The UK Parliamentary order that will bring financial collateral such as shares, debt instruments and bank accounts into the new Moveable Transactions regime was laid before the UK Parliament on 6 March 2025.
What does this mean for the Moveable Transactions Act?
The snappily titled, Moveable Transactions (Scotland) Act 2023 (Financial Collateral Arrangements and Financial Instruments) (Consequential Provisions and Modifications) Order 2025 (the “Order”) will supplement and make certain amendments to the Moveable Transactions (Scotland) Act (the “Act”) and address what some commentators have said was the biggest gap in the Act as it was passed by the Scottish Parliament. It will bring the Act closer to what had originally been proposed by the Scottish Law Commission in their draft bill that was first published in December 2017.
The Order will permit things such as cash, bank accounts, deposits, and other credit claims to benefit from the new simplified regime that is being introduced for assignations. The Order also extends the statutory pledge security regime to financial instruments such as shares, bonds and interests in collective investment schemes.
What does this mean in practice?
Practitioners throughout Scotland will be breathing a sigh of relief now that the Order has been published. It will work to address the concerns that have been raised over the years in relation to share security in Scotland, removing some of the barriers that existed, in particular, as a result of the Persons with Significant Control (PSC) regime and the National Security and Investment Act 2021. The Order will also simplify bank account security in Scotland, with the question of control no longer being as relevant to the security considerations for lenders.
Why was the Order necessary?
Although the original draft bill leading to the Act included financial collateral as being within its scope, this was removed by the Scottish Government at an early stage in the Scottish parliamentary process due to concerns that the Scottish Parliament did not have the power under the Scotland Act 1998 to deal with legislation relating to financial collateral. The view was taken that the UK Government would need to address this by exercising its powers under the Scotland Act by way of a separate order. Thanks to constructive discussions between the UK Government and the Scottish Government over the last few years, the Act will now take effect as originally intended.
When will the changes come into force?
The Order is set to take effect from 1 April 2025, which is the same day as the Act enters into force, meaning that there will be a consistent regime applying from day one.
What else does the Order do?
As well as expanding the new regime to financial collateral, the Order makes certain changes to how the Act will apply with respect to financial collateral. These include:
- introducing an additional regime, which does not require intimation or registration, for an assignation where the transfer of financial collateral is in security;
- introducing an additional regime whereby an unregistered statutory pledge can exist over financial instruments to the extent that the financial instruments are in the possession or control of the security taker;
- permitting individuals to grant a statutory pledge over financial instruments even where the prohibition on the grant of a statutory pledge by an individual would otherwise have applied – this will make it competent to take share security from individuals under the new regime;
- simplifying the appropriation regime for shares and bonds where the statutory pledge includes an agreed appropriation mechanism – which will help to further streamline some of the enforcement routes available to lenders; and
- disapplying certain rules of execution and form that were introduced by the Moveable Transactions Act to ensure that it is compliant with the Financial Collateral Arrangements (No. 2) Regulations 2003.
Next steps
As the countdown to 1 April gets shorter, we remain ready to help guide you through what these changes will mean for you and practice so please get in touch with our team or visit the Moveable Transactions Resource Hub for more information.
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