Commentary on Sections Part 2 – Security over Moveable Property Statutory pledge Section 50 – Creation of statutory pledge: insolvency
231.Sections 45(4) and 58(5) of the Act set out that the property to be encumbered as described in the constitutive document of a statutory pledge, or an amendment document, may be property to be acquired by the provider of the pledge. This section provides for the effect of the intervening insolvency of the provider.
232.Subsection (2) provides that a statutory pledge will not be created over property acquired at a time when the provider is insolvent (as defined in subsection (3)). The effect is that the property in question is treated as an asset of the provider for the purposes of the insolvency. It may for example be sold or realised for the benefit of the creditors as a whole.
233.Subsection (4) confers a power on the Scottish Ministers to modify subsection (3) by regulations. That power could for example be used to add a further type of insolvency to the list in subsection (3).