With the new Moveable Transactions (Scotland) Bill comes new opportunities for small and medium-sized enterprises in the food and drinks sector to raise finance.
The long-awaited Moveable Transactions (Scotland) Bill introduces a raft of fundamental changes which modernise and simplify how security is taken over Scottish moveable property. Of particular interest to the food and drinks community will be the reforms around how security is taken over corporeal moveable property i.e. tangible assets; assets that can be moved, seen and touched.
As it stands, the only way to effectively secure tangible assets is by way of a 'pledge'. Currently under Scots law, a pledged asset requires to be physically delivered in security to a creditor. The creditor will then take - and retain - control over the pledged assets.
The practice of 'pledging' assets is cumbersome. It restricts a business from being able to use the pledged assets in its day-to-day business operations. For this reason, amongst others, businesses are often forced to resort to riskier and more expensive types of lending.
The new statutory pledge would allow funds to be secured against tangible assets with straightforward online registration and without the requirement to deliver pledged assets to a creditor. Businesses would retain the ability to utilise key business assets, irrespective of those assets being secured as collateral. Commercial transactions across the food and drinks sector will become more efficient and less complicated.
Full details of the proposed reforms, including how it is proposed that the new legislation will work and the key benefits are set out in this webinar.
Consider some of the benefits to the Scotch whisky sector as an example. Whisky producers will no longer be required to pledge their stock to an independent third-party security holder (who would previously have held secured stock on behalf of a secured creditor). Valuable, maturing whisky stocks could be secured multiple times, whilst security could even be granted over future stocks, dispensing of the requirement for supplementary pledges. Additionally, there will no longer be a question mark for creditors over the legal efficacy of this type of 'constructive' - rather than physical - delivery. Not only will the proposed reforms result in reduced expense for distilleries and open up access to finance, the legal assurance around 'constructive' delivery will undoubtedly lead to a reduction in the cost of borrowing. Clearly, the changes will be of particular interest to whisky distillery start-ups looking for secured finance.
How the reforms will benefit Scotland's whisky producers is only one example in relation to the food and drink sector. The reforms will make it easier for funders to take fixed security over high-value plant and machinery, agricultural livestock production on farms, farmed fish or intellectual property in the food and drink sector.
These are welcomed changes and will be of vital importance to facilitate investment and growth of the Scottish food and drinks economy.
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