REGULATIONS TO TACKLE CONTRACT TERMS PREVENTING ASSIGNMENT OF RECEIVABLES LAID BEFORE PARLIAMENT

A revised draft of the Business Contract Terms (Assignment of Receivables) Regulations 2017 has been laid before Parliament.

The regulations provide that, save in respect of certain listed contracts, contractual terms prohibiting or restricting the assignment of a receivable or its enforcement by an assignee shall have no effect.

The aim of the regulations is to remove barriers to receivables finance for SMEs. Where a receivables contract contains a non-assignment clause, any assignment in breach of that clause will be invalid as between the purported assignee and the debtor. The debtor can refuse to pay the assignee and continue to deal with the assignor. This is unattractive to finance providers and such restrictions therefore prevent companies raising finance against invoices they have issued by way of factoring or invoice discounting.

A date for approval of the draft regulations has not yet been proposed.