This month Regulations were made so as to bring into force, with effect from 1 April 2025, those sections of the Moveable Transactions (Scotland) Act 2023 (“the 2023 Act”) so far as not already in force.
What are “moveable” transactions?
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The term “moveable” in the title of the 2023 Act makes one think of property you can physically move e.g. a table, machinery or whisky barrels. And that is so. But it is only half the story.
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“Moveable” property also includes stuff you cannot physically move from A to B. For example, it also includes personal rights (referred to as “claims” in the Act) like claims to a sum of money, copyrights and other intellectual property which is “incorporeal” and cannot be physically manhandled. Nevertheless, in legal terminology it still counts as “moveable” property.
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One of the key things (but not the only thing) the Act does is to modernise the law about transferring personal rights or claims.
An example to provide some context – and certain terminology
Suppose that Jim owes £10,000 to Mary. From Mary’s point of view that is an asset in the form of the “claim” she has against Jim. She can transfer that claim to Andrew.
The result will be that Andrew will be substituted for Mary as Jim’s creditor.
In legal terminology Mary is the “assignor”; the transfer deed required of Mary as the “assignor” is called an “assignation”; and, in order to complete the transfer, notice or “intimation” of the assignation is given to Jim as the debtor.
In general, the consent of the debtor (as with Jim in our case) is not required.
One of the main problems with the pre-2003 Act law
Assignation and intimation amongst Mary, Andrew and Jim would be easy enough to achieve. But if, say, a business wanted to assign its unpaid invoices to a financial institution in order to raise finance, there had to be written intimation (notification) of the assignation to every invoiced customer which could run into thousands. This was cumbersome, expensive and often simply impractical.
And it could not be done in respect of future claims, such as invoices due by future customers, where the debtor could not yet be identified.
The Act provides a solution to these (and other) problems and one way in which it does so is by introducing a new official public register to be known as the Register of Assignations.
The Register of Assignations
The 2023 Act introduces an alternative method of transfer: registration in the new Register of Assignations. The choice is that of the assignee i.e. in our example above, Andrew.
So Andrew could either (i) intimate the assignation to Jim (the debtor in our example) or (ii) register in the new Register.
In either case the basic result would be the same: the claim would be transferred from Mary to Andrew.
In method (ii), from the date of registration, Andrew would be Jim’s creditor in place of Mary.
This may sound a bit odd. How can Jim owe money to Andrew when Jim may well have no notice (or “intimation”) of Andrew’s actual existence?
And what happens if Jim pays the £10,000 to Mary and not Andrew?
The answer is that if Jim pays Mary in good faith then he is discharged and so cannot be made to pay a second time to Andrew. (Andrew can in that case demand the £10,000 from Mary.)
So, if Andrew wants to be sure that this does not happen he will notify Jim of the assignation by the traditional “intimation” method.
In that case one might well ask: what was the point of registration?
The value of registration in the above example
True: registration is not as strong as notice of “intimation”. But it has a value. For example: Andrew registers his assignation from Mary on 1 March but does not “intimate” it to Jim (the debtor). Mary is bankrupted on 1 April. Does the benefit of the £10,000 debt go to Mary’s creditors (through the official entrusted to deal with her bankruptcy) or to Andrew (the “assignee”)?
The answer is to Andrew. In other words, the registration of the assignation (by Andrew as assignee) protects the assignee from the assignor’s (Mary’s) subsequent insolvency.
Other advantages of registration
In the case of our Mary, Andrew and Jim example the Register of Assignations is unlikely to have any attraction over the traditional “intimation” method. But it has other advantages which are attractive to the financial sector. In particular:
First, a single registration may cover indefinitely many claims. Suppose company A is selling 1,000 consumer loans to company B. The assignation in implement of that sale can be done with a single registration whereas the traditional intimation method would need 1,000 “intimations”.
Secondly, the traditional method only works if there is an identifiable debtor to whom intimation can be made. That restriction does not apply to the new registration option under the 2023 Act. So, company A could assign to Bank B plc all its customer invoices arising in the next six months and that could be registered today (although, even with registration, nothing passes to the assignee Bank until the claim comes into existence).
Note: This material is for information purposes only and does not constitute any form of advice or recommendation by us. You should not rely upon it in making any decisions or taking or refraining from taking any action. If you would like us to advise you on any of the matters covered in this material, please contact Ross Leatham: email Ross@mitchells-roberton.co.uk