1 April 2025 may be a date to be remembered in history for the Scottish banking sector and legal practitioners. The Moveable Transactions (Scotland) Act 2023 (the “Act”) is now in force launching the new regime and simplified process for granting security over most types of physical and incorporeal moveable assets.
Our previous briefings (see Moveable Transaction Reforms), provide a useful explanation of the scope of the reform and the practical consequences but this short alert provides a quick snapshot.
Recap
The new forms of security and related public registers are now in effect:
1. The Register of Assignations (“RoA”) – it is now possible to effect assignations of claims that can, instead of requiring intimation to the relevant contract counterparties, instead be transferred by registration on the new (public and searchable) RoA.
As well as removing the requirement for intimating an assignation, the Act enables assignations in security to be granted over future claims and rights of the relevant chargor (with the assignation being effective over such claims or rights at the point they become held by the assignor (subject to the satisfaction of any other conditions relating to the assignation, plus registration or intimation)).
2. The Register of Statutory Pledges (“RSP”) – this is now used to grant and record new statutory pledges over corporeal moveable property (“corporeal” property exists in physical form, such as equipment and machinery, generally known as “chattel” under English law), intellectual property, and (now also) financial instruments. The new statutory pledges will not require physical or symbolic delivery of the asset, provided they are recorded on the new RSP and so the original security provider/owner can maintain full possession and use of the asset.
It is still possible for lenders to intimate assignations of incorporeal moveable property (provided the intimation complies with the Act, or to take physical pledges of corporeal moveable property, instead of using the new registers to record and create a security interest. It will be up to individual lenders to consider what form of security (essentially, old or new) will be appropriate for them, the assets and the particular borrower in the context of the relevant financing transaction.
Taking security over shares
Scots law share security is now much closer in substance to the commonly used equivalent of an English law fixed charge (or equitable mortgage) over shares.
It is now possible for lenders to take:
- a statutory pledge over (a) shares currently held by a security provider (including by an individual shareholder), and (b) shares to be acquired and held by the security provider in the future; and
- an assignation in security of all rights related to such existing and future shares, e.g. rights to dividends, interest and other distributions paid or payable in respect of the shares (e.g. by way of bonus). Voting rights will remain with the security provider, at least until enforcement.
The statutory pledge does not require actual transfer of the shares, nor for any update on the company’s register of members. In practice, as for an “incomplete” traditional share pledge (and an English share charge), a lender may require that the original share certificates and potentially also blank stock transfer form(s) are provided as deliverables on completion, albeit enforcement steps involved with a statutory pledge of shares may not require completion of stock transfer forms.
The assignation of the related rights may also extend to include an assignation of any debt owed by the collateral company to the security provider, by way of shareholder loans. In an enforcement scenario, this may be useful to the lender as it will be able to also sell the shareholder debt claim and/or to write off the debt (subject to tax advice). Otherwise, on enforcement, the value achievable by the lender on any enforcement sale of the shares may be subject to discounting for such liabilities.
Registration fees
| Registration - Register of Assignations | |
| Application for registration of an assignation document | £30 |
| Assignation document assigning different claims to different assignees | £30 for each claim |
| Registration - Register of Statutory Pledges | |
| Application for registration of a constitutive document | £30 |
| Constitutive document creating more than one statutory pledge | £5 for each additional statutory pledge |
2025
We, at CMNO, have been preparing for this for some time, and we are looking forward to working with our lender and borrower clients in this new era, and participating in this transformation for the banking sector. Please get in contact.
