The Small Business, Enterprise and Employment Bill is expected to produce a huge boost in SME receivables finance. Its key measure provides for regulations to override anti-assignment clauses in SMEs' contracts for the sale or supply of goods or services to businesses. This should make it simpler for SMEs to sell their debts.
The Bill has been progressing rapidly through Parliament and there is every chance it will become law before the general election. However, the resulting Act will not itself override restrictions on assignment. That will only happen when the Government issues regulations under the Act, which seems unlikely before the election. But this is a bipartisan measure, so whoever is in office after the election is likely to introduce the regulations.
In the meantime, the Government is consulting on draft regulations. Two draft provisions are of particular interest. The first provides that the regulations will not override terms that give rise to a duty of confidentiality. A basic confidentiality clause is not necessarily an insurmountable barrier to a receivables purchase. The receivables seller can act as collection agent, for example, of redacted invoices. But SME debtors, who can no longer rely on anti-assignment provisions, might start insisting on more elaborate clauses that make it impractical to finance the receivables they owe.
The second provision is aimed at exempting clauses that only permit selling receivables into buyer-led supply chain finance programmes. The Government believes that, without this protection, pre-existing buyer-led programmes will no longer be viable.
The draft regulations and other consultation documents are available via Invoice finance: nullifying the ban on invoice assignment contract clauses.
These documents include a response form and other details for responding to the consultation. The final date for responding is 11 February 2015.
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