With treasury experience at Ecobank Ghana, bonds/notes are key in capital markets, regulated by SEC Ghana and BoG. Post-DDEP, negotiability aided liquidity; answers reference Eurobonds issued by Ghana.

(a) Nature of the Negotiability of Bonds and Notes

Negotiability allows transfer of ownership/title via delivery/endorsement, making them bearer or order instruments under Bills of Exchange Act, 1961:

• Bonds: Long-term debt securities; negotiable if bearer (transfer by delivery) or registered (via registry). Nature: Provides good title to bona fide holders, free from defects.
• Notes: Shorter-term (e.g., promissory notes); similar, but often unsecured. In Ghana, Treasury notes are negotiable on GSE, enhancing market depth.

Practical: Eurobonds’ negotiability facilitates secondary trading, as in Ghana’s 2021 issuance.

(b) Legal Issues with Negotiability of Bonds and Notes

• Defenses and Defects: Holders in due course protected, but fraud/illegality voids (e.g., Unfair Contract Terms Act applicability). In Ghana, AML Act requires due diligence.
• Tax and Withholding: Negotiability triggers withholding tax; double tax treaties mitigate. Issue: Grossing-up clauses in docs.
• Regulatory Constraints: SEC approval needed; exchange controls under Act 723 limit forex transfers. Post-2017, governance issues at banks holding notes led to collapses.
• Insolvency: Priority in winding-up; negotiable instruments may be set-off.

Example: DDEP exchanges raised issues on altered negotiability.

(c) Negotiability of Foreign Bonds

Foreign bonds (e.g., Yankee bonds) are issued in another currency/jurisdiction, negotiable per governing law (e.g., New York law for Eurobonds).

• Conflicts of Law: Rome Convention determines proper law; choice clauses crucial.
• Enforcement: Brussels/Lugano Conventions aid judgments; sovereign immunity for state bonds (e.g., Ghana’s defaults).
• Market Practice: Clearing systems like Euroclear enhance transfer; but withholding taxes/exchange controls pose risks.

In Ghana, BoG regulates holdings; practical: 2024 recovery involved negotiating foreign bond terms for resilience.