Assignment Of Business

Assignment Of Business-60
This has led some to argue that the common law should recognise all assignments of receivables notwithstanding prohibitions on assignment, at least as between the assignor and the assignee.Arguably, this approach would balance the legitimate interests of all parties. Where they apply, the Regulations will make it easier for SMEs to assign their receivables and to raise finance.

Draft legislation finally appeared in 2017, but was withdrawn following criticism by the Loan Market Association and others.

The final form of the Regulations addresses some of the criticisms, but adds complexity in what is already a complex area of the law.

The Regulations add an additional layer of complexity to the law.

In practice, the question that assignees ask their lawyers is very simple: what action can they take to recover?

For example, they would not restrict the effectiveness of a negative pledge or a restriction on the disposal of receivables contained in a financing document with a third party lender.

The term "assignment" is not defined in the Regulations and, assuming it has its normal legal meaning, does not include the creation of a charge or trust.

Therefore, the fundamental question of whether the debtor should pay the supplier or the assignee remains determined by the governing law of the contract, but subject it seems (at least as far as the English courts are concerned) to the mandatory provisions of the Regulations.

The Regulations only affect prohibitions, restrictions and conditions on assignment contained in the contract under which the receivable arises or another contract between the same parties.

Therefore, it appears that the Regulations do not apply to the creation of a charge or a trust. As a result of the SME Test and the exclusion of certain types of contracts, there will be many situations in which the Regulations are not relevant to the assignment of a receivable.

Where the Regulations do not apply, the current law recognises the effectiveness of contractual prohibitions on the assignment of receivables.

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