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Periodical article Periodical article Leiden University catalogue Leiden University catalogue WorldCat catalogue WorldCat
Title:The new company, asset financing security and the law in Malawi
Author:Chilumpha, C.H.
Periodical:The Comparative and International Law Journal of Southern Africa
Geographic term:Malawi
company law
Abstract:Where a sole trader in Malawi acquires asset financing on condition that he convert his business organization into an incorporated company, difficulties may arise in determining whether the credit agreement is between him and the financier or between the latter and the new company. Where the credit is secured by a bill of sale on assets which are the subject of the financing agreement, the Bills of Sale Act will not apply to the security if the company is the other party to the agreement. This exemption, which is made by section 23 of the Act, reflects the fact that the object of the Act is to protect the unincorporated borrower of money from being abused by the lender who takes security for the credit in the form of a mortgage on the former's personal property. In the case of Label Industries Ltd v. SEDOM (civ. case 526/1987 of 11 January 1991) both the asset financing agreement and the bill of sale securing it were executed by the plaintiff company after its incorporation. Because the bill was created by the company on its movable property, the High Court held it to be void by reason of section 23. This suggests that a financier who provides credit secured by a bill of sale should ensure that so long as credit remains unrepaid the debtor should not be incorporated as a company, or if it is incorporated, it should not become the grantor of the bill. Notes, ref.