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Ipso facto clause An ipso facto clause is a contractual provision that allows one party to the contract to terminate or modify the operation of the contract upon the occurrence of a specified insolvency related event (such as the appointment of an administrator, receiver or liquidator) in respect of another party. Examples include: a clause that entitles a landlord to terminate a lease in the event that an administrator is appointed to the tenant; anda…

Proposed exceptions to the stay on enforcing ipso facto clauses now published; public consultation open

The reform

From 1 July 2018, the moratorium on reliance by solvent counterparties on “ipso facto” clauses in voluntary administration, certain receiverships and creditors schemes of arrangement will come into effect (unless it is proclaimed to commence earlier, which is not presently expected).

In summary, the ipso facto moratorium (or stay) will mean that there will be stays on the enforcement of rights against companies the subject of schemes of arrangement, voluntary administration and receivership if those rights have become enforceable only because of the fact of the company becoming subject to such arrangement. This prohibition include, for example, rights to terminate contracts or accelerate payments due by the debtor company due to such occurrences.