One year on: the Moveable Transactions (Scotland) Act and the new reality of Scottish lending

00:00:05 David Lee, podcast host

Hello, and welcome to Podcast by Brodies. I'm your host, David Lee, and in this episode we're looking at what has been described as the most revolutionary change in Scottish banking and finance law for more than a generation. We're talking about the Moveable Transactions Scotland Act 2023 (MTA).

It came into effect in April 2025, so we're talking today about how the Act has changed lending practice in Scotland in its first year. What practical effects has it had on lenders, borrowers and other participants when executing banking transactions in Scotland?

And I'm joined for this podcast by two Brodies experts from the banking and finance team, partner James Wilson and senior associate Lindsay Lee.

Welcome to you both.

So James, let's just start with the basics – what exactly is the Moveable Transactions Act all about and when was it introduced?

00:01:00 James Wilson, Partner at Brodies

I thought you did a very good job there of making this sound exciting – and it is exciting if you're involved in banking transactions in Scotland. It's not dry at all, I promise!

The purpose behind the act and what it does is it tries to make banking deals in Scotland get done more easily and tries to make it as easy to do transactions in Scotland as it is in the rest of the UK.

It was perceived that for a long time Scotland in particular transactions – particularly invoice financing and in share security – was behind, among other areas, the rest of the UK in how to do deals.

And why it was particularly exciting for me as a practitioner, and I'm sure for Lindsay as well, and for many other people involved in the Scottish banking market, is that Scottish legislation doesn't change very often. There hadn't been a whole scale revolution of Scottish banking practice, if you like, since the 70s.

So there's a lot of work, a lot of white papers, resulting in the act.

The act was published in 2023 and came into effect on the 1st of April 2025, which hopefully isn't too auspicious a date.

00:02:13 David Lee, podcast host

And you've touched on it a little bit there, James, but why the most significant change in the generation? Why has it been described like that?

00:02:24 James Wilson, Partner at Brodies

It modernised the law regarding moveable property which, to a non-banking lawyer, sounds quite a sort of esoteric idea. But what it is, is property that you can effectively move – so not land, but things like equipment. The classic idea of that is something like a vending machine, financial instruments, such as shares, which I'm sure we'll talk about a fair bit today, and financial claims. That is a receivable effectively, so the idea would be that if Lindsay owed me some money, I could give that right that I had, that claim to claim money from Lindsay, I could give a security over it to you, David, which is another type of movable.

And the law in respect of all of these was a bit behind England. For example, in Scotland, we don't have equity, or where we do have equity, it's much more limited in its application than it is in England and Wales.

So where you took share security, you actually had to transfer the shares into the name of the lender, chargeee or bank. You had sort of banks potentially, although they used nominees and other workarounds, actually owning shares and companies that they didn't want to, that would create issues for them. You couldn't give security arguably over future assets – things you would own in the future – so you would have to enter into lots more security documents as you went through a transaction, which cost a lot of money.

Sometimes you didn't know whether you had security over things at all, and sometimes you could only take security if you told particular people that you'd taken it. So if you owned a shopping centre and you wanted to take security over that, you would have to potentially intimate hundreds of leases to the shop owners. It's tricky, it's unwieldy, and while it's probably good for Scottish lawyers, it wasn't for doing business in Scotland, particularly for small businesses.

The idea was to make finance more available, cheaper, and bring the law in line with the rest of the UK.

00:04:33 David Lee, podcast host

Okay, thanks very much, James. So Lindsay, quite a significant change, as James has described.

From Brodies’ perspective, what do you need to do when there is, as we described, the biggest change that we've seen in a generation? What does Brodies have to do to prepare for that change to come in?

00:04:53 Lindsay Lee, Senior Associate at Brodies

As James has said, it's a big change in a good number of decades and the fact is it didn't happen overnight.

There's been a lot of consultation. We've fed into consultations to be involved in the development of the law in its sort of evolutionary stages.

At the time when it was being run as a project by the Scottish Law Commission, we had partner members on the advisory group again being involved in the earlier stages of the legislation.

Once the act was passed in 2023, we, with other law firms, established or took part in a working group, the purpose of which was to establish some common approaches to some of the trickier issues in the MTA. It was also to establish what approaches we were going to take in banking transactions so that when the act went live on the 1st April last year – although we didn't have any banking practice under our belt, obviously – we at least had that sense of what the general approach was going to be in transactions and know that we were largely all going to be coming from the same starting point, which made that really quite helpful for a day one position.

We also thought it was really important that we raise awareness of the act and what it was going to change with clients, contacts, and other advisers just to make them aware of the improvements that were going to be taking place, how things were going to change, how that was going to affect them and the opportunities that the act would offer them once it came into play.

And then last but certainly not least, there was the whole documentation piece. We internally had to effectively rewrite our security documentation, our advisory notes, our internal guidance to make sure that everything was compliant with this majorly different new law that was coming in on the 1st April.

So a lot of preparation at different stages, over many years, to get us just to 1st April last year.

00:06:57 David Lee, podcast host

OK, thanks, Lindsay. As you say, there are lots of stages to get to the point at which the law is passed and then it comes into effect. Did that work? Is it a good piece of legislation, do you think, Lindsay?

00:07:11 Lindsay Lee, Senior Associate at Brodies

I think it has certainly really modernised Scots law. As James has mentioned, we were behind previously.

I think an awful lot of thinking – by academics, practitioners, stakeholders – has gone into what we now have as the law. So from my point of view, I think, yes, it is a good piece of legislation.

There are uncertainties, obviously, as with any new piece of legislation, but it's a well-drafted piece of legislation that does modernise Scots law.

00:07:42 David Lee, podcast host

We’ll come on to some of those uncertainties later, but James, anything to add to that? What’s your view on whether it is good legislation?

00:07:50 James Wilson, Partner at Brodies

I think it's a great piece of legislation.

I've practised in a number of jurisdictions and when new law comes in, sometimes there are issues and you think, ‘well, this isn't going to work, this is going to be quite difficult in practice’.

And I think this was sort of refreshing in the sense that you could see how it was going to work.

They were going to set up new registers and it felt as though I actually got it earlier than the 1st April because I'm a very sad person, just to see how it was going to work – but it did work on a practical level.

Again, you can spend a long time planning everything and I think there will always be teething problems and in areas of uncertainty, but I think overall it's an excellent piece of legislation.

00:08:38 David Lee, podcast host

OK, and then back then to Lindsay and to those uncertainties, what were the biggest areas of uncertainty that actually remained when the act came in in April 2025?

00:08:49 Lindsay Lee, Senior Associate at Brodies

Well, it kept on our toes here right until, I would say, the last few weeks before the 1st April.

We didn't know whether share security, so security over Scots, shares in Scottish companies or certain types of bank accounts, were going to be in or out of the MTA regime.

They had been in at SLC stages and then they'd come out, and we were waiting for that piece of legislation, that bit of the legislative jigsaw, to come from Westminster.

I wouldn't have a great idea of what it was going to look like exactly. The good news was that happily we did get that piece of legislation, I think about three weeks before we went live.

It was then all hands on the drafting deck really to make sure that we were reflecting in our documentation what had actually been produced in this new piece of legislation that meant that from day one, share security and bank accounts would be included within the MTA framework.

00:09:45 David Lee, podcast host

Okay, so we've gone through that legislative hokey cokey, if you like, it's in, then it's out, and it's in again, in terms of the shares specifically.

Now a year on, let's talk about the positive impacts, Lindsay. What have been the positive impacts of this act on banking transactions in Scotland and can you give us a for instance to illustrate that?

00:10:12 Lindsay Lee, Senior Associate at Brodies

Yeah, sure. There’s quite a few positives, to be honest.

I think one of the main changes that's made by the act is the fact that you can now register your assignation document, your security document, to perfect or complete your security right. You do not have to intimate, give notice, and you do not have to transfer the assets to the creditor.

James referenced a landlord earlier – if you have a landlord in a shopping centre that is assigning its rental income over all those various different units under the old law, you would be doing paper intimations using recorded delivery post and enclosing a copy of the a certified true copy of the assignation document.

Now, that is much more streamlined. You can simply create that security right by registering the document in one of the new statutory registers – the Register of Assignation.

So that's practically it – it means a lot less paperwork and it is a lot less costly in terms of perfecting the security right.

In terms of share security, the fact that a lender does not need to become the member of that company, the shareholder, and hold title to the shares, means that the risks that come with that membership and ownership can be avoided at the time of taking security. This has a really big, positive impact to banking practice.

Plant and equipment previously was not much good if you had to transfer that to your lender to take security over it when you needed it day-to-day. Now, a borrower can grant security over its plant and equipment and vehicles without transferring those or putting them within the control of the lender.

Likewise, we're seeing security being taken over wind turbines, battery, energy, storage systems and their component parts, which we weren't seeing previously.

There’s also the ability to take future rights – James referenced that as well – in fund finance space. This means where you're taking security over investors' commitments and capital commitments to pay money into a fund. You can now take that over all the present investors and all the future investors, and it will also cover any changes to the different investment commitments. That’s without having to do all the supplemental security and paperwork that reduces costs.

And then lastly, I think we've talked all about registration, but also intimation notices got a huge overhaul by the MTA. They are much easier now and there’ no need for enclosing a copy of the assignation. You can even intimate electronically where your counterparty has given you an address to do so.

In the fund finance space, again, we are seeing intimation electronically by e-mail to an investor portal. So it is much more modern and much less cumbersome and, at the end of the day, cheaper.

00:13:11 David Lee, podcast host

Okay, great, so lots of positives there. James, you said you thought this was an excellent piece of legislation, but, you know, new acts are never plain sailing. What about any negative impacts that we've seen?And again, if you can give us an example to illustrate that?

00:13:27 James Wilson, Partner at Brodies

It's not so much a negative impact of the act – a lot of what Lindsay talked about are things that are good, save clients fees and make doing business easier.

I would say in 80% or 90% of the cases – for me anyway – there hasn't been a great deal of argument or problems with the provisions of the act or things that come out of the act. But occasionally on the other deals, there have been differences of interpretation or differences of practice between law firms.We're part of the working group and that tries to minimise those, but every transaction is different.

So what are the things that we've seen that perhaps there's a bit of uncertainty over or that practices need to settle down on? We talked about where you can perfect security effectively or create it by registration rather than giving notice, but what we have found is that in a lot of cases, there is a requirement or people are requiring notices to still be given to say payments need to be made to a particular bank account. This is to make sure that payment streams are intact and also to identify the claim.

So that change in the legislation means you don't necessarily need to give a copy of the security documents, and predictably among people who give security documents – if it was your own mortgage, you wouldn't necessarily want that to be sent on to third parties – we are still seeing that given in order to identify the claim.

In security over intellectual property, so broadly speaking, we understand that there has been more lending, particularly at the smaller end of the market where it's secure by intellectual property and it's much easier to give that security over intellectual property now. But there has been some argument as to where the security should actually be given, should it be in England or should it be in Scotland, because the legal regime is UK-wide. So that still needs to be settled down.

We act for a lot of whiskey companies and borrowers and we also act for lenders to them. We find that perhaps the opportunities there that we thought would come up haven't necessarily happened, unless it's a distillery or a business that has a loss of stock that is going to sit there and mature because it's very difficult to take security over stock and trade still. It’s not difficult that you can take it, but it's likely that it'll be extinguished.

We have found occasionally, that there are arguments over how much security should you take.

So it's a great act and it opens up the ability to take security over everything. It’s very similar to in England where I used to be based – you would just do a debenture and you would report to take security of everything. Whereas in Scotland, that hasn't always been the case: you would take a floating charge, so not fixed security, but floating security. Now that you have the ability to say you're taking security of everything, there can often be arguments and discussions as to whether that's actually appropriate for the transaction you're dealing in.

It’s a long-winded way of saying, unfortunately, clients sometimes have to sit through this and think to themselves, ‘oh, you know, was this act a good thing after all?’ But we're hoping that ultimately they'll see the benefits of it.

00:17:04 David Lee, podcast host

Okay, great stuff. Coming on to some more specific details, we'll come to statutory pledges first of all, James.

How is the new act used? What are statutory pledges and how have they been used by the new act?

00:17:19 James Wilson, Partner at Brodies

A statutory pledge in Scotland is a statutorily created fixed security. The primary example we've had of it so far is over shares. That's not to say we're not seeing statutory pledges over other things: Lindsay talked about how it can be used over equipment and wind turbines – it's been particularly useful in the energy space.

The shares is, for me, the most interesting and perhaps the bit of the act I was looking forward to it the most, if you like.

Before the act, if you wanted to properly constitute a Scots law share pledge – and a lot of deals involved taking shares over Scottish companies – then, as I touched upon, you have to transfer the ownership into the name of the bank or you had to do a workaround where arguably the security wasn't constituted at all.

Banks or lenders were left with this difficult position of, do I transfer it into the name of myself or a nominee, potentially bringing it onto the balance sheet?

There are other issues that could arise for them – we had a lot of NSIA advice we had to give. So say you're taking security over a company that is involved in defence, you'd have to go off and make an application. That could, you know, fairly rarely lead to the whole deal falling apart or just a lot of delay, which clients don't like, particularly when you're trying to get a transaction done as quickly as possible.

So the act brought in the ability to take security over shares of the statutory pledge, which meant that you don't have to transfer it into the name of the bank.

All you have to do is go onto the register of statutory pledges, make a registration, everyone can see who owns it and that is fantastic.

I think the register works very well, as we'll come on to, but the problem is that the act– and I don't want to put words into the mouths of people who've designed the act – is trying to copy English law. Section 52 has what is commonly referred to as a torpedo provision, which says that if you release part of the property under a particular pledge, then unless you follow a particular procedure, you lose the whole security.

An example of that would be: say you have a pledge of all the shares the company is going to own in the future, and you do that pledge, you register it, and then that company goes off and buys shares in two companies. It then sells the shares in one of the companies, and you don't follow the procedure that's set out in the act, the security over the other company is extinguished, and all of a sudden you're in a position whereby you thought you had security over the shares in what could be a very valuable company, and that goes.

As lawyers, our job is to deal with the risk of that happening. Our client base includes all the main lenders in the UK and we also have a large borrower client base. What we have found is different deals have different results in that and in how that we're dealing with it. Sometimes it can all be very straightforward and you have a documentary revision used in the previous deal and everyone's happy to use that, and sometimes it's not.

We find that particularly on big leveraged finance or acquisition transactions where people who are buying a company and Scotland is perhaps just one of the subsidiaries that's involved in it, they've agreed how it's going to work, they've agreed that there won't be complicated provisions in the documents and security principles around that. We’ve had to spend a lot of time explaining that to people.

That’s probably been the most interesting bit of it so far and perhaps where practice has diverged the most at the moment.

I should say without shouting out to the other firms is that we have actually been working quite hard to mitigate the problem of that, both informally and formally, with other firms in Scotland. So we are trying to avoid too many client issues on that.

00:21:43 David Lee, podcast host

Okay, thanks very much. And Lindsay, we've also touched on Register of Assignations a couple of times. Can you tell us a little bit more about what that register is and how you assess what’s working so far?

00:21:56 Lindsay Lee, Senior Associate at Brodies

Sure. Under the act, two new statutory registers were set up, the Register of Statutory Pledges, which is relevant to the statutory pledges that James has just been chatting to us about, and also the Register of Assignations.

So both were set up by the Registers of Scotland and they're maintained by the Registers of Scotland.

For the Register of Assignations, most Scottish MTA security is going to contain an assignation, even if it's a statutory pledge. It is really widely used for filings of assignations that are being perfected by registration. Our experience is that for filing it's very straightforward, it's quite slick and it's almost immediate. You file, you register and you get your certificate back almost immediately. It’s really user friendly in the filing side of things. There’s slight limitations in usefulness when it comes to searching and that's really down, in part, to the legislation because as we've explained you can perfect your security by intimation, i.e. off register or by registration in the Register of Assignations. That means at best what we're getting if we're searching Register of Assignations is a snapshot in time.

So if I wanted to go and check to see if a particular business had granted an assignation and I went an searched and it came back clear, that doesn't mean it hasn't granted an assignation because it could have intimated it. Likewise, if it came back with an assignation, it doesn't mean that assignation hasn't been released, because releases are registered by the party releasing, so you'd have to then search against the creditor.

If you then searched against the creditor, just because there wasn't a release there, which is effectively an assignation back, just because there isn't one showing doesn't mean that it's not been released. It’s just having to be aware of the limitations of what your search shows and having to back those up with further searches of other registers where that can maybe fill in the picture for particular entities.

Certainly on the searching front, there is room for improvement. But in terms of usability for filing, it seems to be going really quite smoothly.

00:24:11 David Lee, podcast host

Okay. And any other areas, Lindsay, where you feel the actors may be falling slightly short of expectations?

00:24:20 Lindsay Lee, Senior Associate at Brodies

It had been, I would say, hoped rather than expected, that general partner and limited partners membership rights in funds and Scottish funds might come within, or it might be clarified that those could be taken by statutory pledge. This is so that they could be secured without the membership having to transfer because that has a lot of regulatory implications.

That didn't happen.

Post-MTA, basically the structure of how we're taking security of those rights reflects what we were doing pre 1^st April last year. So there’s no real improvement on that aspect.

James has mentioned the ability to grant floating charges, so sole traders can't grant floating charges.

There was the hope that being able instead to grant the fixed security by statutory pledge over some of their tangible business assets, the physical ones, might improve their access to secured finance. That has not really taken off because there is a statutory limit in the legislation that each item has to have a value of exceeding £3,000. That's given a bit of limited value to that aspect.

Livestock is, again, a valuable asset, and we hoped possibly that rural businesses might be able to grant fixed security over the livestock. But the problem there with flocks and herds where there's animals going off to market or being transferred out is the torpedo provision that James has mentioned. So that’s largely ruled out livestock from the statutory pledge.

Those are some of the areas where we possibly had a higher expectation than what was delivered.

00:26:10 David Lee, podcast host

Okay and moving on from if there, are any other things to add? Where do you think we are now overall compared to where we were before April 2025?

Do you think we're in a better place, a worse place, or just a different place from what you might have expected?

00:26:27 James Wilson, Partner at Brodies

I think in terms of things to add, sort of as a practical point, the register actually requires the lender's lawyers to release security, which is quite interesting conceptually. I think as more deals get done and more deals get released, having the lender's lawyers do it rather than the borrower, i.e. the person who gives the securities lawyers, is quite interesting because the lender's lawyers are less incentivised to do it in a way because that transaction is gone. They aren't dealing with it any further, but there'll be various workarounds for that.

Is it better or worse a year on?

I think it is different from what we expected it to be. It's different from what practice was before and it makes life a bit more interesting and it makes life a bit more – on the edge isn't quite the right point – but it makes negotiations more enjoyable because you are trying to set what the market practice is and you don't always get to do that a lot when you're a corporate lawyer.

So it has removed some challenges, an it's created new ones. Statutory pledges feel really good to me and they're working well – save for the torpedo issues, but those only come up on a few transactions.

Invoice financing is an area of the market that historically perhaps wasn't as tapped in Scotland as it was elsewhere. The invoice finance and transactions that we've done as a firm have worked really well, and seem to be much more simplified than they were in the past and avoid provisions that were very complicated.

I think it has generally been a good thing and has led to an exciting practice for me.

00:28:27 Lindsay Lee, Senior Associate at Brodies

It's been a breath of fresh air.

00:28:30 David Lee, podcast host

So you're pretty positive, Lindsay, about it then, about how it's changed your practice?

00:28:36 Lindsay Lee, Senior Associate at Brodies

Yeah, I mean, like James, I would say it's just different. It's new challenges, new discussions we're having. I think it's bedded in well: practice is evolving and it's quite exciting to be involved in that.

00:28:51 David Lee, podcast host

And next few years, how do both of you see it bedding in over the next two or three years? What would you like to see and what do you fear?

00:29:01 Lindsay Lee, Senior Associate at Brodies

I think we'll see some development in the registers.

There was a big piece of work just getting them up and running for the 1st April. I think we will see the user experience and the functionality possibly improve over the next few years, which would be great.

I'm not sure that within the next couple of years we'll have any case law. In some ways, every practitioner is very nervous about case law because a court might find that it interprets something completely different from how practitioners have done up to date.

So I don't think we'll have that, but what I think possibly is more likely than that is we might see the insolvency practitioners getting to grips with the act, and there's also the possibility that they might take a slightly different interpretation of it from the banking commissioners who are building or establishing banking practice under the MTA.

Possibly there’s also some areas where it’s been slow to adopt. I'm thinking maybe rural businesses where it's been a slower start. I think that will hopefully take off as time progresses.

00:30:07 David Lee, podcast host

James, anything to add? Next two to three years, what are your hopes and fears?

00:30:12 James Wilson, Partner at Brodies

More settled markets on particular points, or more settled practice on particular points, I think would be a good thing, and I think that will naturally happen.

One point that I haven't mentioned yet is that the act carves out from it contracts relating to land, and that has led to a bit of interesting practice as to what contracts relate to land and what don't.

So obviously, missives to buy land aren't within the act, but are contracts to construct items on land within the act. Generally I personally would say no, but probably one needs to go off to read the contract to make sure that's the case.

So it's that sort of thing is quite interesting.

I think if things do go wrong on these transactions, I think it will be interesting to see how banking lawyers and insolvency lawyers are different and how they interpret things. The ability to now give security over assets you own in the future and future points, and the question of when is the security you grant created over that – is it created when you give the initial assignation and security or statutory pledge or is it created later on? – I think could be quite important.

I'm sure if there was a case that decided that point, we would all be back here talking to you, David.

00:31:44 David Lee, podcast host

Okay. And Lindsay, there's quite a lot to unpick here. There's a lot to the new act. So if anyone listening would like to know more about the detail and how it's working in practice, what's your advice to them?

00:31:59 Lindsay Lee, Senior Associate at Brodies

Get in touch. As I said, we did a lot of awareness work as the act was coming into force. Some of that is available on our website, but equally pick up the phone, drop us an e-mail. We enjoy chatting about this so give us a call.

00:32:19 David Lee, podcast host

James, a final word?

00:32:20 James Wilson, Partner at Brodies

Yeah, there's more than 45 lawyers in the banking team at Brodies who would love to talk to you about this.

We see the whole market. But we are genuinely interested in how this works, so we're very happy to talk about it.

00:32:36 David Lee, podcast host

Great stuff.

Thank you very much indeed to Lindsay Lee and James Wilson, the person in Scotland most excited about the new Moveable Transactions Act, for their excellent contributions today.

You've been listening to an episode of Podcast by Brodies where some of the country's leading lawyers and special guests share their informed insights about current issues and developments in the legal sector and what that means for organisations, businesses, and individuals.

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