Reform of vital part of commercial law welcomed by Faculty

07 May


THE Faculty has supported reform of the law on moveable transactions, and an end to the use of “work-arounds”.

Currently, it can be difficult for businesses in Scotland to raise money using moveable assets, ie property other than land and buildings such as plant, intellectual property rights or customer debts. Regimes in other countries, including England, are said to make it easier to raise business finance.

The Scottish Law Commission has proposed reform in a draft Moveable Transactions (Scotland) Bill, and the proposals are being examined by the Scottish Parliament’s Economy, Energy and Fair Work Committee.

In a submission to the committee, the Faculty said it considered the law in this important field would benefit from reform, and that “work-arounds” used by businesses to access finance on moveable goods were not to be encouraged.

“First, the need for a work-around means that the law does not reflect reality,” said the Faculty.

“Secondly, and related to this, the extent to which specialist legal advice is required to operate work-arounds must increase transaction costs, and therefore confer a benefit on those who can afford those increased costs at the expense of those who cannot.

“Thirdly, work-arounds inevitably create uncertainty and increase risk. Work-arounds by definition are ways of working around rules which are unsatisfactory. Work-arounds may not therefore achieve the desired result. This might only become apparent if the issue is tested in court. Most transactions are not tested in court, and so a work-around might not be exposed as inadequate for quite a number of years, until a case raising the issue comes to court.”

  • The submission refers to earlier responses by the Faculty to Scottish Law Commission consultations on moveable transactions. Those are here and here