Reforms to business financing central to new Bill to be scrutinised in Holyrood

The Scottish Parliament’s Delegated Powers and Law Reform Committee has launched a consultation on the Scottish Government’s Moveable Transactions Bill.

The Bill aims to reform the law to make it easier for businesses and individuals to raise finance using moveable property, like cars, machinery and intellectual property. Two new registers would be created to enable this reform.

A register of assignations may allow someone with a right to be paid for goods or services, to transfer their right to payment to another person. A register of statutory pledges might allow a lender to grant a loan and have a piece of moveable property act as a security in case the loan is not repaid.

The changes were initially suggested in a Scottish Law Commission Report that was published in December 2017.

The Commission’s report explained that assignation of debt might be particularly useful for small and medium sized businesses who can face short-term funding gaps while waiting for payment from customers.

Similarly, the Commission found that the current law around securities was impractical for commercial organisations. The report outlined that, under the current law, if a business were to pledge a moveable asset, like a van, to a lender, that asset would have to be delivered to the lender. This would be impractical if that business needed that van to trade.

Previous reforms to the law that have been proposed by the Commission have had a significant impact. In the fourth Session of the Parliament, the Legal Writings (Counterparts and Delivery) (Scotland) Bill, was lodged under the basis of recommendations by the Commission. The Bill aimed to enable legal documents to be delivered electronically, a reform the Committee supported which became particularly useful during the Coronavirus pandemic.

Stuart McMillan MSP, Convener of the Delegated Powers and Law Reform Committee, said:

“The proposed changes to Scots Law in this Bill could have a profound impact on businesses and individuals across Scotland. We have already seen keen interest in the proposals from legal experts.

“Current Scots Law around moveable transactions is widely seen to be outdated and restrictive.

“We would like to understand more about the positive or negative impacts this Bill might have. I encourage any individual, business or professional body who may be impacted to share their views in our consultation.”

In addition to its consultation, the Committee will hold a series of public evidence sessions on the Bill in the autumn.