Foreign contracts will be subject to the changes but may be limited by principles of international and private law. Under the new regime, a right in a contract, agreement or arrangement will be stayed, and self-executing provisions will not apply, only by reason of:.
Where a counterparty is restricted from enforcing contractual rights against a company because of the stay, the ability of the company to enforce its rights under a contract for a new advance of money or credit is also stayed. Broadly speaking, a stay will last for the duration of the relevant insolvency event that triggered the stay and may remain in place indefinitely after that period ends. At this time the regime does not specify the elements to making a successful application, and at this stage, there is no relevant case law to assist with interpretation.
The changes apply to all contracts, agreements and arrangements entered into on and after 1 July , unless they fall within an excluded category. There are over 30 categories of contracts and contractual rights that are excluded under the new changes, some of which include:.
If you have not yet considered how these changes have or will affect you or your franchise then you should do so. We recommend you contact MST Lawyers regarding:. The new Ipso Facto regime will bring a host of new challenges and uncertainties in contracting, many of which may not be realised for some time. The new regime will have broad-ranging effects on many types of contracts and agreements across most industries including:. For franchises, the changes will impact upon various aspects of the franchise relationship and in particular upon the various rights contained in the Competition and Consumer Industry Codes— Franchising Regulation — The Franchising Code of Conduct the Code.
Clause 29 of the Code allows a franchisor to terminate a franchise agreement immediately upon the occurrence of an insolvency event. As this is not a statutory right, in order to rely on this procedure to terminate an agreement, there needs to be a contractual right to terminate included in the relevant franchise agreement.
Franchisors can no longer rely on the right to terminate and will instead be forced to liaise with and co-operate with insolvency practitioners for the duration of the stay.
Legal Updates. The PDF server is offline. Please try after sometime. Why has an ipso facto provision been introduced? When will the ipso facto provision apply? What does ipso facto do? Ipso facto has two main effects: a supplier's contractual right to terminate on the grounds of insolvency is permanently switched off as from the date of the relevant insolvency procedure.
This permanent switch-off also applies to any contractual rights a supplier may have to "do any other thing" due to the company entering into a relevant insolvency procedure for example, amending payment terms ; and a supplier's contractual right to terminate on the grounds of any pre-insolvency events of default are temporarily suspended until the relevant insolvency procedure comes to an end unless the company exits into a subsequent insolvency procedure.
Are there any exceptions? There are some limited safeguards for suppliers in the form of three exceptions, whereby termination by a supplier on account of an insolvency event will be permitted: with the consent of an office holder i.
How will ipso facto work in practice? With thanks to Charlotte Harvey and Samantha Ross for their contribution. Key Contacts We bring together lawyers of the highest calibre with the technical knowledge, industry experience and regional know-how to provide the incisive advice our clients need. Olga Galazoula. Inga West. Drew Sainsbury. Giles Boothman. Keep up to date Sign up to receive the latest legal developments, insights and news from Ashurst.
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