Assignment Of Business

Assignment Of Business-69
However, the Regulations do not mean that assignees can ignore the terms of the underlying contractual arrangements between suppliers and debtors; for one thing any existing rights of set-off will continue to bind the assignee.

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Certain types of contract are excluded from the Regulations.

For example, the Regulations The Regulations do not apply if the supplier is a "large enterprise" or a "special purpose vehicle" (the "SME Test") at the time of the assignment.

This has led some to argue that the common law should recognise all assignments of receivables notwithstanding prohibitions on assignment, at least as between the assignor and the assignee.

Arguably, this approach would balance the legitimate interests of all parties. Where they apply, the Regulations will make it easier for SMEs to assign their receivables and to raise finance.

Draft legislation finally appeared in 2017, but was withdrawn following criticism by the Loan Market Association and others.

The final form of the Regulations addresses some of the criticisms, but adds complexity in what is already a complex area of the law.

Therefore, it appears that the Regulations do not apply to the creation of a charge or a trust. As a result of the SME Test and the exclusion of certain types of contracts, there will be many situations in which the Regulations are not relevant to the assignment of a receivable.

Where the Regulations do not apply, the current law recognises the effectiveness of contractual prohibitions on the assignment of receivables.

Assessing whether a supplier is an SME involves reviewing the most recent relevant annual accounts and the status of the supplier in this respect may change throughout the term of a contract.

There are also various types of contract to which the Regulations do not apply and, in some cases, applying those exceptions is not straightforward.

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