Q&As

What is the impact of section 233B of the Insolvency Act 1986 on a supplier or customer based in the UK where the supply contract is not governed by English law?

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Produced in partnership with Chris Bryden of 4 King’s Bench Walk
Published on LexisPSL on 18/02/2021

The following Commercial Q&A produced in partnership with Chris Bryden of 4 King’s Bench Walk provides comprehensive and up to date legal information covering:

  • What is the impact of section 233B of the Insolvency Act 1986 on a supplier or customer based in the UK where the supply contract is not governed by English law?

Section 233B of the Insolvency Act 1986 (IA 1986) was inserted by the Corporate Insolvency and Governance Act 2020. IA 1986, s 233B(3) provides that any provision in a contract for the supply of goods or services whereby the contract would terminate due to the customer entering into an insolvency procedure, or whereby the supplier would be entitled to terminate as a result of the insolvency procedure, ceases to have effect where a company becomes subject to one of the specified insolvency procedures (as defined in section 233B(2)). Further, if the entitlement arises before the commencement of the insolvency procedure, that right cannot be exercised during the insolvency period (section 233B(4)). A supplier is also prohibited from requiring pre-insolvency debts to be paid as a condition of making further supplies (section 233B(7)). A supplier can in such circumstances only terminate the contract where the company (or relevant insolvency practitioner) consents or if the court is satisfied that the continuation of supply would cause hardship to the supplier (section 233B(5)). The purpose of this reform is to assist companies when they are undergoing an insolvency procedure, and is designed to allow the customer to continue to trade with a view

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