Strength of legal rights index: World Bank-2019

Strength of legal rights index

The strength of legal rights index measures the degree to which collateral and bankruptcy laws protect the rights of borrowers and lenders and thus facilitate lending. For each economy it is first determined whether a unitary secured transactions system exists. Then two case scenarios, case A and case B, are used to determine how a nonpos­sessory security interest is created, publicized and enforced according to the law. Special emphasis is given to how the collateral registry operates (if regis­tration of security interests is possible). The case scenarios involve a secured borrower, company ABC, and a secured lender, BizBank.
The strength of legal rights index covers functional equivalents to security inter­ests in movable assets (such as financial leases and sales with retention of title) only in its first component, to assess how integrated or unified the economy’s legal framework for secured transactions is.

The strength of legal rights index includes 10 aspects related to legal rights in collat­eral law and 2 aspects in bankruptcy law. A score of 1 is assigned for each of the following features of the laws:

The economy has an integrated or unified legal framework for secured transactions that extends to the creation, publicity and enforcement of four functional equivalents to security interests in movable assets: fiduciary transfers of title; financial leases; assignments or transfers of receiv­ables; and sales with retention of title.
The law allows a business to grant a nonpossessory security right in a single category of movable assets (such as accounts receivable, tangible movable assets and inventory), without requiring a specific descrip­tion of the collateral.
The law allows a business to grant a nonpossessory security right in substantially all its movable assets, without requiring a specific descrip­tion of the collateral.
A security right can be given over future and after-acquired assets, and extends automatically to the prod­ucts, proceeds and replacements of the original assets.
All types of debts and obligations can be secured between the parties, and a general description of such debts and obligations is permitted in the collateral agreement and in registra­tion documents.

A collateral registry or registration institution for security interests granted over movable property by incorporated and nonincorporated entities is in operation, unified geographically and with an electronic database indexed by debtors’ names.
The collateral registry is a notice-based registry—a registry that files only a notice of the existence of a security interest (not the underlying documents) and does not perform a legal review of the transaction. The registry also publicizes functional equivalents to security interests.

The collateral registry has modern features such as those that allow secured creditors (or their represen­tatives) to register, search, amend or cancel security interests online.
Secured creditors are paid first (for example, before tax claims and employee claims) when a debtor defaults outside an insolvency procedure.
Secured creditors are paid first (for example, before tax claims and employee claims) when a business is liquidated.
Secured creditors are subject to an automatic stay on enforcement proceedings when a debtor enters a court-supervised reorganization procedure, but the law protects secured creditors’ rights by providing clear grounds for relief from the automatic stay (for example, if the movable property is not used for the reorganization or sale of the business as a going concern, or if there is a risk to its existence) and setting a time limit for it.

The law allows parties to agree in the collateral agreement that the lender may enforce its security right out of court; the law allows the assets to be sold through public or private auctions and permits the secured creditor to take the asset in satisfac­tion of the debt.

The index ranges from 0 to 12, with higher scores indicating that collateral and bankruptcy laws are better designed to expand access to credit.

Higher Value = High protection

Countries and Economies

Rank Country Value Year
1 Puerto Rico 12.00 2019
1 New Zealand 12.00 2019
1 Montenegro 12.00 2019
1 Brunei 12.00 2019
1 Azerbaijan 12.00 2019
6 Colombia 11.00 2019
6 Kenya 11.00 2019
6 Vanuatu 11.00 2019
6 Jordan 11.00 2019
6 Zambia 11.00 2019
6 Australia 11.00 2019
6 Rwanda 11.00 2019
6 Malawi 11.00 2019
6 Tajikistan 11.00 2019
6 United States 11.00 2019
16 Mexico 10.00 2019
16 Palau 10.00 2019
16 Nepal 10.00 2019
16 Liberia 10.00 2019
16 Tonga 10.00 2019
16 Solomon Islands 10.00 2019
16 Afghanistan 10.00 2019
16 Costa Rica 10.00 2019
16 Cambodia 10.00 2019
25 El Salvador 9.00 2019
25 Canada 9.00 2019
25 Jamaica 9.00 2019
25 Mongolia 9.00 2019
25 Latvia 9.00 2019
25 Papua New Guinea 9.00 2019
25 Kyrgyz Republic 9.00 2019
25 Guatemala 9.00 2019
25 Russia 9.00 2019
25 Hungary 9.00 2019
25 Georgia 9.00 2019
25 North Macedonia 9.00 2019
25 Romania 9.00 2019
25 Samoa 9.00 2019
25 Nigeria 9.00 2019
25 India 9.00 2019
41 Bulgaria 8.00 2019
41 Singapore 8.00 2019
41 Djibouti 8.00 2019
41 Moldova 8.00 2019
41 Panama 8.00 2019
41 Hong Kong SAR, China 8.00 2019
41 Denmark 8.00 2019
41 Ukraine 8.00 2019
41 Vietnam 8.00 2019
41 Belgium 8.00 2019
41 Albania 8.00 2019
41 Honduras 8.00 2019
41 Kazakhstan 8.00 2019
54 United Kingdom 7.00 2019
54 Cyprus 7.00 2019
54 Malaysia 7.00 2019
54 Sweden 7.00 2019
54 Slovak Republic 7.00 2019
54 Estonia 7.00 2019
54 Peru 7.00 2019
54 Poland 7.00 2019
54 Ireland 7.00 2019
54 Turkey 7.00 2019
54 Thailand 7.00 2019
54 Bosnia and Herzegovina 7.00 2019
54 Czech Republic 7.00 2019
54 Trinidad and Tobago 7.00 2019
68 Ghana 6.00 2019
68 Switzerland 6.00 2019
68 Dem. Rep. Congo 6.00 2019
68 Mali 6.00 2019
68 Equatorial Guinea 6.00 2019
68 Zimbabwe 6.00 2019
68 Comoros 6.00 2019
68 The Gambia 6.00 2019
68 Chad 6.00 2019
68 The Bahamas 6.00 2019
68 Barbados 6.00 2019
68 Central African Republic 6.00 2019
68 Niger 6.00 2019
68 Serbia 6.00 2019
68 Lithuania 6.00 2019
68 Côte d’Ivoire 6.00 2019
68 Congo 6.00 2019
68 Lao PDR 6.00 2019
68 Cameroon 6.00 2019
68 Israel 6.00 2019
68 Indonesia 6.00 2019
68 Dominica 6.00 2019
68 Burkina Faso 6.00 2019
68 Gabon 6.00 2019
68 Armenia 6.00 2019
68 Togo 6.00 2019
68 Uzbekistan 6.00 2019
68 Benin 6.00 2019
68 Senegal 6.00 2019
68 United Arab Emirates 6.00 2019
68 Guinea-Bissau 6.00 2019
68 Grenada 6.00 2019
68 Mauritius 6.00 2019
68 Finland 6.00 2019
68 Germany 6.00 2019
68 Guinea 6.00 2019
104 Norway 5.00 2019
104 Sierra Leone 5.00 2019
104 St. Vincent and the Grenadines 5.00 2019
104 Bangladesh 5.00 2019
104 Egypt 5.00 2019
104 Namibia 5.00 2019
104 Korea 5.00 2019
104 South Africa 5.00 2019
104 Antigua and Barbuda 5.00 2019
104 St. Kitts and Nevis 5.00 2019
104 Tanzania 5.00 2019
104 St. Lucia 5.00 2019
104 Fiji 5.00 2019
104 Spain 5.00 2019
104 Japan 5.00 2019
104 Lesotho 5.00 2019
104 Uganda 5.00 2019
104 Croatia 5.00 2019
104 Botswana 5.00 2019
123 Uruguay 4.00 2019
123 Eswatini 4.00 2019
123 Chile 4.00 2019
123 Iceland 4.00 2019
123 France 4.00 2019
123 Bhutan 4.00 2019
123 Saudi Arabia 4.00 2019
123 China 4.00 2019
123 Austria 4.00 2019
123 Kiribati 4.00 2019
123 Belize 4.00 2019
134 Luxembourg 3.00 2019
134 Guyana 3.00 2019
134 Sudan 3.00 2019
134 Tunisia 3.00 2019
134 Slovenia 3.00 2019
134 Ethiopia 3.00 2019
134 Belarus 3.00 2019
134 Bahrain 3.00 2019
134 Liechtenstein 3.00 2019
143 Argentina 2.00 2019
143 Malta 2.00 2019
143 Pakistan 2.00 2019
143 Seychelles 2.00 2019
143 Greece 2.00 2019
143 Mauritania 2.00 2019
143 Iran 2.00 2019
143 Morocco 2.00 2019
143 Madagascar 2.00 2019
143 Suriname 2.00 2019
143 Sri Lanka 2.00 2019
143 Italy 2.00 2019
143 Burundi 2.00 2019
143 Myanmar 2.00 2019
143 Lebanon 2.00 2019
143 Haiti 2.00 2019
143 Brazil 2.00 2019
143 Nicaragua 2.00 2019
143 Algeria 2.00 2019
143 Portugal 2.00 2019
143 Netherlands 2.00 2019
164 Oman 1.00 2019
164 Philippines 1.00 2019
164 Kuwait 1.00 2019
164 Qatar 1.00 2019
164 Mozambique 1.00 2019
164 Paraguay 1.00 2019
164 Venezuela 1.00 2019
164 Cabo Verde 1.00 2019
164 Angola 1.00 2019
164 Dominican Republic 1.00 2019
164 Syrian Arab Republic 1.00 2019
164 Ecuador 1.00 2019
164 San Marino 1.00 2019
177 São Tomé and Principe 0.00 2019
177 Yemen 0.00 2019
177 Bolivia 0.00 2019
177 Eritrea 0.00 2019
177 Somalia 0.00 2019
177 Timor-Leste 0.00 2019
177 Libya 0.00 2019
177 Iraq 0.00 2019
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