A proposal to remove the ban on invoice assignment clauses in business to business contracts, was included in a Department for Business, Innovation and Skills (BIS) consultation which closed on 11 February.
The department assessed a proposal to nullify the ban on invoice assignments.
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Invoice finance allows a business to assign the right to future payment of an invoice, known as trade receivable, to a finance provider in exchange for a loan up to the full value of the invoice.
Where businesses encounter bans on invoice assignment clauses they can still often obtain invoice finance by seeking waivers or work-arounds. But this can expose businesses to higher interest and administrative fees.
BIS proposed to remove bans on invoice assignments to business to business contracts only.
It did not suggest the removal of bans in financial service contracts. The department wrote: "We have no evidence to indicate that the problems encountered by small and medium sized enterprises accessing invoice-based finance extend to contracts for financial services. In fact we understand that some financial products would not be able to function without a ban."
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By GlobalDataThe consultation highlighted the need to focus regulation on trade receivables, therefore it was proposed that bans should remain on tenancy agreements and contracts creating interests in land.
In addition, BIS supported that the nullification should not extend to exclusivity clauses for supply chain finance , as it would give security to supply chain finance providers on beneficial terms to both suppliers and debtors.
In order to protect the debtors, the department proposed that bans should not be removed to clauses in contracts which protect commercial confidentiality.
