The Moveable Transactions (Scotland) Act 2023 (MTSA) materially expanded the options available to lenders taking security over moveable property in Scotland, creating a number of important considerations for lenders involved in transactions concerning Scottish assets or entities.
Historically, the legal framework for security and enforcement over moveable assets in Scotland has experienced relatively little reform, resulting in a framework that has failed to meet the needs of increasingly sophisticated finance transactions.
However, the MTSA, which came into force in April 2025, updated and simplified the law, significantly reforming the landscape for secured lending in Scotland by introducing new mechanisms for lenders seeking security over moveable assets.
The MTSA gives lenders two new tools. The first is the ability to perfect an assignation by registration, rather than relying solely on the traditional requirement of intimation.
The MTSA clarifies the methods by which notice of an assignation (an intimation) may be given. Intimation may now be delivered personally, sent by post, or transmitted electronically. The notice may also direct the recipient to a website containing relevant information.
The MTSA introduces a Register of Assignations (RoA), which allows an assignation to be perfected upon registration in the RoA, without requiring notice to be intimated to the debtor.
The introduction of the RoA also means that future claims can now be assigned. Under s.1(4) MTSA, it is competent to assign a claim that is not held by the assignor at the time the assignation document is granted, regardless of whether a claim exists at that time. Previously, this was not possible because an assignee could not intimate a claim that did not yet exist. This important change provides greater flexibility for financing and commercial transactions.
The second new tool for lenders introduced by the MTSA is the creation of the non-possessory statutory pledge. This enables lenders to take fixed security over eligible moveable assets, with the security being created upon registration in the newly created Register of Statutory Pledges (RSP).
If enforcement of the statutory pledge becomes necessary, the MTSA requires the secured lender to service a pledge enforcement notice in the form prescribed by the legislation. This requirement is mandatory and cannot be contracted out of by the parties.
One of the benefits of the regime is the broad range of assets that can be charged. These include corporeal (tangible) moveable property such as plant and machinery and certain incorporeal (intangible) moveable property, including intellectual property rights and shares in a Scottish company.
In the case of Scottish company shares, lenders can now take fixed security without requiring title to the shares to be transferred to them, which helps avoid some of the practical and regulatory complications that previously arose, such as issues under the National Security and Investment Act 2021 and concerns regarding the lender becoming a "person with significant control".
The regime does, however, have limitations as it does not apply to certain assets that are already governed by specialist registration regimes including aircrafts and ships. Furthermore, the statutory pledge is not suitable for fluctuating assets such as stock-in-trade, where a floating charge will remain the more appropriate form of security.
The MTSA broadens the range of security that lenders can take over Scottish assets and from Scottish businesses.
Lenders can take fixed security over a wider range of assets, including future receivables and future claims, where a floating charge would previously have been the only practical option. It also means that statutory pledges will rank ahead of floating charges and be paid first in an insolvency.
These reforms are also relevant for existing financing arrangements. In addition to new financing transactions, for existing lending, lenders should consider whether there are any opportunities to strengthen their current security packages – for example when refinancing, entering into amendments and restatements, or agreeing to grant other concessions such as covenant resets or maturity extensions.
In such cases, consideration should be given to the broader range of assets over which fixed security can now be taken in Scotland, whether any new assets have entered the group and whether a statutory pledge or assignation would enhance the existing security package.
Lenders should also be alive to the new procedural requirements that must be carefully followed on enforcement. In particular, the legislation prescribes the form of certain enforcement notices, and lenders will need to ensure strict compliance with the statutory process.
Although the MTSA has modernised the law relating to security over moveable assets, it has not reformed the enforcement of fixed security (standard securities) over Scottish land.
Enforcement of a standard security remains subject to a cumbersome and prescriptive statutory process that can take some time to implement. Consequently, where Scottish land represents a significant element of the security package, putting the borrower into administration will likely often remain the preferred enforcement option, offering a more efficient and coordinated route to realisation for lenders.
Lenders ought to be aware of the “torpedo” risk associated with statutory pledges under s.52 MTSA.
This means that a lender’s statutory pledge may be extinguished where dealings are deemed inconsistent with a fixed security – for example, where all or any part of encumbered property is transferred. As a result, a lender may be left with floating security only or no effective security over certain assets. As a result of the torpedo risk, the use of limited asset floating charges is coming increasingly commonplace.
The torpedo risk may be mitigated where the secured creditor provides written consent to a specific disposal and agrees that the asset is to be transferred free of the statutory pledge. To be effective, the consent must be transaction-specific and granted within 14 days of the transfer.
To minimise the risk of a disposal unintentionally prejudicing the security package, lenders should consider taking separate statutory pledges over individual high-value assets rather than a single pledge over an entire asset class.
Lenders should also implement robust disposal consent procedures to ensure compliance with the MTSA and avoid inadvertently affecting the continued effectiveness of security. This approach will help reduce the risk that the disposal of a single asset could extinguish a statutory pledge over a wider class of assets.
The RoA and RSP can help lenders and insolvency practitioners identify whether a statutory pledge or assignation has been registered. However, they do not provide a complete picture of all security interests, as traditional methods of creating and perfecting security remain available under Scots law and may not be reflected on the registers.
The registers should be treated as a useful first step in any review rather than a definitive record. Further enquiries may still be required to identify possessory security, security over shares and financial instruments, and assignations perfected through intimation to the relevant debtor or counterparty. While the new registers increase transparency, they do not eliminate the need for careful confirmation of security when assessing a company’s asset and security position.
Statutory pledges are now routinely being incorporated into lenders’ security packages, particularly over shares and high-value equipment.
We have also identified an uptake in the use of statutory pledges over key pieces of machinery or valuable assets, including in the renewables sector.
Registration is emerging as the principal method of completing assignations and members of the MTSA working group in Scotland have indicated that registration should ordinarily be used unless there is a specific reason why intimation would be more appropriate in the circumstances.
While security granted pursuant to the MTSA is now beginning to appear in security reviews carried out for lenders where borrowers are in financial difficulties, its practical operation on enforcement remains largely untested.
The MTSA is a very welcome change and represents a genuine and practical shift in the Scottish secured lending landscape. As market practice continues to develop, insolvency practitioners will need to remain alert to evolving approaches to taking, registering and enforcing security under the new regime.
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