As you will be aware on 6 December 2014 the Department for Business & Innovation Skills (‘BIS’) published a consultation and draft regulations on the proposal to nullify the ban on contractual clauses that prevent invoice assignments.
The context to the consultation and draft regulations is to make invoice finance more accessible to SME’s with invoice discounters no longer discouraged from funding due to contractual clauses preventing an assignment of any part of the underlying contract.
The concern from an invoice discounters perspective with a ‘ban on assignment’ clause is that the assignment of invoices pursuant to the invoice finance agreement is ineffective to vest the contractual right to receive payment from the client, with payment (by the debtor) to the client directly giving the debtor a good and valid discharge of the debt.
In March 2015 BIS published the summary of responses it had received with opinion divided over, amongst other areas (1) the form of the restrictions on assignments; and (2) the extent to which the proposal to nullify clauses that restrict assignment would extend to certain transactions and business arrangements including those in the financial services sector, supply chain finance and other contractual arrangements.
BIS will use the findings from the consultation to prepare a response which will be closely monitored with interest by invoice discounters and factoring organisations.
The link to the summary of responses produced by the Department for Business & Innovation Skills is attached below.
If you would like to understand more then please do not hesitate to contact a member of the Clarion Asset Based Lending team.
Disclaimer: Anything posted on this blog is for general information only and is not intended to provide legal advice on any general or specific matter. Please refer to our terms and conditions for further information. Please contact the author of the blog if you would like to discuss the issues raised.