The "ipso facto" prohibition in the Corporations Act applicable to corporate insolvency

An ipso facto clause is a contractual provision that allows one party to the contract to terminate or modify the operation of the contract upon the occurrence of a specified insolvency related event (such as the appointment of an administrator, receiver or liquidator) in respect of another party.

From 1 July 2018, a moratorium on reliance on “ipso facto” contractual clauses triggered by the counterparty becoming subject to certain specified formal corporate insolvency events came into effect.

On 1 January 2021, the scope of the moratorium was further amended to reflect the new restructuring regime in Part 5.3B of the Corporations Act.

In this publication:

• Ipso facto clauses
• Stay on enforcement of ipso facto rights
• Application of the stay
• Exceptions to the stay
• Ipso facto decision tree
• Exclusions from the ipso facto provisions inserted into the Corporations Act 2001 with effect from 1 July 2018
• The kinds of rights which are excluded
• The kinds of rights which are excluded in specified circumstances