Contracts, agreements, arrangements and rights to which the stay on enforcing ipso facto clauses does not apply; final Regulations and Declaration published
The reform and its progress
From 1 July 2018, the stay on reliance by solvent counterparties on “ipso facto” clauses in voluntary administration, certain receiverships and creditors' schemes of arrangement will come into effect. A number of the exceptions to that stay - a critical feature of this reform, particularly for financiers and insolvency practitioners - have now been legislated, after a consultation period conducted by Treasury earlier this year. An overview of those exceptions is set out below.
You can read further detail on this reform (and the insolvent trading 'safe harbour' defence) in our earlier client note published in September 2017, available here. Background to the consultation process on the proposed exceptions to the stay is set out in our April 2018 alert, available here.
While there is now certainty as to the arrangements and rights that will not be subject to the stay on ipso facto provisions, the market will need time to digest them and come to an understanding of the practical impact of the exceptions to the stay, and the stay itself, on particular transactions and documentation.
In the meantime, if you have any queries in relation to the new ipso facto reform and the impact it may have on your business or contractual arrangements, please get in touch with your usual Baker McKenzie contact, or one of the contacts below.
Contracts, agreements, arrangements and rights excepted from the ipso facto stay
Set out at the end of this alert is a summary of the excepted arrangements set out in the regulations and the excepted rights set out in the declaration. Updated explanatory statements were released with the final regulations and declaration - and they provide detailed commentary setting out the reasons for the inclusion of the various exceptions, and accordingly are a good source for assistance when interpreting the regulations and declaration.