The Scottish Technical Committee (“Committee”) responded to the recent consultation seeking views on the definition of insolvency for the Moveable Transactions (Scotland) Act 2023 (“the Act”).

Broadly speaking, the Act modernises the law of Scotland in relation to transactions covering moveable property and introduces a new statutory scheme for moveable transactions law in relation to both: the assignation of claims over moveable property; and security over corporeal and certain non-corporeal moveable property.

In their Report, the Scottish Law Commission recognised that “(t)he law of rights in security is closely linked to insolvency law” but as the project was not about insolvency law and to include it would have made the project too large and unwieldy, the policies of insolvency law are left substantially unaffected. We note that the subject matter of insolvency is, to a large extent, reserved.”

The consultation referenced a summary of the amendments that had been made to the insolvency definitions at Stage 2 of the legislative process which were essentially reversed at Stage 3 focussing on the issues that have been raised by those amendments.

The consultation also sought general views on the definitions and the more conceptual issue of what insolvency should be intended to capture for the purposes of the Act.

It has been recognised that this matter is a complex area of law where opinions are divided. Indeed, this was reflected during the length and breadth of the discussions the Committee had on the consultation.

In collaboration with the Committee, R3 submitted a response which can be accessed below. The response highlights the policy choices which would determine whether a narrow or more expansive definition of insolvency is needed and the possible technical considerations thereon rather than expressing a view on which policy should be adopted. We thank the Committee for its significant input in this response.