Fund Financing

What you need to know about the Moveable Transactions Act:

The Moveable Transactions (Scotland) Act 2023 (the “MTSA”) came into force on 1 April 2025. and made fundamental, and very positive, changes to fund finance transactions involving Scottish limited partnerships. 

The MTSA modernised the law as it related to the transfer of, and the creation of security over, contractual rights. In fund finance situations, security is typically taken over: (i) the rights to call for and receive commitments from investors; or (ii) the rights of partners to receive distributions; or (iii) assets of the partnership. The MTSA makes it much easier to create security over those rights and assets .

What changed?

Three positive changes:

Control

Under previous Scots law, an assignation in security over rights required a transfer of those rights to be effective. Security documents often included mechanics giving lenders an element of control over assigned rights prior to enforcement so they could be confident a transfer had taken place and valid security created.

The MTSA makes clear that rights will transfer upon either intimation or registration of the assignation in security, and going forward no transfer of control over rights being assigned will be required. Any changes to the day-to-day management or control of rights being assigned will not need to change. 

Registration vs intimation

Under previous Scots law, notice of an assignation in security over rights (including rights to call for and receive commitments) had to be given to the relevant counterparty for security to be created. In fund finance situations where security was being taken over the rights to call for/receive commitments, that meant intimation notices had to be sent to all limited partners. The previous process of sending intimations was outdated and administratively burdensome. The modernisation of the law under the MTSA offers streamlined options:

• the MTSA created a new online public Register of Assignations in which an assignation in security over rights can be registered. Registration of an assignation in this new register will effect a transfer of the assigned rights from the assignor to the assignee. The new Register of Assignations allows lenders to bypass the notice (or “intimation”) process, and the assignation in security will create valid security over the assigned rights upon registration; 

and/or

• where traditional intimation is preferred over registration, the MTSA provides that notices can be deemed effective when served by email or by an electronic link to a website or portal. These new provisions significantly modernise an outdated process, and are a very welcome change particularly for funds with a large international investor base. 

Future rights

The previous law was not clear on the ability to assign (by way of security or otherwise) future rights (including rights created at subsequent closings/transfer of partner interests throughout the life of a facility). However, the MTSA expressly permits the assignation of future rights. Lenders have increased comfort that assigned rights will cover the commitments of all limited partners admitted during the term of a loan, preventing the need for supplemental assignations to be taken when new limited partners are admitted.

How will this impact on fund financing?

As a result of these changes, assigning rights in fund finance situations under Scots law has been streamlined and modernised. Clients should expect a more efficient, international-friendly process of granting security over rights related to Scottish limited partnerships.

Andrew Christie

Partner

Funds

andrew.christie@burnesspaull.com

+44 (0)131 473 6192

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