Ipso facto provisions to commence 1 July 2018

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The ipso facto provisions in Part 2 of Schedule 1 of the Treasury Laws Amendment (2017 Enterprise Incentives No 2) Act 2017 (Cth) will commence on 1 July 2018.

The provisions amend the Corporations Act 2001 (Cth) to restrict how a party may rely on contractual rights that arise in the event of another party’s insolvency.

The amendments to the Corporations Act will prevent a party from relying on a contractual right that arises because of certain insolvency events, including:

  • making, or announcing an intention to make, a compromise or arrangement under s 411 of the Corporations Act;
  • appointment of a managing controller; or
  • voluntary administration.

The new provisions operate as a stay on the enforcement of the relevant provisions. Self-executing provisions that provide for a contract to automatically terminate due to these events will also be caught.

It is important for Government agencies to understand these changes when drafting and managing contracts. Further information about the changes is set out in Crown Law’s article from 1 December 2017, which is available here.

If you need help reviewing precedent documents or have any questions about termination clauses generally, Crown Law can help.