Commentary on Sections Part 2 – Security over Moveable Property Pledge, secured obligation and encumbered property Section 42 – Pledge
189.A pledge is a type of right in security over moveable property.
190.This section sets out the main methods by which a pledge is created over corporeal and incorporeal moveable property respectively. However, subsection (5) confirms that any existing law on creating a possessory pledge over a negotiable instrument remains undisturbed.
191.Corporeal moveable property is property that has physical form, other than land or buildings (which are known as heritable property). It includes whisky, paintings, furniture, and motor vehicles. The Act defines corporeal moveable property, but only to confirm that it does not include money for the purposes of the Act (see section 113(1) which defines “money” by reference to section 175 of the Bankruptcy and Diligence etc. (Scotland) Act 2007, with the effect that, broadly speaking, it means cash and banking instruments (such as cheques and postal orders, among other things)).
192.Incorporeal moveable property is property that does not have physical form, such as intellectual property or financial instruments.
193.A pledge over corporeal moveable property can continue to be created as a possessory pledge but will now also be able to be created as a statutory pledge through the mechanism of registration. A possessory pledge will normally be created by delivery of the property to the secured creditor (for which see section 44 of the Act). The exception to that is where the property is not the provider’s when delivered; then the pledge is created when the property becomes the provider’s.
194.A pledge over incorporeal moveable property, or over property which is a mixture of corporeal and incorporeal property, must be created by registration in the new Register of Statutory Pledges.
195.Section 113 of the Act has the effect that a reference to registering a statutory pledge or an amendment to it (however expressed) is a reference to registration by the Keeper in the Register of Statutory Pledges under sections 87 and 89 of the Act.