On 19 December, the Scottish Law Commission (“SLC”) published its three-part report on the reform of moveable transactions. The law in Scotland in this area is outdated and cumbersome to use in practice, creating problems particularly in the context of asset finance, project finance and securitisation transactions. By creating a more flexible system which more readily meets the needs of modern commerce in Scotland, the proposed reforms will, if enacted, hopefully have a positive impact on financiers, investors and Scottish businesses.
In summary, the key recommendations of the SLC in its draft bill are:
- Claims to payment may transfer by registration of the assignation in a new electronic register called the ‘Register of Assignations’, as an alternative to intimation. This would facilitate the assignation of future claims.
- Changes to the general law of assignations will apply equally to assignations in security.
- Among other reforms aimed at modernisation, electronic intimation would be recognised.
- A new form of security called a ‘Statutory Pledge’ would be created which would allow non-possessory security to be taken over corporeal moveables.
- The ‘Statutory Pledge’ would also be available for certain classes of incorporeal moveable property, such as intellectual property and financial instruments (including shares in companies).
- Consumers would be able to grant a ‘Statutory Pledge’ (in relation to assets over a certain value), potentially giving them access to finance which before would not have been available to them.
- The new security would be registered in a new electronic register called the ‘Register of Statutory Pledges’.
Bruce Stephen and Chris Dun of Brodies’ Banking and Finance team were members of the Advisory Group for the SLC’s project.
The report and draft bill can be accessed on the SLC’s website.