Assigning Receivables Update

United Kingdom
In 2015 the UK Government passed an Act which included provision to prevent contracting parties prohibiting the ability of the parties to assign debts which are due to them under a contact. The aim was to make it easier for SMEs to raise finance against those book debts.

Despite indications that the prohibition would come into effect in early 2016 there is still no official timescale for the prohibition to become effective only an informal indication that the regulations will be implemented in Autumn 2016.


The Small Business Enterprise and Employment Act 2015 (the “Act”) was passed on 26 March 2015 with the aim of tackling contractual barriers that exist in respect of SMEs having access to finance arrangements. In late 2015 the Government published The Business Contract Terms (Restrictions of Assignment of Receivables) Regulations 2015 (the "Regulations") with an expectation that these would become law in early 2016. There remains no timetable for their implementation.

The legislation aims to help SMEs obtain finance by prohibiting restrictions on the assignment of receivables which are often found in commercial contracts involving SMEs. Assignment clauses allow for businesses to assign the right to future payment of an invoice to a finance provider in exchange for a loan up to the full value of the invoice. This assignment helps to facilitate cash flow as SMEs may use invoices that they have issued to customers as security for further finance.

The provisions apply to contracts governed by English Law and the Scottish Government will be required to bring equivalent provisions into effect if they wish contracts governed by Scots law to obtain equal treatment.

The provisions do not apply to consumer contracts, contracts relating to land, contracts for financial services or supply chain contracts.


In advance of the Regulations becoming effective finance providers should consider their position in relation to whether they will be happy to rely on the Act without the need to consider on a case by case basis whether debts can be assigned.

It is not yet clear how confident finance providers will react to the new legislation. There is a general feeling that at least until a market practice emerges finance providers may insist on express consents or waivers or a formal acknowledgment that the restriction of assignment has no effect in a particular transaction.