What you need to know about the Moveable Transactions Act:
The Moveable Transactions (Scotland) Act 2023 (the “Act”) was passed by the Scottish Parliament in May 2023 and will make fundamental, and very positive, changes to the commercial landscape in Scotland when it comes into force.
We expect that the Act will come into force in Spring 2025, although no date has been confirmed yet. The Act modernises the law by creating a new security right (the statutory pledge) that can be used to secure moveable assets.
What is changing?
The Act will change how companies create security over their Scottish assets. It will be easier to use valuable contractual rights as security for borrowings. It will also be possible for companies to create a new type of security called a statutory pledge over their moveable assets in Scotland, such as plant and machinery, vehicles and stock in trade. Currently the only way to create security over these types of assets is to transfer possession of them to a lender or grant a floating charge.
How will this impact on the oil & gas sector?
Much of the general flexibility provided by the Act in relation to security over Scottish assets will not immediately open up new areas of security in typical offshore oil & gas production projects and facilities. The Act currently only allows a statutory pledge over incorporeal rights in relation to intellectual property, and in any case, the majority of any relevant incorporeal assets – contracts, receivables and rights over bank accounts in particular – will likely be governed by English law.
There are, however, some areas where the greater flexibility provided by the Act may help:
- Tangible Moveables: Fixed security may now be taken over valuable items of plant and machinery located on installations in the Scottish area of the UKCS via the statutory pledge.
- Shares: The Act does not currently allow a statutory pledge to be granted over shares in Scottish companies, but it is hoped that it will be amended to allow for this. This would mean that it would no longer be necessary to transfer title to the shares to create fixed security. Transferring title to shares causes practical issues in oil and gas financing, notably due to the risk of liability for security holders for decommissioning costs under section 29 of the Petroleum Act 1998 and the requirement for NSIA approval for share acquisitions.
- Production licences: Again, the current Act does not allow for a statutory pledge to be created over oil and gas production licences. However, if this class of asset is later included, the current terms of The Open Permission (Creation of Security Rights over Licences) should be wide enough to allow a statutory pledge to be granted without breaching the terms of the licence.
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