Scotland is on the brink of a transformation in commercial law, with the introduction of the Moveable Transactions (Scotland) Act 2023.

The Act was passed by the Scottish Parliament on 4 May 2023 and is expected to come into force around Spring 2025, although there is currently no confirmed date. The Act aims to modernise and simplify the framework around taking fixed security over moveable property and the transfer of contractual rights in Scotland. Here we explore the main changes and what they mean for the construction industry.

What’s changing?

Under current Scots law, fixed security over corporeal moveable property (i.e. physical property which is not land or buildings, like vehicles and machinery) requires a pledge, which involves physical or symbolic delivery of the property. The new Act introduces a “statutory pledge”, allowing businesses to secure financing over corporeal assets and certain types of incorporeal assets (such as intellectual property), without needing to transfer possession of the secured property in question to the lender. Instead, registration in a new Register of Statutory Pledges will be sufficient.

The Act also modernises the law on security over contractual rights. Currently, transferring rights requires notifying the debtor (referred to as “intimation”) to make the transfer effective. The Act introduces an alternative to intimation by registering the assignation in a new Register of Assignations, modernising the law in relation to intimation. Businesses can transfer current and future claims more easily and assignations can be effected by either registering the assignation or notifying the debtor electronically.

Impacts across Industries

The new Act is expected to benefit various sectors including construction, banking and intellectual property, by enabling more efficient access to secured credit. Businesses will have more flexibility to finance operations using a wider range of assets, unlocking growth potential. Small and medium-sized enterprises, partnerships and sole traders which previously had limited options for securing financing will benefit in particular.

The Act also aligns Scots law more closely with practices in England and other jurisdictions, facilitating cross-border transactions and improving consistency in credit analysis. This alignment opens new doors for collaboration and investment between Scotland and other markets.

Key considerations for the construction industry

For the construction industry, the changes around assignations and statutory pledges are particularly relevant. Assignations of construction documents such as building contracts and collateral warranties can be cumbersome. They were traditionally effected using hard-copy documents with wet-ink signatures and physical notification to performing parties. There remain some uncertainties around that notification and what acknowledgement is required.

The Act will simplify matters all round. It will allow electronic execution of assignations (using a “simple” electronic signature.) The new Register of Assignations will allow electronic registration and online searches. It will be possible to effect an assignation by notification, registration, or both.

Collateral warranties for example, which are often relied upon by employers, funders, and future tenants, will now be easier to assign. While parties may still opt to notify performing parties directly, the option to register assignations without notice will streamline transactions and remove many of the uncertainties surrounding the current framework.

Further, the introduction of statutory pledges offers new opportunities for contractors and suppliers to secure financing against high-value assets like plant machinery and vehicles, while continuing to use these assets in their day-to-day operations.

Conclusion

The Moveable Transactions (Scotland) Act 2023 marks a pivotal shift in Scotland's commercial landscape. By modernising the legal framework around the use of moveable property as collateral and simplifying the process for transferring claims, the Act offers significant advantages for businesses across all sectors. These changes will be attractive to the construction industry as they will allow easier assignation of construction documents and increased finance options through statutory pledges.

You can read more about the Moveable Transactions (Scotland) Act 2023 with sector-specific guides in our Moveable Transactions Resource Hub here, or contact Kirsty Maciver to discuss further.

Co-authored by Lila Macfarlane.

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