EXPLANATORY NOTE
(This note is not part of the Regulations)
These Regulations deal with terms in contracts to which the law of England and Wales or the law of Northern Ireland applies which prohibit or restrict the assignment of receivables. A receivable is a right to be paid under a contract for the supply of goods, services or intangible assets. Various types of contract are excluded from the scope of the Regulations.
The Regulations, which are made under section 1 of the Small Business, Enterprise and Employment Act 2015 do not cover financial services contracts: see section 1(3) and (4) of that Act. ‘Financial services’ are defined in section 2 of the Act. Some similar contracts that do not fall under this definition, such as operating leases and derivative contracts, are also excluded from the Regulations.
Regulation 2(1) provides that a term has no effect to the extent that it prohibits or imposes a condition, or other restriction, on the assignment of a receivable. Regulation 2(2) specifies a particular category of contractual terms which, by their impact on an assignee, would have the effect of imposing a condition or other restriction on the assignment. Regulation 2(3) sets out the information that the assignee must be able to obtain in order to determine the validity or value of the receivable or their ability to enforce it.
A contractual right of set-off which the debtor could have exercised against the assignor prior to the assignment or but for the assignment is not a term that imposes a condition or other restriction on the assignment of a receivable for the purposes of these Regulations.
The Regulations do not apply if the person to whom the receivable is owed is a large enterprise or a special purpose vehicle. These terms are both defined in regulation 3. For these purposes a large enterprise is an enterprise which is not a sole trader, partnership or unincorporated association or a company or LLP qualifying as small or medium-sized under the relevant legislation (including bodies incorporated overseas which would so qualify if incorporated in the U.K.).
Regulation 4 excludes various types of contract from the scope of the Regulations, such as where none of the parties has entered into the contract in the course of carrying on a business in the United Kingdom. A contract is also excluded if it has been entered into in connection with or for the purpose of the transfer of all or part of a business (including transitional services agreements, which are contracts to provide services in order to facilitate the transition). For the latter exclusion to apply, the contract must include a statement to that effect.
A full regulatory impact assessment of the effect of these Regulations on the costs of business and the voluntary sector is available from the Department for Business, Energy and Industrial Strategy, 1 Victoria Street, London, SW1H 0ET or from www.gov.uk/beis.