Government consults on nullification of ban on invoice assignment clauses

Government consults on nullification of ban on invoice assignment clauses

What effect would proposals to nullify bans on invoice assignment clauses have on companies and suppliers?

Original news

The government is proposing to nullify bans on invoice assignment terms on business-to-business commercial contracts. The proposals are part of its plans to remove barriers to invoice finance. It is seeking views on its proposals, the draft regulations which would implement them and the costs and benefits of the measures on both companies and the invoice finance market. The measure would nullify any bans on assignment of receivables included in contracts (with certain exceptions) after the regulations have come into force. It would bring the law in England and Wales more in line with the position under the US Uniform Commercial Code and under the UNCITRAL (United Nations Commission on International Trade Law) Convention on the Assignment of Receivables in International Trade. Comments should be submitted by 11 February 2015.

What is invoice financing?

Invoice financing is where a supplier sells the right to future payment of an invoice by its customer to a finance provider in exchange for a loan. When the customer pays the relevant invoice, the supplier will remit the amount due in respect of the invoice to the finance provider in repayment of the loan. By allowing the supplier to receive money in respect of an invoice before the customer has paid it, invoice financing effectively accelerates payment terms and smooths a company's cash-flow. It is therefore a useful financing technique, particularly for SMEs—use of which the government wishes to encourage.

What is the current law on assignment and bans on assignment?

Under English law, 'in the absence of the clearest words' prohibiting assignment, a party to a contract is entitled to assign its rights under that contract (see Don King Productions Inc v Warren and others [1998] All ER (D) 114). If the assignment is notified in writing to the other party to the contract, then a legal assignment will have been

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