In Scotland claims (e.g. the right to payment) are currently transferred by assignation followed by intimation (i.e. notice) of the transfer to the party which is under an obligation to perform the obligation (e.g. making a payment).
The current law is riddled with uncertainty, including how intimation is validly effected, the competency of assignation subject to a suspensive condition (to allow the postponement of the transfer to a certain date or the occurrence of a specific event) and whether or not a partial assignation (where only some of the claims are transferred) is effective.
The Moveable Transactions Bill clarifies the uncertainty around assignations and creates a new, additional method of transfer of claims by assignation followed by registration in a new Register of Assignations.
Key things to know about assignations under the Bill include:
- Future claims and pools of claims can be assigned: the claim(s) must be identified in the assignation document but the claim(s) need not be held by the assignor (and need not exist) at the time of signing of the assignation document. The claim(s) will not transfer until the assignor holds the claim and the assignation has been either intimated or registered.
- Claims can be assigned subject to a condition: provided the condition (for example, a date being reached, or the occurrence of a specific event) is specified in the assignation document (and cross-referring to another document for this purpose is sufficient), a claim can be assigned subject to that condition. The claim will transfer once the condition is satisfied, and the assignation has been either intimated or registered.
- Claims can be assigned in part: monetary claims can be assigned in part or whole. As partial assignations can be burdensome to debtors (instead of having to pay one person they have to pay two or more), the assignor may have to pay the debtor any additional expenses as a result of the claim being assigned in part rather than in whole.
- Intimations can be electronic and to a single co-debtor: intimations can be made by email and the required information can be given to the debtor via an electronic link to a website or portal. Where there are co-debtors intimation to one of them alone is all that is required, but any debtor or co-debtor who has in good faith paid the person they last knew to be the holder of the claim is discharged from the claim to the extent paid.
- Assignations of claims as part of financial collateral arrangements are excluded: for example an assignation in security by a credit card company of the amounts due by its customers would not benefit from the changes made by the Bill. These issues are expected to be addressed by secondary legislation passed by the UK Government with the effect that the assignation provisions in the Bill will apply equally to the assignation of such claims.
The practical benefits of these changes are that businesses will be able to transfer claims with greater efficiency and without the need for supplemental transfers or supplemental security. Transactions in a wide range of sectors including the asset finance, invoice finance and fund finance spaces, as well as securitisation deals involving Scottish receivables which are not land-secured, will be simplified and more streamlined, ultimately delivering reduced costs and opening up financing opportunities to businesses.