With so many of those that take advantage of London Registrars’ business formation services being frequently anxious about accessing finance and maintain their company’s cash flow, they may be interested to read the Government’s response – released in August – on the subject of nullifying the ban on invoice assignment contract clauses.

Some businesses – particularly small firms – have long found that the only assets against which they can borrow are invoices for payment due to them for their provided goods or services. Suppliers therefore often greatly depend on invoice finance. However, it is still possible for a supplier’s commercial customers to contractually bar invoice assignment, which can increase the cost of invoice finance or even prevent access to it at all.

This prompted a provision in the Small Business, Employment and Enterprise Act 2015 to nullify bans on assignment, with the Government having consulted on its initial proposals (Nullification of Ban on Invoice Assignment Clauses), including draft Regulations, in December 2014. 20 responses were received from a broad range of respondents, encompassing invoice financiers, legal practitioners, academics, representative bodies and businesses of various sizes.

The Department of Business, Innovation & Skills (BIS) added that it had held meetings with groups of businesses from across the industrial sectors, including retail and construction, meeting with stakeholders to develop its final proposals after the publication of its Summary of Responses.

Considering the views that it had received, the Government came to several conclusions on exceptions to the ban on invoice assignment clauses including the following. That such a measure should apply only to business to business contracts, as opposed to also including business to consumer contracts, that the nullification should extend to all sizes of business, but should exclude financial services contracts, due to non-assignment being crucial to the functioning of some financial market products. That contracts with interests in land be given the existence of already significant related laws that it did not wish the new regulations to interfere with and finally that no special provisions for supply chain finance arrangements should be created by the exceptions, thus enabling suppliers to opt into supply chain financing arrangements or seek alternative arrangements with other invoice financiers.

In the words of BIS in its response document, “These proposals will directly benefit businesses, and will contribute to making the UK the best place in the world to start and grow a business. We will consequently aim to begin the Parliamentary process after the summer break in order to commence these proposals as soon as possible.”