Seòmar agus comataidhean

Good morning. I will set out some context for all my amendments.

Clearly, we are supportive of the bill in principle, and I welcome the comments that the Scottish Government has made. I hope that my amendments will clarify some things and ensure that the bill will work in practice.

I am grateful to the groups that have been in touch with me and have suggested amendments. I am particularly grateful to the Law Society of Scotland, which I have had a number of conversations with and which has helped me with some of my amendments. I hope that my amendments will be dealt with in a constructive way, and I look forward to hearing what the minister has to say.

I turn to amendments 54, 67 and 74, all of which are in my name.

Amendment 54 would expressly allow the assignation document to refer to the claim by reference to another document or data that is not reproduced in the assignation document itself. That is important because a number of invoice discounting systems use online portal-based invoice discounting systems, and we need to ensure that they are able to utilise the register of assignations. Similarly, I am sure that we want to avoid lengthy documents, including customer lists, needing to be uploaded to the register. This approach is coherent with and follows the approach taken to conditions for assignation in section 2(4). I ask the committee to accept amendment 54.

If it passes, amendment 67 would expressly allow the constitutive document in a pledge to refer to the property pledged by reference to another document or data that is not reproduced in the constitutive document itself. I lodged amendment 67 because, having spoken to a number of people in practice, I found that they generally consider that a number of pledges will be composite pledges referring to a large number of the debtor’s assets, and that having to upload such asset lists might be prejudicial to debtors. Again, I hope that this is a constructive amendment that the committee can support this morning.

Amendment 74 would affect section 56 of the bill. It expressly allows for an amendment document in respect of a pledge to refer to the property pledged by reference to another document or data that is not reproduced in the constitutive document itself. Again, having spoken to those in practice, I consider that a number of pledges will be composite pledges referring to a large number of the debtor’s assets, and that having to upload such asset lists might be prejudicial to debtors. That could also apply in respect of an amendment of a pledge. Amendment 74 will make things clearer for those who are dealing with this day in and day out.

I look forward to hearing the minister’s response to my amendments.

I move amendment 54.

I thank the minister for lodging those amendments, which are helpful and will get the committee to where we want be. However, I am looking for clarification. There is a balance to be got right in the treatment of individuals as opposed to sole traders. We started our discussions on the bill by saying that the threshold here could be £1,000. Would there be any advantage in considering, at stage 3, whether the situation could be clarified further by having the figure increased to, say, £5,000 or £10,000? Would that give absolute clarity to individuals, or would it not bring them any benefit? I genuinely seek clarification on that point so that we can keep a balance between individuals and sole traders.

Amendment 61 ensures that, as the minister has outlined, the timescales for valid intimation will also be subject to a determination as to the method of service. As he has suggested, some concerns have been raised about the wording in the bill as introduced that some of the detail in respect of intimation is slightly too prescriptive, and more aspects of intimation, including how long after serving a notice should receipt of such notice be deemed, should be subject to a determination as to the method of service, too. However, I intend to reflect on what the minister has said and will not move the amendment today.

I am still inclined to move amendment 65, which seeks to change the definition of “assignee” by including the assignee’s trustees or agents. I accept what the minister has said about provision for this being made later on in the bill, but it is still my view that this amendment is helpful and will give clarity. Simply defining the assignee as

“the person to whom a claim is assigned”

lacks clarity; after all, trustees and agents of the assignee can act on the assignee’s behalf, and it is possible for creditors to hold claims and pledges as trustees and/or agents for themselves and other creditors. Amendment 65 simply makes it clear that those acting in the place of assignees are included in the definition of “assignee”. Clarity is always a good thing, and the amendment will just put into the bill something that people will be able to understand and refer to.

Finally, I will be supporting all of the minister’s amendments.

It was just over 30 years ago that I sweated blood and tears when trying to do company law. I am pleased to say that I have never practised it in my life.

However, I have had another look at the amendments in this group and had conversations about them, and I slightly disagree with the minister’s position. My view is that we need more clarity around the area of insolvency. It is, as the Law Commission has said, and as the minister has said this morning, very technical, and we should bring more clarity to very technical areas by including the amendments in the bill and enacting them. If the amendments do not achieve what I think that they will achieve, there is room to make changes at a later stage, as the minister has said. However, I think that the amendments would clarify the situation, and it is my intention to press amendment 58.

I appreciate what the minister says, but if everything is fine, the review can be a very quick process. There is concern that we do not know how this will work in practice. I would have thought that having a more formal process of carrying out a review would give stakeholders the opportunity to have input into the process. If there is not, how do stakeholders go about having that input into how it works in practice?

I thank the minister for his amendments on electronic documents in the previous group, which were really helpful. I welcome them completely.

My amendment 85 is almost identical to amendment 53. I have nothing further to add. If amendment 53 is agreed to, I will not move my amendment.

Amendment 55 deletes part of section 1(5), which will ensure that part 1 of the bill operates without prejudice to the rules relating to financial collateral arrangements.

Section 1 deals with the assignation or transfer of claims. At paragraph 11, the explanatory notes state:

“Subsection (5) provides that nothing in Part 1 applies to the assignation of a claim as part of a financial collateral arrangement within the meaning of the Financial Collateral Arrangements (No.2) Regulations 2003.”

Financial collateral arrangements are defined as

“a title transfer financial collateral arrangement or a security financial collateral arrangement, whether or not these are covered by a master agreement or general terms and conditions”.

Financial collateral arrangements are a form of security arrangement designed to simplify the process of obtaining financial collateral. Financial collateral is defined as

“either cash or financial instruments”.

Having spoken to the Law Society and others in practice, I believe that the current terms of section 1(5), which makes the proposition that nothing in part 1

“applies to the assignation of a claim as part of a financial collateral arrangement”,

lack clarity. Instead, we consider that the provisions of part 1 should be without prejudice to the rules for financial collateral arrangements.

I will now speak to amendment 56 and my other amendments in the group. As the minister and the committee will be aware, the inclusion of individuals in the bill is perhaps the most interesting and controversial part of the bill. The bill does not include the provisions on stocks and shares that were in the Scottish Law Commission’s provisional draft bill. The committee has debated the issue, and I know that the minister has made the Scottish Government’s view clear. These are probing amendments, so I do not intend to move any of them.

I am looking for clarity on why the Government thinks that it is not possible to have such provisions in the bill. When the Law Commission drafted its bill, it thought that the provisions would be legally competent, and others have given legal advice that they would be legally competent. When the minister gave evidence to the committee previously, he said that, according to the legal advice that he had received, it would be incompetent to have the provisions in the bill. Could he expand on that? In practical terms, this is one of the most important parts of the bill, because it will allow much greater freedom for business to take place, which is what we all want, so it would seem sensible to include such provisions in the bill. I ask the minister to say a bit more about the legal advice.

If the Government’s view is that such provisions cannot be included because of whatever reason the minister gives in a moment, I would like to push the minister on another matter. I appreciate that, in his letter to the committee, he said that, once the bill becomes an act, there can be more engagement with the United Kingdom Government on the matter, but I hear questions from those in practice about how long that will take. I appreciate that that involves two Governments working together, but can the minister give some sort of timescale for when that will happen in practice?

I move amendment 55.

I thank the minister for his comments so far. He is right that amendment 79 seeks to clarify that only the execution of prior ranking diligence will extinguish a statutory pledge. In the light of his comments, however, I will not move that amendment, and I will go away and reflect on the matter with regard to stage 3.

With regard to amendment 83, I go back to a debate that we had earlier this morning. Again, this amendment seeks to extend the interpretation of a “secured creditor”. I note that the minister believes that that is already in the bill, and I accept that. However, I still think that my amendment would provide greater clarity, and I will explain briefly why. The bill does not include a “trustee or agent” in the interpretation of a “secured creditor”. The amendment provides a fuller definition of the parties defined as a “secured creditor”.

In corporate finance transactions, it is likely that a club or syndicate of lenders jointly lend to a corporate debtor. Here, one will take security in their own name as security agent or security trustee to hold the security for the benefit of all lenders. Thus, for example, HSBC, the Bank of Scotland and the Royal Bank of Scotland could jointly agree to advance a loan to ABC Ltd, in various proportions, with one of them—say, the Bank of Scotland—holding all the security granted in respect of the aggregate amount of the loan owed to all the lenders. Although the Bank of Scotland would have the benefit of the security, it would be misleading to think of it as the sole beneficiary of the security as it would be holding it as trustee or agent for all the lenders.

Amendment 83 would bring clarity and, in practical terms, it would be helpful for business. I will seek to move it in due course.

I thank the minister for his helpful remarks. I am pleased that the timescale of next summer is still achievable. I will reflect on what he said before stage 3 but I will not press amendment 55.

Amendment 55, by agreement, withdrawn.

Amendment 56 not moved.

Section 1, as amended, agreed to.

Section 2 agreed to.

Section 3—Transfer of claims

I thank the minister for his helpful remarks and explanation. If it is okay with the minister, it would be helpful for the amendments to be agreed to now, but I would welcome working with him to get them absolutely right for stage 3. It would be helpful to have them ready for that, however, so I intend to press amendment 54.

Amendment 54 agreed to.