Blog - 09/09/2015
Ban on invoice assignment clauses to be made ineffective
The Department for Business Innovation & Skills has recently published the government’s response to a consultation concerning the nullification of clauses which ban the assignment of invoices. The paper outlines the government’s intention to legislate to nullify such clauses and it is hoped that the new measures will improve cash flow and access to invoice financing for SMEs. Any legislation would be implemented under powers conferred by the Small Business, Employment and Enterprise Act 2015.
Invoice financing enables a company to use its unpaid invoices as security against which it can borrow funds. This method of financing allows a company to receive an injection of working capital which it would otherwise have to wait to receive pending actual payment of its invoice by the customer. Invoice financing therefore aims to provide a solution to the problem of late payment of invoices which continues to be a burden on UK companies. Research carried out by Bacs Payment Schemes Limited estimates that over 75% of all UK companies were kept waiting more than one month beyond agreed remittance terms before being paid.
Companies looking to access invoice financing may be restricted from doing so where their commercial customers contractually bar the assignment of invoices. These barriers will be made ineffective under the government’s proposals which will affect business-to-business contracts, regardless of the size of the business, but will not apply to certain contracts for financial services.
Further details of the new proposals will come to light once the Parliamentary process is started which should be after the summer recess.
The government’s response referred to in this blog, published on 9 August 2015, is available here.
For further information regarding this topic please contact David Kinch, Partner.
If you aren’t receiving our legal updates directly to your mailbox, please sign up now
Please note that this blog is provided for general information only. It is not intended to amount to advice on which you should rely. You must obtain professional or specialist advice before taking, or refraining from, any action on the basis of the content of this blog.
Edwin Coe LLP is a limited liability partnership registered in England and Wales (No. OC326366) and is authorised and regulated by the Solicitors Regulation Authority. A list of members of the LLP is available for inspection at our registered office: 2 Stone Buildings, Lincoln's Inn, London WC2A 3TH. "Partner" denotes a member of the LLP or an employee or consultant with the equivalent standing. Our privacy notice which we are obliged to give you under the GDPR is available here.