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Why the modernisation matters and what's in Moveable Transactions (Scotland) Act 2023

19th February 2025

Coming into force in April, the Act brings modernisation to moveable transactions, says Ahsan Mustafa.

The Moveable Transactions (Scotland) Act 2023 was enacted on 13 June 2023 and will come into force on 1 April 2025. The Act will make changes to the transfer of commercial rights such as lending, securitisation and discounting; and change how security over moveable property such as debts, obligations, intellectual property, financial instruments and equipment is created. Future rights can also be assigned.

Background and objectives

The Scottish Law Commission worked on the moveable transactions reform project for more than 14 years, publishing a discussion paper in June 2011 and a three-volume report in December 2017. Book debts, loan books, intellectual property, stock and equipment all fell within the scope of the report.

The Commission examined the model scheme that originated in the US (Article 9 of the Uniform Commercial Code) and has since been adopted with variations in other countries, including Australia, Canada and New Zealand. The Commission also looked at the work of the Financial Law Committee of the City of London Law Society and the Secured Transactions Law Reform Project.

The recommendations for reform noted that the existing legal framework was outdated and inhibited economic growth. The Act will make raising finance easier as entrepreneurs with intellectual property (IP) rights will be able to let lenders take a charge over their IP rights without the need to transfer and enter into a license-back arrangement.

Similarly with statutory pledges, there will be no need to physically transfer assets to the lender. The changes may benefit lenders and financiers by giving more certainty over their rights of enforcement in the event of default as there are now statutory remedies.

Rights and registers

Two separate registers have been created, simplifying the way rights are assigned: the Register of Assignations and the Register of Statutory Pledges. Both will be maintained by Registers of Scotland and go live in spring 2025. There will be a fee of £80 to register an assignation, and no fee for correction. The fee for an extract will be £35. Once an assignation is registered, there will be no need to intimate this to a debtor.

The Register of Statutory Pledges will be a fixed security over moveable assets. This will eliminate the need to physically transfer property or assets. The fee for registration will also be £80. The contrast between a statutory pledge and a common law pledge would be that control of shares or assets would no longer have to transfer temporarily and the pledgor would retain ownership and control. Companies would then be able to utilise their shares to secure funding without causing disruption and additional costs.

In relation to the assignation of unsecured debts, there has historically been no requirement in Scots law for assigned obligations in relation to incorporeal moveables to be in writing or in any specific form. The only requirement has been to intimate the fact that the assignation has taken place; this intimation has not had to take any particular form, but the service of a court writ has been deemed to the best form of intimation as in Carter v McIntosh (1862) 24D 925. The position was further clarified in Libertas-Kommerz Gmbh v Johnson 1977 SC 191, where it was held that it was not necessary to refer to the details of the assignation if the intention was clear. This was confirmed in Promontoria (Ram) v John Moore 2017 CSOH 88 and Cabot Financial (UK) Limited v Sylvia MacLennan [2021] SC ABE 6, which was upheld by the Inner House, in particular making reference to the ‘cardinal principle’ of judicial intimation in Scots law.

Further changes

Electronic intimation is now possible and intimation can also be made on a portal. Consumers are protected by the right to withhold performance until information as to the assignation is provided (section 15 of the Act). There is also protection to a consumer who acted in good faith where the assignation was not intimated, and the assignee has a duty to respond to requests for information. The assignation can be executed by wet ink signature or electronically authenticated. The claim must also be identified, or the identifying class must be identified in the case of a bulk debt assignation.

The assignor can warrant that they have the title to assign the claim, that the debtor has an obligation in relation to the claim assigned, and that the assignor has not and will not prejudice the assignation. Any suspensive conditions to the assignation must be satisfied before the claim can be assigned (section 2 of the Act).

Once the assignation is registered, it will become effective without the need for intimation to the debtor. However, it would still remain a practical requirement to inform a debtor that the debt has been assigned, so that payment can now be made to the assignee. Intimation can be sent by email, personal service, post or courier and does not need to be signed.

The Act will make it simpler for borrowers to grant security over their moveable assets. Statutory pledges will be expected to be granted alongside floating charges and standard securities.

Written by Ahsan Mustafa, banking litigation associate at Aberdein Considine and member of the Law Society of Scotland’s Consumer Law Sub-Committee

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https://www.clio.com/uk/?utm_medium=bar_partner&utm_source=law-society-scotland&utm_campaign=law-society-scotland-q2
https://www.evelyn.com/people/keith-burdon/
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https://www.findersinternational.co.uk/our-services/private-client/?utm_campaign=Scotland-Law-society-Journal-online&utm_medium=MPU&utm_source=The-Journal
https://yourcashier.co.uk/
https://www.lawscotjobs.co.uk/client/frasia-wright-associates-92.htm

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