The ipso facto provision is a statutory override of the insolvency termination provision in a contract. It is also worth reminding yourself of termination provisions in key licences and, for new licences, considering whether you want termination rights to extend to events prior to the commencement of an insolvency process (such as cash flow or balance sheet insolvency). Note that if a party is caught by these provisions, they are not entitled to require that the company pay any outstanding charges as a condition of ongoing "supply". Our personal approach, technical expertise, local knowledge and global network enable us to deliver an experience that other professional service providers find hard to match. The Corporate Insolvency and Governance Act (CIGA), which came into force on 26 June 2020, reverses this position in relation to contracts for the supply of goods and services meaning that such contracts cannot be terminated simply because of a counterparty entering an insolvency process. Nina Goodyear, Louise Popple, by The Bankruptcy Code prohibits enforcement of such provisions in executory contracts and unexpired leases of the debtor (§ 365 (e) (1), Bankruptcy Code). if a post-insolvency event of default occurs giving rise to a new event of default, such as non-payment. ​Scroll through these slides to access the personalised features of your Dashboard. It will not protect, for example, an insolvent company's customer contracts. There are also some temporary COVID-19 exemptions for small suppliers. It is intended to assist an insolvent company in preserving its business critical contracts with a view to facilitating a rescue of the company or its business. The concern with these provisions is that allowing counterparties to terminate contracts in such circumstances can have a significant impact on the ability of a company to implement a successful restructuring or rescue (of either the company or the business) which may adversely impact creditors. Having a deep understanding of our clients' industries and the challenges that they face is key to delivering excellent legal advice. Banks are only be affected to a limited extent, whilst the impact on a supplier with a large market capitalisation which is bound to long-term contracts will be significant. We are recognised as a foremost authority in law and go-to organisation for legal expertise. The PDF server is offline. “ipso facto”とは、事実それ自体によって、何らの手続きもなしにただちにというほどの意味です。例えば、次のような条項はipso facto clause（ipso facto条項）と呼ばれることがあります。 When considering the extent to which the new ipso facto provision fetters a party's contractual right to terminate in the event of a counterparty's insolvency, the identity of the parties to the contract in question and the exact nature of the agreement between them will be crucial. An ipso facto clause is one which permits a party to a contract to terminate that contract as a result of the counterparty entering an insolvency process. In the context of insolvency Marie Keup. Material personally selected by your relationship manager for your interest. An ipso facto clause is one that allows a party to terminate or modify the operation of a contract when a specific event occurs, even if the other party is in full compliance of its contractual obligations. In relation to the scope of "supplies of goods and services" the government noted: "The Government intends that contractual licences, such as for use of software or patents, will be covered by the ‘ipso facto’ provisions, acknowledging the importance of these to certain businesses and sectors.". Dr. Dirk Wieddekind, Dr. Benedikt F. Flöter, by Licensors of intellectual property rights may soon be unable to terminate licences where the licensee has gone into an insolvency process. You may unsubscribe at any time. The provision applies in the event that a company that is party to a contract for the supply of goods or services enters a "relevant insolvency procedure", defined as a moratorium, administration, administrative receivership, a company voluntary arrangement, liquidation, provisional liquidation or a restructuring plan. Ipso facto 1 clauses allow a party to terminate or modify the operation of a contract (including accelerating payment) upon the occurrence of certain events of default such as a counterparty's insolvency or restructuring. Almost all IP licences will contain termination provisions of this nature and parties will therefore need to consider whether they are impacted by this legislative reform. Last (but not least), the ipso facto provision does not provide for circumstances in which an office holder does not want to continue taking supply of certain goods or services (unlike its Chapter 11 counterpart). Our global industry teams work together to share knowledge and experience so that we can provide our clients with insightful, innovative commercial advice. For more information on how we use cookies, or how to change your browser settings, please see our Cookie Policy. By signing up, you agree to receive commercial messages from us. While the extent of what is caught is somewhat unclear, it is arguable from the government commentary above that these provisions will apply to the vast majority of licences of intellectual property rights, including bare licences. Given the narrow scope of the CIGA ipso facto provision, the Belmont case would still be decided in the same way, thereby demonstrating a continuing difference between the two regimes. Notably, the CIGA does not include a scheme of arrangement in this list notwithstanding that its close counterpart, the new restructuring plan is included. However, forewarned is forearmed in these circumstances and allows you to make decisions including considering terminating before matters are potentially taken out of your hands. Adrian Toutoungi, Charlie Adams, by The ipso facto measure will apply when the recipient of the supply enters a range of insolvency procedures, including for example the CIGA's new moratorium and restructuring plan, in addition to administration and liquidation (among others). We bring together lawyers of the highest calibre; progressive thinkers driven by the desire to help our clients achieve business success. To the extent that the prohibitions apply to a particular IP licence, the licensor will only be able to terminate the licence where: The position on this is not clear. et seq. The ipso facto provision is therefore narrower than its US Chapter 11 counterpart, which generally applies to all executory contracts (subject to carve-outs).

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