Q&As

Does section 233B of the Insolvency Act 1986 prevent a supplier from calling on a parent company guarantee (or other security) which is triggered by the insolvency of a customer?

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Produced in partnership with Ryan Hocking of Hardwicke Chambers
Published on LexisPSL on 22/09/2020

The following Commercial Q&A Produced in partnership with Ryan Hocking of Hardwicke Chambers provides comprehensive and up to date legal information covering:

  • Does section 233B of the Insolvency Act 1986 prevent a supplier from calling on a parent company guarantee (or other security) which is triggered by the insolvency of a customer?

The Corporate Insolvency and Governance Act 2020 (CIGA 2020) inserted section 233B into the Insolvency Act 1986 (IA 1986) as part of a package of measures intended, among other things, to mitigate the economic impact of the coronavirus (COVID-19) pandemic. For further information on CIGA generally, see: Corporate Insolvency and Governance Act 2020—overview.

The first point to note is that IA 1986, s 233B only applies where a company becomes subject to a relevant insolvency procedure (as defined in IA 1986, s 233B(2)). It therefore follows that there would be no impact upon a parent company guarantee if that guarantee is triggered by, for example, the customer being unable to pay its debts in circumstances where the customer has not (yet) entered any of the insolvency procedures specifically referred

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