In September 2024, we wrote about the Moveable Transactions (Scotland) Act 2023 (the MTA) and the potential for the reforms which the Act was implementing to accelerate Scotland's clean energy ambitions. 1 April 2026 will mark the one-year anniversary of the MTA coming into force and we therefore wanted to take the opportunity to look back at the impact it has had on project finance transactions in its first year.
Background
As a reminder, the MTA introduced once-in-a-generation reforms to the law in Scotland relating to the transfer of rights and security over moveable property.
The three primary changes which the MTA made were:
- Modernising the law relating to assignation of rights
- Introducing a new form of security that can be granted over Scottish moveable property, known as the "statutory pledge"
- Creating two new registers operated by Registers of Scotland – the Register of Assignations and the Register of Statutory Pledges
Prior to the MTA coming into force, Scots law relating to assignation of contractual rights and security over moveable property was extremely old fashioned. This led to various complications on project financing transactions:
- An assignation of contractual rights had to be perfected by service of notice on the relevant counterparties (together with a certified copy), and it was not possible to assign future contracts – meaning that any contracts entered into following financial close had to be separately assigned in security to the relevant funder at that point in time, and then separately intimated to the relevant contractual counterparty.
- It was only possible to take fixed security over moveable property by way of a security interest referred to as a "pledge", which involved a transfer of possession of the asset to the security holder – this made it impractical to take fixed security over equipment, plant, and machinery (which any developer needs to retain possession of in order to develop and then operate their project).
- The issue above applied equally to security over shares, which had to be transferred to the security holder. This led to a fairly burdensome documentation process, which is described in more detail in our previous September 2024 article.
Reforms
The MTA made various changes to Scots law which addressed, among other things, the complications referred to above. The MTA:
- Modernised the law relating to assignation of rights – the law relating to assignations has been improved so that:
1.1 It is now possible to assign future rights.
2.2 An assignation registered in the new "Register of Assignations" does not have to be otherwise intimated/notified to the relevant contractual counterparty.
3.3 Where the parties elect to still perfect an assignation by way of formal notice (rather than by registration in the new register), the MTA has simplified the intimation process by permitting electronic service and removing the requirement to serve a certified copy of the assignation document; and
2. Introduced a new form of security that can be granted over Scottish moveable property, known as the "statutory pledge" – the MTA has created a new form of non-possessory fixed security which can be granted over moveable property. This allows the granters of security to grant fixed security over their moveable property without having to transfer possession to the relevant funder.
The first twelve months – how has the market adapted?
In general, the reforms implemented by the MTA have been welcomed by the market. While the content of any security package still needs to be considered on a deal-by-deal basis, we would now expect security documents for any new financing to be drafted on an MTA footing:
Security over key development documents – an assignation in security of any Scots law governed project documents remains a key part of a lender's security package on any project financing of a Scottish project. In general, we would now expect an assignation in security of key contracts on any project financing to be registered in the new Register of Assignations. This approach is beneficial for both developers and funders, as it removes the need to follow strict notice procedures at financial close to ensure the fixed security interest is validly created. It also allows any future variations or future contracts (which are entered into after financial close) to be validly secured by the assignation in security entered into at financial close, removing the need for further documentation to be signed.
Security over shares – the new option to secure shares by way of statutory pledge rather than traditional pledge has been welcomed by both lenders and developers, on the basis that it significantly reduces the documentation burden associated with taking/granting share security and alleviates any concerns associated with the PSC Regime or the NSI Regime (as described in our September 2024 article). Where share security is taken over the shares in a Scottish company on any new project financing, we would now expect that security to be documented as a statutory pledge and registered in the new Register of Statutory Pledges.
Security over other moveable property – prior to the MTA entering into force, funders simply did not take fixed security in Scotland over the key moveable property associated with any renewable energy development due to the impracticalities associated with doing so. Since 1 April 2025, we have seen a change of approach in this area and lenders are now considering whether there are any moveable assets of the borrower (e.g. wind turbines, solar panels, and other key components) which are capable of being secured by way of statutory pledge. This change has brought Scottish projects more closely in line with English projects, where the relevant security documents would ordinarily include fixed charges over all moveable property, equipment and machinery.
A look to the future
With Scotland still maintaining an ambitious legally binding target to achieve net-zero greenhouse gas emissions by 2045, and an energy strategy aimed at 50% of Scotland's heat, transport, and electricity consumption being supplied by renewable sources by the year 2030, there is still a large amount of private investment required to develop the projects required to achieve these goals.
Scotland remains an attractive place to transact, and changes such as those introduced by the MTA will hopefully be seen by lenders and developers as a positive step which both improves the availability of fixed security for lenders and streamlines the financing process for all parties.
The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.
