search the register. —(1) Any person shall be entitled to search the 
register and obtain reports therefrom on payment of a prescribed fee. 
 
(2) The register may be searched by reference to the following criteria, namely:— 
 
(a)  1[****] 
 
1Subs, Omitted  and Ins. by the Act of The Financial Institutions (Secured Transactions) (Amendment) Act, 2021 (XXXIII of 2021), s s. 23-24. 
 
Page 23 of 35 
 
(b)  where the entity is a natural person, the National Identity Card Number or 
National Identity Card for Overseas Pakistanis number, or in case of a 
foreign national, the passport number; 
 
1[(ba) in case of any other entity, against the name of the entity, as may be  
prescribed;] 
 
(c)  unique registration number; 
 
(d)  the vehicle registration number; or 
  
(e)  any other criteria 1[specified] by regulations. 
 
(3) On a search of the register, a search report shall be issued in such form as may be 
1[specified] and shall set forth all registered financing statements and modification statements in 
relation thereto in the register relating to the search criterion used: 
 
Provided that where the search does not produce any results, the search report shall state 
and confirm that there are no registered financing statements relating to the search criterion used. 
 
(4) A search report issued under sub­section (3) shall be  conclusive evidence of the 
registered financing statements and modification statements in relation thereto to which the search 
relates including — 
 
(a)  unique registration number or registration number, as applicable, date and time 
on which the financing statements and modification statements in relation 
thereto were registered; and 
 
(b)   order of the registered  financing statements and modification  statements 
in relation  thereof set out in the search report. 
 
34.  Outsourcing. —The 1[Commission] may issue a licence to any local or foreign entity 
for operating and maintaining the register or for performing any of the functions of the Registry 
in respect of the register. 
______________ 
 
PART V 
PRIORITY OF SECURITY 
INTERESTS  
 
CHAPTER I  
GENERAL PRIORITY  RULES 
 
35. Priority of security interests in the same collateral where there is no other way of 
determining priority. Unless otherwise provided in this Part V, the following rules shall apply, to 
determine priority of security interests over the same collateral, namely: — 
 
(a)  between security interests that have not been perfected, the first in time to 
create the security interest shall prevail; 
 
(b)   a perfected  security interest has priority over a security  interest that has not 
been perfected; and 
 
1Ins. and subs  by The Act of Financial Institutions (Secured Transactions) (Amendment) Act, 2021 (XXXIII of 2021), ss. 24 -25. 
 
Page 24 of 35 
 
 
(c)  between perfected security interests, the first in time to perfect the security 
interest in accordance with section 14 shall prevail. 
 
 
Explanation. — 
 
(i)  Between security interests that have been perfected by registration as 
provided under this Act, priority will be determined by the order of registration. 
 
(ii)  Between security interests that have been perfected by possession or control, 
priority will be determined by the order of possession or control. 
 
(iii)  Between a security interest that has been perfected by registration as provided 
under this Act and a security interest that is perfected otherwise than by 
registration, priority will be d etermined by the order  of registration or 
perfection otherwise than by registration, whichever occurs first. 
 
36.  Priority of security interest in proceeds.  A security interest in proceeds shall have the 
same priority as the security interest in the collateral. 
 
37.  Priority extending to  future finance.   Where a security interest extends to future 
finance, the security interest shall have the same priority in respect of existing and future finance. 
 
38.  Priority of security interest in after­acquired 1[and future] property. The priority of 
a security interest that is perfected by registration as provided under this Act shall extend to all the 
collateral stated in the registered financing statement or Form 10, as applicable, regardless of whether 
it is present 1[property] or after­acquired 1[and future] property. 
 
39.  Extent of priority. —1[(1) If a financing statement or Form 10 is required to state a 
maximum amount secured, then the priority of a security interest that is perfected by that  financing 
statement or Form 10 is limited to the maximum amount as stated in the registered financing statement 
or Form 10, as applicable.] 
 
(2) Where the maximum amount secured by the security interest as stated in the registered 
financing statement or Form 10, as applicable, is increased by way of a registered modification 
statement or Form 16, the priority of the security interest in respect of such increase shall be from the 
date the modification statement or Form 16, as applicable, was registered. 
 
(3) Where a modification statement or Form 16, as applicable, has been registered in respect 
of an addition of collateral, other than by way of proceeds, the priority of the security interest in 
respect of such additional collateral shall be  from the  date  the  modification statement  or Form 
16, as applicable, was registered. 
 
40.  Subordination. — An agreement may be entered into between secured creditors of 
a customer or between a secured creditor and a customer pursuant to which one secured creditor 
subordinates his security interest to the security interest of another secured creditor. 
 
41.  Right of secured creditor to follow the collateral. —(1)  Unless otherwise provided 
in Chapter III of this Part V of this Act, if a customer transfers, leases or licenses collateral that is, at 
the time of transfer, lease or license, subject to a perfected security interest, the transferee, lessee or 
licensee shall acquire the collateral subject to such perfected security interest. 
    1Ins. and subs  by The Act of Financial Institutions (Secured Transactions) (Amendment) Act, 2021 (XXXIII of 2021), ss. 2 6-27. 
 
Page 25 of 35 
 
 (2) A secured creditor's right to follow the collateral under sub­section (1) shall be without 
prejudice and in addition to the secured creditor's r ight to the proceeds of the collateral, where 
applicable. 
______________ 
 
CHAPTER lI  
SPECIAL PRIORITY  RULES 
 
42.  1[Priority of acquisition security interest].— 1[(1) An acquisition security interest in 
collateral that is perfected by registration as provided under this Act within ten days of the date on 
which the customer takes possession of the collateral shall have p riority over all other competing 
security interests in the same collateral irrespective of the time of perfection of such competing 
security interests.] 
 
(2)  1[* * * * * * * *] 
 
 
Illustration  
 
 Secured Creditor A has a 1[a security interest over all present and] after-acquired movable property 
of Customer B (an entity) that was perfected by registration in the register on 1st December. 
 
Customer B leases a car from Secured Creditor C pursuant to a finance lease agreement on 1st 
February. The ownership of the car is registered in the name of the Secured Creditor C. 
Secured Creditor C also perfects its security interest in the car by registration in the register on 4th 
February.  
 
Secured Creditor C will have priority over Secured Creditor A. 
 
43.  Priority between secured creditor and bailee providing services in respect of the 
collateral. — A secured creditor shall have priority over a bailee having a lien in respect of 
the collateral under section 170 of the Contract Act, 1872 (IX of 1872), provided the security 
interest was perfected before the bailment was created. 
 
44.  Priority between secured creditor and unpaid seller.— An unpaid seller having a 
lien in respect of the collateral under the Sale of Goods Act, 1930 (III of 1930) shall have priority 
over a secured creditor. 
 
45. Priority between secured creditor and a bank having a bankers' lien. — A bank 
having a bankers 'lien under section 171 of the Contract Act, 1872 (IX of 1872) shall have priority 
over a secured creditor unless such bank has in writing waived of its bankers' lien. 
 
46. Priority of security interest in a right to payment of  funds credited in a deposit 
account. —(1) A security interest in a right to payment of funds credited in a deposit account that is 
perfected by control has priority as against a security interest in a right to payment of funds credited 
in a deposit account that is perfected other than by control 1[******]. 
 
 
 
 
1Subs. and omitted by the Act of The Financial Institutions (Secured Transactions) (Amendment) Act, 2021 (XXXIII of 2021), ss. 28-29. 
 
 
 
Page 26 of 35 
 
 
(2) A depository bank's right of set­off against the customer's obligations shall have priority 
over a security interest in the right to payment of funds credited in a deposit account unless the 
depository bank has, in terms of the control agreement, waived of its right of set­off. 
 
(3) Sub­section (2) shall not in any way affect the depository bank's right of set­off under the 
insolvency laws.   
 
Illustrations  
 
(a)  Secured Creditor A has a security interest in a right to payment of funds credited in a 
deposit account of Customer B (a company) that was perfected by control on the 25th 
December. 
   
Secured Creditor C has a 1[security interest] on all the present and after­acquired 
movable property (including funds credited in deposit accounts) of Customer B that 
was perfected by registration on the 1st December. 
 
Secured Creditor A shall have priority over Secured Creditor C. 
 
(b)  Secured Creditor A has a security interest in a right to payment of funds credited in a 
deposit account of Customer B (an entity) that was perfected by control on the 25th 
December. 
  
Secured Creditor C has a 1[security interest]  on Customer B's present and 
after­acquired inventory that was p erfected by registration on the 1st December. 
Secured Creditor C's 1[security interest] shall extend to the proceeds, i.e. sale proceeds 
of inventory that are credited in a deposit account over which Secured Creditor C has 
no control. 
 
Secured Creditor A shall have priority over Secured Creditor C. 
 
 
47.  Priority of security interest in collateral covered by title document. —A  security 
interest in collateral covered by title document that is perfected by possession has priority as 
against a security interest in collateral covered by title document that is perfected other than by 
possession pursuant to sub­section (3) of section 14. 
 
Illustration  
 
Secured Creditor A has a security interest in collateral covered by a title document of 
Customer B (an entity) that was perfected by possession on the 25th December. 
 
Secured Creditor C has a 1[security interest] on all the present and after­acquired movable property 
(including goods­in­transit covered by title documents) of Customer B that was p erfected by 
registration on the 1st December. 
 
Secured Creditor A shall have priority over Secured Creditor C. 
 
48.  1[* *  * * * *  *] 
 
1Subs and omitted by The Act of Financial Institutions (Secured Transactions) (Amendment) Act, 2021 (XXXIII of 2021), ss. 2 9-31. 
 
 
Page 27 of 35 
 
49. Priority of security interest in a negotiable instrument. —(1) A security interest 
in a negotiable instrument that is perfected by possession has priority as against a security interest 
in a negotiable instrument that is perfected other than by possession 1[******]. 
 
(2) A security interest in a negotiable instrument is sub­ordinate to the rights of a holder in 
due course as defined in section 9 of the Negotiable Instruments Act, 1881 (XXVI of 1881). 
 
Illustration  
 
(a)  Secured Creditor A has a security interest in a negotiable instrument issued in favour 
of Customer B (an entity) that was perfected by possession on the 25th December. 
 
Secured Creditor C has a 1[security interest] on  all the present and after­acquired 
movable prop erty (including right to payment under negotiable instruments) of 
Customer B that was perfected by registration on the 1st December. 
 
Secured Creditor A shall have priority over Secured Creditor C. 
 
(b)  Secured Creditor A has a security interest in a negotiable instrument of Customer B 
(a company) that was perfected by possession on the 25th December. 
 
Secured Creditor C has a 1[security interest] on Customer B's present and after­acquired 
inventory that was perfected by registration on the 1st December. Secured Creditor C's 
1[security interest] extends to proceeds, i.e. sale proceeds of inventory that may be 
in the form of a negotiable instrument of which the Secured Creditor C will have no 
possession. 
 
Secured Creditor A shall have priority over Secured Creditor C. 
 
__________________ 
 
CHAPTER III  
TAKING FREE OF SECURITY 
INTEREST 
 
50.  Purchaser taking   free of security interest. —(1)  A  purchaser  for  value  will  
acquire collateral (other than a negotiable instrument or collateral covered by title document) free of 
any security interest, where the customer— 
 
(a)  sells the collateral in ordinary course of business, provided that the 
customer shall not conduct a bulk sale of collateral without the prior written 
consent of the secured creditor. 
 
Explanation:— Unless otherwise provided in the security agreement, a bulk sale shall mean 
any transfer of all or major part of the collateral of a customer or of the collateral held at a particular 
place of business of a customer; or 
 
(b)  is authorized in writing by the secured creditor to sell the collateral free  
of the security interest. 
 
1[(1A) A purchaser for value of a motor vehicle shall acquire the motor vehicle free of a 
security interest if the security interest is perfected by registration and the registration does not 
include the correct vehicle registration number.] 
 
1Omitted and s ubs. by The Act of Financial Institutions (Secured Transactions) (Amendment) Act, 2021 (XXXIII of 2021), s. 32. 
 
Page 28 of 35 
 
(2) A purchaser for value shall not acquire collateral free of security interest under clause 
(a) of sub­section (1) 1[or under sub-section (1A)] if, at the time of the acquisition, the purchaser 
has actual knowledge that the sale of the collateral is prohibited under the security agreement. 
 
51. Rights of a lessee and licensee. — (l) The rights of a lessee and licensee in the 
collateral are not affected by a security interest where the customer— 
 
(a)  leases or licenses the collateral in ordinary course of its business; or 
 
(b)  is authorized in writing by the secured creditor to lease or license the 
collateral. 
 
(2) Clause (a) of sub­section (1) shall not apply if, at the time of the conclusion of the lease 
or license agreement, the lessee or licensee has actual knowledge that the lease or licence of the 
collateral is prohibited under the security agreement. 
 
52. Transferee of funds held in a deposit account taking free of security interest. —
Where the customer has initiated a transfer of funds from a deposit account that is subject to a 
security interest, the transferee of the funds takes the funds free of any security interest unless 
the transferee had actual knowledge that the funds transfer is prohibited under the security agreement. 
 
1[52A Transferee of money. ― A person that obtains possession of money that is subject to 
a security interest acquires its rights in the money free of the security interest, unless the person had 
actual knowledge that its obtaining the money is prohibited under the security agreement.] 
 
    _____________________ 
 
PART VI 
ASSIGNMENT OF RECEIVABLES 
 
53. Assignment of receivables by way of security and absolute. — 1[(1) This Act shall 
apply to an assignment of receivables as a security interest, whereby― 
 
(a)  a customer may assign its rights, title, interests and benefits in receivables to 
a secured creditor in accordance with Part II of this Act; 
 
(b) the secured creditor may perfect the security interest created by the 
assignment,― 
 
(i)  if the customer is an entity, in accordance with Part III of this Act; or 
 
(ii)  if the customer is a company, in accordance with the Companies Act, 
2017 (XIX of 2017); 
 
(c)  the priority of the secured creditor’s interest in the receivables shall be 
determined in accordance with Part V of this Act; and 
 
(d)  the secured creditor must enforce its security interest, unless it is an absolute 
assignment of a receivable, in accordance with Part VII of this Act.] 
 
 
1Ins. by the Act of The Financial Institutions (Secured Transactions) (Amendment) Act, 2021 (XXXIII of 2021), ss. 3 3-35. 
 
Page 29 of 35 
 
(2) 1[*   * * * * * *] 
 
(3) 1[Subject to this Act, upon an assignment of receivables], — 
 
(a)  the rights and remedies of the 1[customer] , whether by damages or 
otherwise, shall vest in the 1[secured creditor]  ; and 
 
(b) the 1[secured creditor]  may sue or institute proceedings in respect of the 
assignment of receivables in 1[its] own name without obtaining the 
1[customer’s]  consent to such suit or proceedings and without making him a 
party thereto. 
 
(4) 1[ * * * * * * *] 
 
Explanation.—Future receivables are receivables that are generated as a result of a contract 
that is concluded after the conclusion of the agreement assigning the receivables. 
 
1[(5) If receivables subject to a security interest are secured by movable property, then, unless 
otherwise agreed between the customer and the secured creditor, the secured creditor shall 
automatically benefit from that security without the need for any new act of transfer.] 
 
1[(6) The rights of a secured creditor in respect of the receivables that are subject to a security 
interest are subject to― 
 
(a)  all defences and right to set-off arising from the original contract between the 
account debtor and the customer that the account debtor could have asserted 
against the customer: 
 
Provided that the secured creditor shall, unless otherwise agreed with 
the customer, be entitled to recover from the customer, any loss suffered by it 
as a result of the account debtor exercising any such defences and right to set-
off; and 
 
(b)  any rights to set-off that the account debtor could have asserted against the 
customer in respect of claims against the customer accruing before the account 
debtor received notice in writing of the security interest.] 
 
(7) Sub­section (6) shall not apply if the account debtor has agreed in writing with the 
1[customer]  that it shall not assert any defences or right to set­off. 
 
54.  1[ * * * * * * *] 
 
1[55.  Protections for the account debtor.― (1) Subject to subsection (4), an account debtor 
shall be bound by a security interest over the receivables and have a duty to make payment to the 
secured creditor where the account debtor receives notice of security interest in writing. 
 
(2) The notice to be given under sub -section (1) to the account debtor may be given by the 
customer or secured creditor and shall at the minimum― 
 
 
1Omitted,  Subs. by the Act of The Financial Institutions (Secured Transactions) (Amendment) Act, 2021 (XXXIII of 202 1), ss. 3 5-37. 
 
 
Page 30 of 35 
 
(a)  state name and address of the customer; 
(b)  state name and address of the secured creditor; 
(c)  identify the receivables; and 
(d)  require the account debtor to pay to the secured creditor in accordance with 
payment instructions stated therein. 
(3) If notice has not been given to an account debtor under subsection (1), of a security interest 
in receivables, he shall be entitled to make payments to the customer in respect of the receivables in 
accordance with the original contract between the account debtor and the customer and such payment 
shall fully discharge the account debtor:  
 
Provided that payment made to the customer in respect of such receivables shall be held in 
trust for the benefit of the secured creditor and the customer shall forthwith make payment of such 
amount to the secured creditor or its agent duly authorised in th is behalf, unless otherwise agreed 
between the customer and secured creditor. 
 
(4) If an account debtor receives notices under sub -section (1) in relation to more than one 
security interest created by the same customer, it is discharged by paying in accord ance with the first 
notice received. If an account debtor receives more than one notice under sub-section (1) in relation to 
security interests created in favour of a secured creditor by the initial or any other secured creditor, it 
is discharged by paying in accordance with the last notice.] 
 
1[55A Contractual limitations on security interests in receivables. ―  (1) A security 
interest in receivables shall be effective notwithstanding any agreement between the initial or any 
subsequent assignor and the account debtor or any secured creditor limiting in any way the assignor’s 
right to create a security right. 
 
(2) Nothing in this section affects any obligation or liability of the customer for breach of the 
agreement referred to in sub-section (1), but the other party to the agreement may not avoid the contract 
giving rise to the receivable or the security agreement on the sole ground of the breach of the 
agreement, or raise against the secured creditor any claim it may have as a result of such a breach 
against the customer. A person that is not a party to the agreement referred to in sub-section (1) is not 
liable for the customer’s breach of the agreement on the sole ground that it had knowledge of the 
agreement. 
 
(3) This section shall apply only to receivables― 
 
(a) arising from a contract that is a contract for the supply or lease of goods or 
services other than financial services, a construction contract or a contract for 
the sale or lease of immovable property; 
 
(b)  arising from a contract for the sale, lease or license of industrial or other 
intellectual property or of proprietary information; 
 
(c)  representing the payment obligation for a credit card transaction; or 
    
(d)  arising upon net settlement of payments due pursuant to a netting agreem ent 
involving more than two parties.] 
 
56.  Applicability of the Transfer of Property Act, 1882 (IV of 1882) .— Sections 130, 
131, 132 and 134 of the Transfer of Property Act, 1882 ( IV of 1882) shall not apply to an assignment 
of receivables under this Act. 
 
1Ins. by the Act of The Financial Institutions (Secured Transactions) (Amendment) Act, 2021 (XXXIII of 2021), s.38. 
 
 
Page 31 of 35 
 
1[56A. Applicable law .― The law applicable to the creation, perfection and priority of a 
security interest granted by a customer in a  receivable and any other intangible property shall be the 
law of the jurisdiction in which the customer is located. 
 
56B.  Part does not apply to absolute assignments of receivables . ― This Part does not 
apply to an absolute assignment of receivables and nothing in this Act shall prejudice a secured 
creditor’s right to enforce an absolute assignment of receivables without the intervention of the courts.] 
________________________ 
 
PART VII 
ENFORCEMENT OF SECURITY 
INTERESTS 
 
57.  Modes of enforcement. A secured creditor may, after an occurrence of an event of 
default, enforce a security interest in accordance with section 58 or 59. 
 
58. Recovery suit. —(1) A secured creditor may enforce a security interest by filing a 
recovery suit against the customer in the Banking Court. 
  
(2) The provisions of the Recovery Ordinance shall apply mutatis mutandis for the 
purposes of filing a recovery suit against the customer. 
 
Explanation. —The provisions of  the  Recovery  Ordinance  relating to  the  enforcement  
of  a mortgage over immovable property shall not be applicable. 
 
59. Other enforcement modes.—(1)  A secured creditor may enforce the following security 
interests without the intervention of the courts: 
 
1[(a)  a security interest that is perfected by possession] ; 
 
(b)  an assignment of receivables by way of security; 
 
(c)  a security interest in a negotiable instrument that is perfected by 
possession; 
 
(d)  a security interest in a right to payment of funds credited in a 
deposit account that is perfected by control; 
 
(e)  a security interest in a motor vehicle based on retention of title 
arrangement; and 
 
(f)  a security interest in a title document that is perfected by possession. 
 
(2) At any time after a secured creditor decides to enforce a 1[ security interest referred 
to in sub -section (1)] after an occurrence of an event of default, the secured creditor may give a 
written notice of demand to the customer in writing and require the customer to satisfy his obligation 
within fourteen days from the date of receipt of the notice. The notice shall give details of the amount 
payable by the customer and specify the collateral that may be enforced in the event of the customer 
failing to satisfy his obligation: 
 
Provided that the secured creditor may dispense with such notice if —(a) in the 
reasonable op inion of the secured creditor, the collateral is in danger of being wasted, 
misappropriated or is perishable; or (b) the amount of finance exceeds ten million rupees and the 
security agreement provides for such dispensation. 
 
 
1Ins. by The Financial Institutions (Secured Transactions) (Amendment) Act, 2021 (XXXIII of 2021), s. 3 9-40. 
 
Page 32 of 35 
 
(3) The right to enforce an assignment of receivables by way of security and  a security 
interest in a negotiable instrument in terms of this section includes the right to enforce any 
security over movable property or a mortgage of immovable property by deposit of title deeds as 
provided in sub­ section (1) of section 58 of the Transfer of Property Act. 1882 (IV of 1882) that 
secures the payment of the receivables or the negotiable instrument. 
 
(4) In case of a security interest in a right to payment of funds credited in a deposit account, 
the secured creditor shall — 
 
(a)  where such secured creditor is the depository b ank, be entitled to 
appropriate and set­off the funds credited in the deposit account against 
the customer's obligation; or 
 
(b)   where such secured creditor is not the depository  bank, be entitled  to 
instruct  the depository bank to pay the funds credited in the deposit 
account to or for the benefit of the secured creditor in terms of the control 
agreement. 
 
(5) Nothing in this Act shall prejudice a secured creditor's right to enforce a security interest 
without the intervention of the courts under any other law for the time being in force. 
 
60. Enforcement  where  collateral  is  in  the  nature of property  attached to  immovable 
property.—(1) If the collateral is in the nature of property attached to immovable property, the 
secured creditor may, upon enforcement of the security interest in accordance with the provisions of 
this Part, remove such property and shall r eimburse the mortgagee or owner of the immovable 
property to which such property is attached for the cost of repair of any damage to the immovable 
property resulting from the removal: 
 
Provided that the secured creditor shall not be required to reimburse the mortgagee or 
owner of the immovable property for any reduction in value of the immovable property resulting 
from the removal of the property attached to immovable property. 
 
(2) The secured creditor shall be entitled to recover from the customer any expenses 
incurred by him for the purposes of removing the property attached to immovable property. 
 
61. Fresh election of directors on request of the secured creditor. — Notwithstanding 
anything contained in the 1[Companies Act, 2017 (XIX of 2017)], where a secured creditor acquires 
twenty percent or more of the voting securities of a company in his own name upon enforcement of a 
1[security interest over] securities, he may require the company to hold a fresh election of directors 
in accordance with the procedure laid down in section 178 of the Companies Act, 2017 (XIX of 2017) 
within sixty days of the secured creditor requesting the same. 
 
 
_______________________ 
 
 
 
 
 
 
1Subs. by The Financial Institutions (Secured Transactions) (Amendment) Act, 2021 (XXXIII of 2021), s. 41. 
 
Page 33 of 35 
 
PART VIII 
RIGHTS AND OBLIGATIONS OF 
SECURED CREDITOR AND 
CUSTOMER 
 
62.  Duties of customer in case of a non­possessory security interest.—(1) A customer shall 
exercise as much care in the custody, preservation, operation, maintenance, use or other enjoyment or 
exploitation of collateral in the customer's possession as a man of ordinary prudence would as if the 
collateral had been free of any security interest and shall not take any action, directly or indirectly, 
that may waste, misappropriate or otherwise prejudice the value of the collateral. 
 
(2) A customer shall be liable to the secured creditor for any loss or damage to the collateral 
as a result of a breach of the obligations under sub­section (1). 
 
(3) Subject to the terms of the security agreement, the secured creditor and its agents shall 
have the right to inspect, value, insure, superintend, take samples and particulars of the collateral and 
to check any statements, accounts, reports and information pertaining to the collateral. 
 
63. Duties of secured creditor in case of a 1[possessory security interest] and security 
interest in collateral covered by a title document. —Sections 150, 151, 152, 153, 154, 155, 156, 157. 
173 and 175 of the Contract Act, 1872 (IX of 1872) shall apply mutatis mutandis to a secured creditor 
in the case of a 1[security interest that is perfected by possession of the collateral or, in the case of 
collateral covered by a title document, by possession of the title document.] 
 
64.  Material information from secured creditor. —(1)  The  customer  may  send  a  written 
demand to the secured creditor to provide material information in respect of a security interest. 
 
(2) A secured creditor shall, upon receiving a written demand under sub­section (1), provide 
the material information to the customer within fourteen days of receiving the demand. 
 
(3) A secured creditor may charge the customer a reasonable fee for responding to a 
written demand under sub­section (1) provided that such fee shall not exceed the cost of processing 
such demand. 
 
(4) For the purposes of this section, material information shall mean— 
 
(a)   a copy of the security agreement and any amendments thereto; 
 
(b)   a statement in writing of the amount of the aggregate outstanding 
obligation of the customer secured by the collateral as of the date 
specified in the written demand under sub­section (1); and 
 
(c)  a statement in writing that approves or corrects an itemized list of what 
the customer believes to be the collateral securing an obligation as of the 
date specified in the written d emand under sub­section (1) and duly 
authenticated by the customer. 
  
 
    ________________________ 
 
 
 
1Subs. by the Act of The Financial Institutions (Secured Transactions) (Amendment) Act, 2021 (XXXIII of 2021), s.42. 
 
 
Page 34 of 35 
 
PART IX 
MISCELLANEOUS PROVISIONS 
 
65. Notice.—(1) A notice or demand required to be given pursuant to any provision in Part 
IV of this Act may be given to the secured creditor or entity, as applicable, through courier or 
registered po st with acknowledgement due at the address provided in the registered financing 
statement. 
 
(2) A notice or demand given in accordance with sub­section (1) shall be deemed to have 
been given and received — 
 
(a)  on the day of actual delivery, where the notice is sent by a courier; or 
 
(b)  four days after the notice has been posted, where the notice is sent by 
registered post with acknowledgement due. 
 
(3) The registrar may prescribe by regulations additional modes of providing a notice or 
demand to the secured creditor or entity, as applicable, pursuant to any provision in Part IV of this 
Act and matters ancillary thereto. 
 
1[65A.  Security interests take precedence. ― Subject to this Act and notwithstanding any 
other law for the time being in force, a perfected security interest takes absolute precedence over all 
other claims, including those of the Government.] 
 
1[66.  Provisions of insolvency laws. ― Subject to section 65A, if a customer becomes 
insolvent, the same rules shall prevail and be observed with regard to the priority of debts upon the 
distribution of the insolvent customer’s estate, the respective rights of the secured and unsecured 
creditors and to debts provable as are in force for the time being under the applicable insolvency laws.] 
 
67. Protection of action taken in good faith.—No suit, claim or other legal proceedings 
shall lie against the Registry or the registrar, deputy registrar or officers, staff and other employees of 
the Registry in respect of anything which is done or omitted to be done in good faith under this Act 
or any rules and regulations made thereunder. 
 
68. The provisions of this Act to override other laws.—(1) The provisions of this Act shall 
be in addition to, and not, save as expressly provided in this Act, in derogation of any other law for 
the time being in force. 
 
(2) In the event of any inconsistency or conflict between the provisions of this Act and 
any other law for the time being in force including but not limited to the 1[Companies Act, 2017 (XIX 
of 2017)], Recovery Ordinance, Contract Act 1872 (IX of 1872), Transfer of Property Act, 1882 
(IV of 1882), Specific Relief Act, 1877 (I of 1877), Sale of Goods Act, 1930(III of 1930), and 
General Clauses Act, 1897 (X of 1897), the provisions of this Act shall prevail. 
 
69.  Power to remove difficulties. —If any difficulty arises in giving effect to the 
provisions of this Act, the Federal  Government may, by order published in the official  Gazette, 
make such  provisions, not inconsistent with the provisions of this Act, as may appear to be necessary 
for removing such difficulty. 
 
 
 
1Subs. by the Act of The Financial Institutions (Secured Transactions) (Amendment) Act, 2021 (XXXIII of 2021), ss. 43-45. 
  
 
Page 35 of 35 
 
70.  Power to make rules.—(1) The Federal Government may, by notification in the 
official Gazette. make rules, not inconsistent with the provisions of this Act, for carrying out the 
purposes of this Act. 
 
(2)  1 [*   *  *  *  *  *  *]  
 
71. Public Servants. —(1)  The registrar, deputy registrars, officers, employees of the 
Registry and  other  persons authorized to  perform or  exercise  any  function or  power under this 
Act  or rendering services to the Registry as consultant or adviser shall be deemed to be public 
servants within the meaning of section 21 of the Pakistan Penal Code, 1860 (Act XLV of 1860). 
 
(2) Save as otherwise provided by this Act and only for the purposes so provided, nothing 
herein contained shall be construed to mean that any person referred to in sub­section (1) is or shall 
be deemed to be in the service of Pakistan or is to be regarded or treated as a civil servant. 
 
1[72.  Power to make regulations. ― The Commission may, by notification in the official 
Gazette, make regulations, not inconsistent with the provisions of this Act and the rules made 
thereunder for carrying out the purposes of this Act.] 
 
73.  Transitional provisions. —(1) For the purposes of this section,— 
 
(a) “prior security interest” means a security interest created or provided 
for by a security agreement or other transaction entered into by an entity 
before the commencement of this Act; 
 
(b)  “prior law” means any law, whether statutory, equitable or common law, 
that was in force before the commencement of this Act; 
 
(c)  “transitional period” means the period of six months after the 
notification of 1[operationalization]  of the Registry is published by the  in 
terms of 1[Commission in terms of sub-section (2)] of section 19. 
 
(2) Secured creditors may perfect prior security interests in accordance with this Act 
during the transitional period. 
 
(3) Upon perfection under sub­section (2), a prior security interest shall retain priority 
from the date it was perfected under prior law and shall have priority over a security interest created 
and perfected after the commencement of this Act. 
 
(4) If a prior security interest is perfected after the transitional period, such prior security 
interest shall be deemed to have priority from the date of actual perfection in the event of a conflict 
with a security interest created and perfected after the commencement of this Act or a prior security 
interest perfected during the transitional period. 
 
(5) Nothing in this Act shall prejudice a security interest created and perfected by a 
company before the commencement of this Act and such security interest shall continue to be 
governed by prior law. 
 
_______________________________ 
 
 
1Omitted and Subs. by the Act of The Financial Institutions (Secured Transactions) (Amendment) Act, 2021 (XXXIII of 2021), ss. 4 6-48.