The Insolvency (Protection of Essential Supplies) Order 2015—what is its effect?

The Insolvency (Protection of Essential Supplies) Order 2015—what is its effect?

The Insolvency (Protection of Essential Supplies) Order 2015, SI 2015/989 (I(PES)O 2015) was made on 26 March 2015, and will in accordance with article 1(1) come into force on 1 October 2015. The purpose of I(PES)O 2015 is stated in its explanatory memorandum to:

  • amend the Insolvency Act 1986 (IA 1986) 'to prevent essential IT and utility suppliers of businesses on certain formal insolvency procedures from exercising contractual rights terminate the supply or to increase charges to the insolvent company on account of the insolvency', and
  • 'ensure that insolvency practitioners are able to secure supplies that are essential to facilities a prospective rescue of the business' and provide 'safeguards for those suppliers who will be affected to ensure they may terminate the contract or the supply in certain specific circumstances'

Why have these changes been brought in?

When a company or an individual enters into an insolvency process, suppliers of gas, electricity and water are unable to demand payment of any outstanding charges as a condition of continuing to supply that company or individual. This is particularly important where there is a business that can be rescued, with the prospects of rescue being hindered or altogether being removed if the company or individual can effectively be held to ransom. That position has existed for a long time, which has meant that the law is out of date when it comes to other supplies which are essential to the functioning of a business and which have only become prevalent over the past few years—principally supplies of IT products and services.

Such is the importance of IT supplies to most businesses today that insolvency practitioners reported increasing instances where IT suppliers were exercising commercial leverage over insolvent companies and individuals for continued supply, risking a potential rescue of the business to the detriment of creditors as a whole.

By section 92 of the Enterprise and Regulatory Reform Act 2013 (ERRA 2013), which came into force on 25 April 2013, the Secretary of State was given the power to amend by order section 233 of the Insolvency Act 1986 (IA 1986) for corporate in

Related Articles:
Latest Articles:

Access this article and thousands of others like it free by subscribing to our blog.

Read full article

Already a subscriber? Login

About the author:

Stephen qualified as a solicitor in 2005 and joined the Restructuring and Insolvency team at Lexis®PSL in September 2014 from Shoosmiths LLP, where he was a senior associate in the restructuring and insolvency team.

Primarily focused on contentious and advisory corporate and personal insolvency work, Stephen’s experience includes acting for office-holders on a wide range of issues, including appointments, investigations and the recovery and realisation of assets (including antecedent transaction claims), and for creditors in respect of the impact on them of the insolvency of debtors and counterparties.