Will modernising reforms to Scots law on the assignation (assignment) of claims simplify the transfer of Scottish receivables in securitisation and similar financing arrangements? The Moveable Transactions (Scotland) Act 2023 (MTA), which came fully into effect on 1 April 2025, opened up additional structuring options for such transactions involving Scottish receivables. Some of these options are considered below.
MTA changes to assignations
The MTA radically changed Scots law on assignations (including assignations in security) by enabling:
- the assignation of receivables that may be originated and/or owned by the seller at a future date;
- conditional assignations, thereby postponing legal title transfer;
- perfection of assignations by registration in the new public online Register of Assignations; and
- modernised intimation (notice) mechanics, including electronic notice and notice by reference to a website.
Pre-MTA sale structure
Scotland has no direct equivalent of the English law concept of equity. In order to implement (as closely as possible) the legal effect under Scots law of an English law sale and equitable title transfer, any Scottish receivables the subject of the sale have traditionally been held in trust by the seller pending perfection of an assignation that would, on perfection, transfer legal title to the purchaser/issuer.
Under these arrangements:
- receivables assignation - the Scottish receivables are transferred to the purchaser/issuer by an assignation which is not perfected (and therefore not effective) until the underlying debtor is notified of the transfer;
- declaration of trust - the rights in and to the Scottish receivables are held by the seller in trust for the purchaser/issuer, to protect against intervening insolvency of the seller; and
- assignation in security of trust interest - the interest of the purchaser/issuer in the trust (and the trust assets) is assigned in security in favour of a security trustee.
As, pre-MTA, Scottish receivables which did not exist, or were not owned by the seller, at the time of entering into the documentation could not be assigned with certainty, dynamic portfolios often required supplemental receivables assignations, supplemental declarations of trust, and supplemental assignations in security to be entered into from time to time throughout the duration of the financing arrangement, the frequency of which would depend on commercial factors.
Post-MTA sale structure
The MTA reforms create opportunities to simplify certain aspects of the treatment of Scottish receivables in a portfolio:
Receivables assignations
As the MTA enables the assignation of ‘future’ Scottish receivables (i.e. Scottish receivables that may be originated and/or come into the ownership of the seller at a future date), the seller could assign existing and future Scottish receivables by either an unconditional or a conditional assignation, registered in the Register of Assignations. Registration would be effective (subject to certain debtor protections) to transfer legal title to the Scottish receivables that exist as at that date and as and when they arise or, where the transfer is subject to a condition (i.e. the occurrence of a perfection event), on the satisfaction of that condition, in each case without a hard requirement to (i) intimate the transfer to the underlying debtors, or (ii) enter into supplemental assignations. It may, however, remain preferable to intimate the transfer to the underlying debtors in certain cases, taking advantage of the modernised rules of intimation under the MTA.
An unconditional assignation perfected by registration may arguably make the need for a day 1 and, where applicable, supplemental Scottish declaration(s) of trust redundant. However, the use of unconditional assignations would need to be considered carefully on a case-by-case basis where, pending a perfection event, only equitable title to the English receivables is transferred. For example, queries may arise in relation to whether or not the purchaser/issuer (and, where applicable, the security trustee) may require to obtain any necessary regulatory approvals as a consequence of holding legal title to the Scottish receivables, whether there are any confidentiality concerns relating to the registration of the receivables assignation in the public Register of Assignations, and whether the transfer of legal title to the Scottish receivables fits with the wider commercial arrangements for the servicing of the portfolio. Consideration may also need to be given in relation to the mechanics of a repurchase and re-transfer of Scottish receivables that no longer meet specified eligibility criteria.
The use of conditional assignation(s), whereby the transfer of Scottish receivables is tied to the occurrence of a specified perfection event, may circumvent some of the issues referred to above. For dynamic portfolios, conditional assignations could also be used to deal with ‘future’ Scottish receivables, which may avoid the need for supplemental assignations. However, the use of Scottish trusts may still be desirable to protect against intervening insolvency of the seller and, as the MTA does not change existing Scottish trust law, supplemental Scottish trusts may continue to remain a feature in cases where the portfolio is dynamic.
Assignations in security
Whether perfected by registration or intimation to the underlying debtors, the availability and desirability of Scots law fixed security from the purchaser/issuer should also be considered on a case-by-case basis where an unconditional assignation is used. However, where a conditional assignation and trust structure is used in respect of the Scottish receivables, supplemental assignations in security under dynamic portfolios may no longer be necessary.
RMBS and CMBS transactions
Due to restrictions around the types of claims that can be assigned under the MTA, the traditional (pre-MTA) structure outlined above is likely to continue to be followed for RMBS and CMBS transactions.
Comment
As the MTA beds in, market practice relating to securitisation and similar financing arrangements that involve Scottish receivables continues to develop. Depending on the asset class involved, and also on whether the sale is intended to be an equitable or legal title transfer on day 1, traditional Scottish trust structures are likely to continue to remain a feature in many securitisations involving Scottish receivables. However, supplemental assignation / assignation in security documentation can be reduced in many cases, making such transactions simpler and more cost-effective. There may also be additional structuring options presented by the MTA reforms which can be taken advantage of where the securitisation profile permits.
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