(3 min read)
The Moveable Transactions (Scotland) Act 2023 seeks to modernise and simplify the regime for taking security over moveable assets in Scotland, making it easier and more attractive for lenders to take fixed asset security. It should be remembered that Scots law does not have an equivalent concept to an English equitable charge, and therefore all perfection steps must be taken in order to have an enforceable security right in Scotland.
Issues under current regime
- Unable to take security over future assets
- Administratively burdensome to issue intimation notices to perfect assignations in security (over rents, collateral warranties, material contracts, insurance etc.)
- Requirement for delivery of tangible assets to the lender / security agent in order to perfect security (meaning that often fixed security is not taken and a floating charge is relied on)
- Requirement for shares in a Scottish company to be legally transferred to the lender / security agent in order to perfect share security (leading to concerns around the PSC regime and the National Security and Investment Act 2021 (NSIA))
Solution under new Act
- Possible to take security over future assets with correct drafting
- New Register of Assignations will make it possible to perfect security by registration
- New security instrument called a "Statutory Pledge" and new Register of Statutory Pledges will make it possible to perfect security by registration
- Expecting secondary legislation to allow shares to be caught by new Statutory Pledge, meaning security will be perfected by registration in the new Register of Statutory Pledges instead of shares being transferred
We expect the new regime to be implemented as soon as the Register of Assignations and Register of Statutory Pledges are set up by Registers of Scotland.
AG are part of a cross-firm working group in Scotland, discussing practicalities for implementing the regime, likely amendments to existing template documents and market-facing approaches to the new Statutory Pledge.
What to expect next
- AG are able to provide virtual or in person updates and training in relation to the new Act (now or after implementation).
- NSIA analysis should be undertaken whenever security is taken over a share under the existing regime.
- Lenders should consider their existing template documentation and what amendments may need to be made as a result of the legislation. AG are happy to help with documentation updates and advise on the new regime and its implications.
