Scottish Law Commission recommends reform of moveable transactions law
The Scottish Law Commission today publishes its report recommending reform of moveable transactions law in Scotland.
The report is the culmination of one of the most complex projects ever undertaken by the commission.
Moveable transactions law enables businesses and individuals to use their moveable property to access finance. It is a crucial part of commercial law. For example:
- A company can sell to a bank its customer invoices (claims to payment) by means of an assignation and thus obtain immediate finance.
- business may have tangible assets such as equipment and vehicles. It may also have intangible assets such as patents and other intellectual property. These assets can be used to secure a loan, rather like a house being used for mortgage finance.
For example, Scotland is home to many intellectual property enterprises in the food and drink, oil and gas, renewable technologies, IT, life sciences and creative sectors. It is difficult under the current law for such enterprises to raise working capital by using their intellectual property as security for a loan.
The main recommendations are:
- Claims to payment can transfer by registration of the assignation in a new Register of Assignations,
- Such claims can continue to transfer by intimation of an assignation, but now with clear modern rules on electronic intimation, and
- A new security (a “statutory pledge”) can be created by registration of the pledge in a new Register of Statutory Pledges, without the need for delivery or transfer of the asset.
“It rests on Victorian legislation and disparate court decisions. There are many gaps and uncertainties. Scotland has fallen considerably behind modern international standards in this area. Our recommendations provide for a new statutory scheme fit for the needs of business in Scotland in the twenty-first century.”