The Moveable Transactions (Scotland) Act 2023 ('MTA'), which was passed by Scottish Parliament in May 2023, received Royal Assent in June 2023 and is hoped to come into force in 2024, introduces a new legal framework for the transfer of rights in Scotland. The legislation also creates a new form of security – the statutory pledge - over moveable property and is expected to increase the ability for Scottish companies to raise secured finance. In this blog post, we will summarise the key provisions of the MTA and explore its potential impact on companies operating in Scotland.

Overview of the MTA

A main aim of the MTA is to make it easier for Scottish businesses to use their moveable assets, such as inventory, machinery, livestock and IP as collateral for obtaining financing. Taking security over moveable property in Scotland currently presents practical challenges and often involves workarounds. The MTA modernises the law around taking security over moveable assets, facilitating the ability of Scottish companies to raise secured finance.

The MTA enables assignations (transfers) to be completed by registration in the new Register of Assignations as an alternative to intimation. Intimation requirements will also be updated to allow electronic intimation which will modernise and streamline the process.

There will also be a new Register of Statutory Pledges created, and it will become possible to take a statutory pledge over certain types of moveable assets without having physical possession of them. This is a new fixed security right which will be available to multiple types of entities, including companies, LLPs and sole traders.

We have detailed five things you need to know about the new rules of assignations and the new statutory pledge in previous blog posts.

Impact

Financing Opportunities

One of the most notable impacts of the MTA is the extended secured finance options it creates for businesses seeking to raise finance. Once the MTA is in force secured finance should become easier to obtain as businesses will be able to grant fixed security over their moveable assets without some of the challenges that currently exist. In taking fixed security over moveable assets lenders will be able to take a security package offering a greater return on insolvency which ought to lead to cheaper finance for businesses. These factors could be particularly beneficial for businesses which cannot grant floating charges and startups and small to medium-sized enterprises that are looking for capital to expand their operations.

Streamlined Administration

The registration of rights in relation to moveable assets will become a straightforward, online process, reducing the administrative burdens and the associated costs for companies when obtaining finance.

Asset Utilisation

The MTA allows companies to make more efficient use of their moveable assets. With the knowledge that their moveable assets can serve as collateral, businesses can leverage these assets and rights for secured financing while still utilising the assets in their day-to-day operations. This will be particularly beneficial to borrowers with high value moveable assets that are retained for long periods of time – such as whisky distilleries. Start-up companies with few rights and assets (other than IP rights) will also be able to benefit as they will be able to leverage the rights for financing as they build up their businesses.

Growth Opportunities

Once the MTA is in force, Scottish companies will be better able to utilise their moveable assets to secure access to finance which they can use to grow their businesses. The ability to take a security package which includes fixed security over moveable assets makes lending more attractive to lenders because of the improved position on insolvency. These factors could fuel business expansion and innovation in Scottish companies.

Risk Management

The clarification and modernisation which the MTA brings security law in respect of moveable assets in Scotland is expected to enhance lender credit and risk assessment.

Conclusion

The MTA marks a significant turning point in how companies in Scotland secure financing and manage their assets. By expanding and simplifying the ways in which security can be taken over moveable assets in Scotland creates an improved landscape for economic growth and innovation.

As the MTA is brought into force and businesses adapt, it is crucial for companies to stay informed about its provisions and leverage any possible benefits to their advantage.

How Brodies Can Help

If you would like to discuss anything raised in this blog in more detail, please get in touch with a member of the corporate and commercial team or your usual Brodies contact.

Contributors

Michaela Watts

Senior Associate

Lindsay Lee

Senior Associate