The Business Contract Terms (Assignment of Receivables) Regulations 2018 (“The Regulations”) are presently a draft statutory instrument. If approved, The Regulations will apply to all contracts that are entered into or after 31^st December 2018. The effect of The Regulations will be to nullify any term in contract that prohibits, or otherwise restricts, assignment.

 

A restriction on assignment would be a term that prevents a person from determining the value of the assigned debt/right to be paid or from ascertaining the value of the assignment e.g by withholding the names and addresses of the parties, the VAT registration number of the parties, a limited description of the goods that give a right to the debt, or information as to any discount that was offered with the goods.

 

There are two limits on The Regulations: the type of contract and the nature of the assignor:

 

1. Amongst other restrictions, The Regulations do not apply to regulated agreements under the Consumer Credit Act 1974 nor contracts where a party is acting for purposes which are outside of a trade, business or profession. There are other limits at section 4. 

 

1. The Regulations will not apply if the Assignor is a Large Enterprise or Special Purpose Vehicle. The Assignor must therefore fall under the small companies’ regime, be a medium sized company or satisfy one of the other conditions listed in section 3 of The Regulations.

 

The ability to assign sums owing is a useful one to many firms and it is hoped, amongst other benefits, that The Regulations will allow greater flexibility for business wishing to use invoice finance to improve their cash flow.