City of London Law Society: ‘New business contract terms could have detrimental effect’

15 Nov 2017

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The City of London Law Society (CLLS) has written to the Department for Business, Energy & Industrial Strategy concerning its issues with the Business Contract Terms (Assignment of Receivables) Regulations 2017. The chair, Dorothy Livingstone states that the letter is to explain why the CLLS believes the Regulations ‘will create substantial uncertainty in a wide range of financial transactions and may adversely affect access to finance for UK businesses if they are adopted’. The CLLS believes the best outcome would be for the Regulations to not be approved and the terms be reconsidered.

The new law is primarily to enable small and medium-sized UK enterprises to obtain better access to finance by outlawing prohibitions on the assignment of receivables, with the hope that this will make them more attractive to invoice discounters.The CLLS believes it may, however, undermine other forms of financing, such as loans, bonds and structured finance, ‘by making fundamentally important provisions routinely included in the documents for such financings ineffective to the extent they apply to receivables’.

The letter concludes: ‘If adopted, the Regulations will create serious uncertainty in a wide range of financial transactions. Any benefit to invoice discounters would be substantially outweighed by the detrimental effect on other parts of the financial markets. They may also be ultra vires. Either way, they are not a good advertisement for a post-Brexit UK. The best outcome would be that the Regulations are not approved and that their terms are reconsidered, following proper consultation.’

Source: Letter: The Business Contract Terms (Assignment of Receivables) Regulations 2017