Lenders, borrowers and solicitors will know that taking fixed security over moveable assets in Scotland (whether vehicles, stock or company shares) as part of a finance transaction can be a tricky task from a practical perspective. Broadly speaking the only way to take fixed security over such Scottish assets is to pledge or transfer the assets. Perfection of the security will often then require the borrower to give control of the assets to the lender, sometimes by passing physical possession of the assets. In relation to many types of moveable assets this can cause major practical problems resulting either in no fixed security being taken, or complex control arrangements being put in place to ensure any fixed security is valid.
In light of these difficulties, the Scottish Law Commission’s (SLC) latest consultation on reform of the law relating to ‘Moveable Transactions’ (i.e. assignation of, and taking security over, moveable property) in Scotland is to be warmly welcomed. The SLC have produced a short memo and draft Bill for public comment which aims “to allow assets to be used by businesses and others to access finance more easily”.
The draft Bill suggests sweeping changes to the way in which security is taken over moveable property in Scotland by introducing a new form of fixed security right known as ‘Statutory Pledge’. The Statutory Pledge could be granted over many types of moveable property in Scotland, from vehicles to whisky stock and shares, and could be taken by simple online registration relative to both present and future assets. The draft Bill also clarifies and loosens the level of control that would be required in order to perfect the Statutory Pledge.
In addition to introducing the new Statutory Pledge security interest, the draft Bill also proposes new ways in which assignations can be perfected under Scots law. Instead of intimating / notifying assignations of, for example, book debts or rents to the underlying third party (as is the current requirement), parties would be able to perfect their assignations by simple online registration in a new register. This would provide parties with additional options for perfecting assignations (whether outright title transfers or in security) with the potential for avoiding cumbersome and time-consuming notification processes.
The changes being suggested will allow this to happen, with many of the practical problems associated with taking security over or assigning moveable assets in Scotland eradicated. The draft Bill and consultation – which closes on 11 August – can be accessed here and any interested parties can provide a response.
If you would like to discuss any aspects of the Consultation, please contact Andrew Kinnes, Hamish Patrick or Neil Campbell from our banking and finance team who formed part of the advisory group that helped the SLC prepare the proposals.