(a) In the scenario described, where BBA Construction Ltd. seeks a GHC 500,000 working capital loan for a road construction project but lacks suitable traditional collateral due to the depreciating nature of its assets (office building and equipment), an alternative security that aligns with Ghanaian banking practice is the assignment of contracts or specifically, the assignment of receivables/proceeds from the construction contract. This is particularly feasible given the company’s certified works of GHC 800,000 pending payment, which represent future cash flows tied to the project.

• Rationale for Assignment of Contracts as Alternative Security: Under Ghanaian law, including the Contracts Act, 1960 (Act 25) and the Borrowers and Lenders Act, 2020 (Act 1052), banks can take security over intangible assets like contractual rights and receivables. This is common in project financing, especially for construction firms where physical assets depreciate rapidly (e.g., equipment subject to wear and tear as noted by the MD). The certified works indicate enforceable claims against the project owner (likely a government entity or private contractor), making the assignment a low-risk, cash-flow-based security. This avoids the pitfalls of fixed/floating charges over depreciating assets, which could crystallize inefficiently under the Corporate Insolvency and Restructuring Act, 2020 (Act 1015). In practice, banks like GCB Bank or Ecobank Ghana often use this in infrastructure lending to mitigate risks from asset depreciation, aligning with BoG’s risk management guidelines.
• Steps to Take and Perfect the Security:
  1. Due Diligence on the Contract: Review the construction contract to confirm assignability (ensure no anti-assignment clauses), verify certified works (GHC 800,000), and assess the counterparty’s creditworthiness (e.g., if it’s a government project under the Public Procurement Act, 2003 (Act 663), payments are more secure). Obtain copies of certificates, invoices, and payment schedules.
  2. Obtain Board Resolution and Mandate: Require BBA Construction Ltd. to pass a board resolution authorizing the assignment, as per the Companies Act, 2019 (Act 992). This ensures corporate authority and prevents ultra vires challenges.
  3. Execute Assignment Deed: Draft and execute a legal assignment deed under Section 13 of the Contracts Act, 1960 (Act 25), transferring rights to the receivables/proceeds to the bank. Include clauses for absolute assignment (bank gains legal title) or equitable assignment (as backup). The deed should specify the loan amount, default triggers, and bank’s right to notify the debtor.
  4. Give Notice to the Debtor/Counterparty: Serve formal notice of assignment to the project owner (debtor) immediately, as required for a legal assignment (Dearle v Hall principle, adapted in Ghanaian common law). This prevents set-off or payment to the assignor and perfects the bank’s priority. In practice, use registered mail or legal service for evidence.
  5. Register the Security: Register the assignment at the Collateral Registry under Section 22 of the Borrowers and Lenders Act, 2020 (Act 1052) within 28 days of creation. This provides public notice and priority over subsequent claims. Also, file at the Companies Registry if it qualifies as a charge under Act 992.
  6. Dominate Payment Flows: Set up a domiciliation agreement where payments are directed to a bank-controlled escrow or project account, monitored per BoG’s anti-money laundering directives. This ensures control without possession.
  7. Monitor and Enforce: Include covenants for ongoing reporting on project progress. Upon default, enforce by collecting directly from the debtor or suing under the assignment deed. If needed, appoint a receiver under Act 1015.

  These steps protect the bank’s interest by ensuring enforceability, priority, and minimal realization risks, drawing from cases like post-2017 banking cleanup where unsecured loans led to losses (e.g., UT Bank).

(b) The four key remedies provided to a lender under the Borrowers and Lenders Act, 2020 (Act 1052) in the event of borrower default include:

1. Right to Sue for Recovery: The lender can initiate legal action to recover the outstanding debt, including principal, interest, and costs (Section 40).
2. Enforcement of Security: The lender may realize secured collateral through sale, appointment of receiver, or possession, subject to notice and fair valuation (Sections 41-45).
3. Set-Off: The lender can apply any credits or deposits held by the borrower against the debt (Section 46).
4. Appointment of Administrator or Receiver: For corporate borrowers, the lender can trigger insolvency proceedings or appoint a receiver to manage and sell assets (cross-referencing Act 1015).

In lectures, emphasize practical application, e.g., how BoG’s oversight post-DDEP ensures fair enforcement to maintain sector stability.