Regulations banning the prohibition on assignment of receivables now in force

by Grant Eldred & Emma Halton 

The Business Contract Terms (Assignment of Receivables) Regulations 2018 (the “Regulations”) came into force on 24 November 2018. The Regulations are particularly significant for businesses involved in receivables financing, whether as borrower or as lender.

For this purpose, a receivable is defined as the right to be paid any amount under a contract for the supply of goods, services or intangible assets.

The Regulations stipulate that “a term in a contract has no effect to the extent that it prohibits or imposes a condition, or other restriction, on the assignment of a receivable arising under that contract or any other contract between the same parties”.  Also, if a contract restricts an assignee from determining the validity or the value of the receivable, or its ability to enforce it, that restriction will be void, since it would have the practical effect of making that receivable unassignable.

The Regulations apply to any term in a contract:

  • entered into on or after 31 December 2018;
  • where the supplier of the goods, services or tangible assets is, at the time of the assignment, is neither a large group (defined by reference to the Companies Act 2006) nor a special purpose vehicle;
  • entered into by at least one of the parties in the course of business in the UK; and
  • governed by the laws of England and Wales, or the law of Northern Ireland – although there are provisions to prevent the parties from choosing a foreign law, if the purpose for doing so is to avoid the operation of the Regulations.

For more detailed information, please see our article on the draft Regulations – that draft was adopted with no substantive changes – or contact us directly.

If you have any queries about this article, please get in touch with Grant Eldred or Emma Halton, whose details appear below.

This article is filed under:  Industry news, Press releases, Publications

About the contributors

  • Grant Eldred Partner

    Grant is a partner and the head of our Finance Group. He specialises in banking law including bilateral and syndicated secured and unsecured lending, trade finance and banking regulation and compliance.

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  • Emma Halton Solicitor

    Emma is a Solicitor in the Finance, Company and Commercial Team.

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