The updated Prescription and Limitation (Scotland) Act 1973

The law of prescription in Scotland means that in certain circumstances certain rights (for example the right to demand repayment under an obligation to repay sums) and obligations are extinguished after a specified period of time (the prescriptive period) has passed. The prescriptive period can be interrupted (and that interruption would re-start the prescriptive period running, once the interruption was resolved) if a ‘relevant claim’ is made before it expires.

As of 28 February 2025 the law has changed so that the appointment (in certain circumstances) of administrators or the submission of a claim in an administration is sufficient to interrupt the prescriptive period for that creditor, rather than the creditor having to raise formal proceedings. Raising proceedings against an insolvent company would require the consent of the relevant insolvency practitioner or the court, due to the statutory moratorium and so the changes make the process a little more straightforward. 

What do these changes mean for creditors?

These changes are potentially beneficial for all creditors because they increase the available options for interrupting prescription. The changes have been made in an attempt to make the process fairer, since previously certain actions relating to liquidations (but not administrations or receiverships) had been sufficient to interrupt the period.

Where a creditor appoints administrators (whether out of court as a qualifying floating charge holder, or by submission of an application to court) or a receiver over floating charge assets, the prescriptive period relating to any rights or obligations owed to that creditor by the insolvent company will be interrupted.  This means that the appointment will stop time running until the claim is fully disposed of.  This could help tip the scales in making a decision about whether to make an appointment or not and will be helpful in those situations where some time has run since the obligation was originally put in place, and insufficient action had been taken to enforce the obligation.

Even creditors without the benefit of a qualifying floating charge can take advantage of these changes if an administrator is appointed over the debtor, or (as very rarely happens nowadays) a receiver is appointed over the debtor’s floating charge assets.  In these circumstances, the creditor should ensure they submit a claim in the administration or receivership as soon as possible in order to stop time running.  This claim needs to be submitted in accordance with the relevant Insolvency Rules in order to effectively interrupt the prescriptive period.  There are also other options available where the expiry of the prescriptive period (or any limitation period for issuing a claim) is a concern and creditors should take legal advice where necessary to protect their position.

What do these changes mean for Insolvency Practitioners?

Awareness is key for IPs.  These changes apply only in certain administration appointments or on the appointment of a receiver (although these types of appointments are now extremely rare) of floating charge property under Scots law.  They mean that the prescriptive period will be interrupted for any rights or obligations owed by the insolvent company to the creditor who has made the appointment or submitted a court application for the appointment.  Any other creditor will need to submit a claim in the administration or receivership in accordance with the relevant Insolvency Rules to benefit from the changes and interrupt the prescriptive period. 

The appointment of an administrator by the company itself or its directors will not be a relevant claim for these purposes.  Creditors will still potentially benefit from the changes to the law though as the submission of a claim in the administration will still interrupt the prescriptive period in relation to that right or obligation.  You might expect to see an increase in claims being submitted early in the process, as a way to have outstanding obligations finally assessed and disposed of.  If there is any doubt at all about whether the right or obligation has expired or whether any claim has been submitted correctly you should seek legal advice.

Conversely, if the insolvent company has the benefit of any rights or obligations these new provisions may have an impact on the steps you take to enforce those rights. In any event IPs should always take care to ensure claims belonging to the insolvent entity are appropriately dealt with before the expiry of any prescriptive or limitation period.

Next steps

The law of prescription in Scotland is a complex area of law and requires careful consideration to calculate the dates on which obligations became enforceable, how long the prescriptive period runs for, what type of actions interrupt the running of the period and when that period comes to an end. We recommend taking advice as early as possible if this type of issue becomes relevant in any of your cases. Please contact Ainslie Benzie and we can provide advice on your specific circumstances.

Contributor: Tessa Durham

This publication is intended for general guidance and represents our understanding of the relevant law and practice as at May 2025. Specific advice should be sought for specific cases. For more information see our terms & conditions.