From reform to reality: a reflection on the implementation of the Moveable Transactions (Scotland) Act 2023

1 April 2026 marked the first anniversary of the Moveable Transactions (Scotland) Act 2023 (the “Act”) fully coming into force. The long-awaited reforms were welcomed by market-participants, including at CMS (see our update published when the Act came into force here). In this update we reflect on how the regime has been operating in practice, discussing key practical changes established so far and how certain issues continue to cause a level of angst on Scottish finance transactions.

Recap of reforms

The Act made major changes to Scots banking law by introducing a new form of security over “moveable” property (essentially all property other than land) and overhauling the Scots law of assignation.

1. New security – statutory pledges are now available which, in contrast to a ‘traditional’ Scots law pledge, do not require physical delivery of the asset to the lender (i.e., the owner can maintain full possession and use of the pledged asset). These can be used to secure “corporeal” moveables (property existing in physical form e.g. equipment and machinery), and certain incorporeal moveables (property which does not exist in physical form) including intellectual property rights and shares in Scottish companies. The new security must be registered in the new public and searchable Register of Statutory Pledges;
    
2. Assignation reforms – the law of assignation has been extensively reformed. An alternative method of completing an assignation is now available which, in contrast to a ‘traditional’ assignation, does not require intimation (notification to counterparties). Instead, the assignation may be registered in the new public and searchable Register of Assignations. Additionally assignations may now also be granted over rights to future claims (which it will own in the future) and multiple claims may be included in one assignation. 

It is still possible for a lender to take a traditional form of pledge and/or a traditional assignation but the flexibility of the new regime has meant these are now much less frequently used. 

Practical progression

• Notices of assignation (intimation) – as anticipated, the market has largely moved away from giving notice to counterparties of assignations in security in favour of the simpler option of registering the assignations at the Register of Assignations. This is a notable advancement when considering the administrative burden in transactions involving large numbers of underlying debtors.  However, a form of notice may still be required instead where there are confidentiality concerns around the assignation document being publicly registered. Further, even if the assignation is registered, it may still be that notice is required to be issued to the counterparties for other practical reasons, for example to document a payments direction instruction.
   
• Share security – the subsequent extension of the Act to enable statutory pledges over shares in Scottish companies was particularly celebrated. While still possible in theory, “traditional” Scots law share pledges have been largely supplanted in practice by the statutory pledge which is more akin to an English law share charge. The traditional shares pledge required the transfer of the shares into the name of the lender (or its nominee), and the subsequent transfer back to the shareholder on release of the security. This option became increasingly unpopular with lenders who did not want the administrative burden of being the registered shareholder and the potential obligations and liabilities for the purposes of the PSC regime, pensions schemes and the notification and approval requirements under the National Security and Investment Act 2021 (the “NSIA”).
   
•  Project finance – the Act removed some of the obstacles which made fixed security over project assets previously impracticable, if not, impossible. Lenders are making use of the new statutory pledge and seeking fixed security over any plant, equipment or similar assets forming part of the relevant project (and which are likely to be determined to be “moveable” assets). Until now these assets could only generally be secured by a floating charge, which on enforcement, ranks after insolvency expenses and other preferential creditors (including HMRC and certain employee claims) and is also subject to the prescribed part reserved for unsecured creditors. 
  
  Project finance teams in leading law firms have been developing “market standard” wording for use on certain asset classes like battery energy storage systems (BESS), wind and solar projects in order that statutory pledges can be attempted over the relevant moveable assets forming part of a project. This is indicative of the collaborative spirit in which law firms have been approaching the Act and supporting lenders and borrowers in seeking to agree common positions across a range of issues. 
   
• “Composite” security – until now market practice in Scotland has been to document separate asset specific security using standalone individual documents. The flexibility of the new regime has allowed lawyers to bring the different Scots law security (statutory pledges, assignations in security and a floating charge) into one composite document, similar to an English law debenture. This practice has been adopted by many firms to differing extents. While Scots law still requires that fixed security over land and buildings must be granted by way of a separate standard security as there is a required form, combining other security is welcome in reducing paperwork on Scottish financings and Companies House filings leading to time and cost efficiencies.

Remaining “glitches”

• “Torpedo risk” to statutory pledges – this is the biggest concern in terms of drafting for lawyers and ongoing attention of lenders. Pursuant to section 52 of the Act, where the security provider (a) transfers any of the pledged assets to a third party; and (b) the secured creditor “acquiesces, expressly or impliedly” to that transfer, the statutory pledge is extinguished in its entirety (including the scope of the pledge over assets which were not actually transferred). This can be avoided via a provision in the Act which provides an exception for the secured creditor’s express consent to a proposed transfer. However, this is not helpful in practice as:
  • the consent must be granted in writing no earlier than 14 days before the transfer and must specifically consent to the particular transfer of  the property in question being transferred unaffected by the pledge and
  • whether or not to grant or withhold consent to a requested transfer must remain at the absolute discretion of the lender. The lender is not able to agree any parameters in advance as to how such discretion will be exercised.  
    
    This absolute requirement and rigid timeline for lender consent to each specific disposal creates an impractical administrative burden and does not dovetail neatly with provisions in financing documents which contain provisions around permitted disposals and agreed security principles. 
    
    In efforts to mitigate the “torpedo” risk to the remaining pledged assets, several workarounds have become largely agreed between lawyers acting for lenders and borrowers. These include taking (i) separate pledges over individual assets or asset classes so that if pledge A is extinguished by operation of s.52, pledges B and C continue unaffected; and (ii) “back up” floating charges. Statutory pledges may unfortunately still not be appropriate for certain asset classes, such as stock-in-trade, with which the pledgor anticipates dealing regularly, and instead floating charge security is all that is available. However, this does accord with the situation in England where any purported fixed charge over fluctuating classes of assets would likely be recharacterised as a floating charge. 
     
• “Non-monetary right[s] relating to land” - these are excluded from the scope of claims which may be assigned under the Act. What this means in practice is uncertain (as no further detail is provided in the Act) and lawyers continue to debate what this may include (or not) and, where it is proposed a non-monetary right relating to land is to be assigned, how this can be validly assigned.
   

• Securitisation – following on from the point above, while the Act may have been transformational to certain finance sectors, it has had less of an impact on other parts of the market. It had been hoped that the ability to assign a defined class of future claims by registration (i.e., without notification) would help facilitate Scots law securitisations. Despite the Act’s reforms, the new assignation regimen cannot be used for residential mortgage-backed securities securitisations or where the underlying contracts are otherwise relating to interests in land. Whilst there may be more scope for using assignations in other securitisations (e.g., involving credit card receivables) to date we have not seen a general shift away from the well-used trust-based structures.  We are, however, seeing some interest in utilising the Act’s assignation regime for other receivable based financing structures such as invoice discounting.
   
• Replacement of existing share security – whilst in an ideal world lenders may want to replace existing traditional share pledges with statutory pledges, any new statutory pledges will be subject to fresh insolvency “hardening” periods and any release will involve the transfer of the shares back to the pledgor which, if in scope of the NSIA will be subject to the approval / notification of that regime. As such, we’re not seeing any wholesale replacement proposed.
   
• Intellectual property – although the Act now clearly provides for statutory pledges over Scots law governed IP, given the applicable regime is UK-wide, debates continue as to whether and how IP can be definitively classed as “Scottish”. A consistent approach in the market has not yet emerged, although considerations in practice will include the value of the IP in the context of the transaction/ wider security package and whether other security may be taken to “catch” the IP, by way of a Scottish floating charge or by also taking English security over valuable UK IP, so that both jurisdictions are covered.

Conclusion

The impact of the Act on Scottish banking and finance transactions has been significant. Some aspects of secured lending in Scotland have been fundamentally altered. In general, the new statutory share pledge and the use of the registered assignation have been well received by market participants and hence worth the wait. We are hopeful that the market or legislators (as needed) will be able to address the outstanding issues to allow us to reap the rewards of further efficiency and flexibility, including in other sectors where the new forms of security are perhaps not yet being utilised.  It will also be interesting to see how practice under the Act may evolve on refinancing and security releases and how insolvency practitioners will (in due course) approach the new enforcement options available under the Act.  We will continue to reflect and expect to have more updates in this coming second year.