2025 looks set to be another busy year of banking and finance legal developments – with updates including ECCTA implementation, the 2019 Hague Convention and the Moveable Transactions (Scotland) Act 2023 all anticipated throughout the year.
ECCTA implementation
The Economic Crime and Corporate Transparency Act 2023 (ECCTA) looks set to continue its phased implementation over the course of 2025. The aim of ECCTA is to combat economic crime in the UK by, amongst other things, overhauling the role of Companies House.
Of particular interest to lenders will be the new identity verification requirements for those delivering documents to Companies House, as this will affect the filing of company mortgages and charges. Identity verification will also be required before new directors can act, and this may impact processes on acquisition finance transactions where directors change in the course of the transaction.
Companies House has provided an outline transition plan setting out a proposed timeline for implementation. Key points of relevance to lenders include:
- by spring 2025, Companies House will allow professional service providers (such as accountants and solicitors) who are regulated in the UK to register to become Authorised Corporate Service Providers (ACSPs) to enable them to carry out verification services for their clients and provide these details to Companies House;
- by autumn 2025, all directors and People with Significant Control (PSCs) will be required to verify their identity for new incorporations and new appointments. There will be a transition period of 12 months for existing companies who will be required to provide identity verification credentials for their directors and PSCs when their annual confirmation statement is due;
- by spring 2026, Companies House will make identity verification of presenters a compulsory part of filing any document (including the registration of charges) and require third-party agents filing on behalf of companies to be registered as an ACSP; and
- by the end of 2026, Companies House should be able to complete the transition period for all individuals on the register requiring identity verification and start compliance activity against those who have failed to verify their identity.
Other key ECCTA and related measures which may come into force in 2025 include:
- the abolition of the PSC register held by a company – once this change takes effect, such information will only be filed and updated at Companies House, and conditions precedent in loan agreements relating to PSC registers will need to be updated to reflect this; and
- restrictions on the use of corporate directors – only UK corporate entities with legal personality will be capable of acting as a corporate director, any corporate director will be required to have an all-natural person board, and all the directors of the corporate director will be required to verify their identity.
For more information, visit our ECCTA hub.
2019 Hague Convention
The Hague Convention of 2 July 2019 on the Recognition and Enforcement of Foreign Judgments in Civil or Commercial Matters (2019 Hague Convention) will enter into force in the UK on 1 July 2025 following its ratification on 27 June 2024.
The 2019 Hague Convention provides a mechanism for the recognition and enforcement of judgments between contracting states, including EU member states (except Denmark). Importantly for lenders, under the 2019 Hague Convention, subject to certain exceptions, contracting states must recognise and enforce judgments including those given by a court designated under an asymmetric jurisdiction clause (where the lender can bring proceedings in any jurisdiction of its choice, but the obligors can only bring proceedings in the English courts). Asymmetric jurisdiction clauses are beneficial to lenders as they provide flexibility as to where to commence proceedings.
Judgments given in relation to disputes arising out of English law finance documents containing asymmetric jurisdiction clauses had been routinely enforced in the EU prior to Brexit under the Recast Brussels Regulation, however after the UK left the EU, this regime ceased to apply. Lenders could instead seek to have judgments under such documents enforced in the EU under the 2005 Hague Convention on Choice of Court Agreements; however this only applies to judgments given by a court designated under an exclusive jurisdiction clause (where both parties can only bring proceedings in the English courts), meaning less flexibility for the lender.
It is worth noting that once in force, the 2019 Hague Convention will not have retrospective effect. It will apply only where the convention was in force as between the relevant states when the proceedings that resulted in the judgment were commenced.
Moveable Transactions (Scotland) Act 2023
The Moveable Transactions (Scotland) Act 2023 (MTSA) will come into force on 1 April 2025. Although this is a Scots law development, MTSA constitutes a major overhaul of secured transactions law in Scotland and will therefore impact lending transactions with a Scottish element.
MTSA creates a new form of fixed security known as a statutory pledge, which can be granted over moveable assets such as equipment and goods and also over intellectual property. It is generally hoped that this will be extended to shares in the future but that is yet to be confirmed. A statutory pledge can be granted by a company, LLP, limited partnership, general partnership or sole trader (with some restrictions and in respect of assets used for the purpose of the sole trader’s business). MTSA establishes a new online and searchable Register of Statutory Pledges (RSP). For a statutory pledge to take effect, it must be effectively registered at the RSP.
The statutory pledge has been designed to enable a pledge to be created without delivery of the relevant asset to the lender, which is required under Scots law at present. It will therefore allow borrowers to continue to use such assets whilst pledged, and for future acquired property to be covered under the pledge provided it is properly described in the pledge document.
It is hoped that, in due course, MTSA will be extended to cover shares and remove the need for the lender (or its nominee) to be registered as a shareholder in the company’s register of members. This has been a cause for concern for lenders, who are anxious to avoid triggering legislation that relates to control of companies based on share ownership.
MTSA also makes significant changes to Scots law regarding assignation of claims (transfers of contractual rights or debts). Under the current law, where a lender takes an assignation in security, notice must be given to the contract counterparty (unlike in English law where it is possible to take an equitable assignment without giving notice). It is also not currently possible to take an assignation of future assets. It is therefore expected that the changes will have a significant impact on invoice finance transactions in particular. MTSA provides for the creation of a new searchable Register of Assignations (RoA), and assignations will now be capable of being electronically registered as an alternative to giving notice (intimation) to the counterparty. It should be noted that the RoA does not replace the need for registration at Companies House.