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. The Act comes intoforce on 1 April 2025.
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 statutory pledge over their physical moveable assets in Scotland, such as plant and machinery and vehicles. Previously, the only way to create security over these types of assets was to transfer possession to a lender or grant a floating charge.
How will this impact on the oil & gas sector?
Much of the flexibility provided by the Act will not necessarily increase the classes of asset that may be subject to fixed security in typical UK offshore oil & gas production projects and facilities. This is because even for Scottish companies or companies operating within the Scottish part of the UKCS, the majority of relevant incorporeal assets – contracts, receivables and rights over bank accounts in particular – will typically 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 be taken over valuable items of plant and machinery located on installations in the Scottish area of the UKCS from 1 April via the statutory pledge. It remains to be seen whether lenders will insist on this type of security in view of the obvious practical difficulties of taking possession in order to sell at the point of enforcement (and also taking into account the possibly diminished “independent” value of any such items).
Shares: From 1 April it is possible to grant a statutory pledge over shares in Scottish companies. This means that it will no longer be necessary to transfer title to the shares to create fixed security. The current requirement for the transfer of title 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.
Bank accounts: Bank accounts located in Scotland may now be secured by way of assignation, created by registration under the Act rather than by intimation. An assignation created in this way can cover existing and future rights and also crucially does not require any element of “control” to be given to the assignee/security holder.
Production licenses: The Act did not previously 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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