Written by Samir Younes
On 25 May 2022, the Moveable Transactions (Scotland) Bill (the Bill) was introduced into the Scottish Parliament. Once enacted, it will significantly update and reform the landscape for financing moveable property in Scotland.
The Bill seeks to implement the Scottish Law Commission's report on moveable transactions (Report on Moveable Transactions), and aims to make it easier for businesses to leverage their moveable property (i.e. property which can be physically moved such as cars and machinery) to obtain finance. The existing Scots law securities of pledges and assignations are affected.
- A pledge is a type of security which is taken over moveable property. Currently, a pledge can only be perfected (i.e. created) by delivery of the moveable property subject to the pledge to the party taking the benefit of the security, or its nominee. In reality, this possessory element can often be difficult or indeed impossible for businesses as they may require to access and use the moveable property as part of their day-to-day operations.
- The Bill creates a new statutory pledge whereby the security can be granted without the requirement of possession/delivery to the party taking the benefit of the security. The Bill envisages instead that this pledge would be recorded in a new Register of Statutory Pledges.
- An assignation is essentially a transfer of claim or right from one party to another. The key element of this form of security is that notice (intimation) of the assignation requires to be made to the counterparty from whom the claim is owed or the right is derived. This can give rise to confidentiality issues and also issues as regards perfection if the counterparty cannot easily be notified.
- The Bill creates a new Register of Assignations whereby the assignation can be to be created without the requirement of intimation.
The Bill envisages the new statutory pledge and assignation process will operate alongside, and as an adjunct to, the current means of creating pledges and assignations.
The Bill is in the very early stages, having only been introduced to the Scottish Parliament on 25 May 2022. It is to be welcomed, as potentially removing obstacles to granting fixed security over certain assets in Scotland (and which can cause difficulty for Scottish companies seeking to access finance) but not elsewhere. As always, there could be a range of amendments made as it goes through the process so watch this space!
You can follow the passage of the Bill's progress via this link : Moveable Transactions (Scotland) Bill.