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It remains to be seen if the Singapore market will similarly move to include in guarantees a provision that upon the occurrence of an ipso facto event (i.e. 1506 0 obj <> endobj Certain contracts are excluded from the restriction (see the section "Excluded contracts" below).

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Level 32, MLC Centre

Any termination based on non-payment or other breaches should be carefully documented (e.g. It is important to note that the ipso facto changes do not necessarily mean that you can never rely on a termination for insolvency clause (for example, for termination which occurs prior to a formal insolvency process being entered into); it simply means that you need to carefully consider all circumstances prior to relying on such a clause. 0000012702 00000 n 1506 40

0000011323 00000 n The Ministry of Law rejected the market participants' argument that financial institutions ought to be given sufficient autonomy to determine whether to enforce their ipso facto rights on the basis that they are reputable, reasonable and responsible lenders which will benefit from the rehabilitation of an ailing company. 0000115019 00000 n

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It is not designed to express opinions on specific cases. Ipso facto clauses may operate to reduce the chance of a successful restructure, destroy the value of the business and prevent its sale as a going concern.

Fax +61 2 8241 5699, ENQUIRY TYPE* If you think your counterparty has solvency issues, there are some threshold issues to consider before thinking about whether you are caught by the stay on exercising your termination rights. 19 Martin Place

Nigel Yee (White & Case, Legal Assistant, Singapore) contributed to the development of this publication.

This publication is provided for your convenience and does not constitute legal advice.

If you try to enforce an unenforceable right (e.g.
The impact of the ipso facto restriction on lenders can be mitigated through the operation of other clauses within the loan agreement as the restriction only renders the ipso facto provisions (such as accelerating due solely to an event of default relating specifically to the "proceedings" referred to in section 440 of the IRDA or to the company's insolvency) unenforceable7. If lenders are unable to accelerate against the borrower, and thereby make the loan due and payable, the lenders may similarly not be able to claim against the guarantor until there is a failure by the borrower to make a scheduled payment of principal or interest. ipso facto definition: 1. used to say that it is reasonable to state or believe something based on facts that are already…. Brisbane QLD 4000 0000002183 00000 n In both cases, the scope of the exclusion of margin-lending agreements is fairly limited to that set out under the respective legislation. Melbourne enquiryBrisbane enquiryCanberra enquirySydney enquiryNewcastle enquiry, Level 2, 16 Telford Street This means that these reforms are wide reaching, noting however, that there are a series of contracts and rights that are excluded from the reforms (discussed further below).

In light of the introduction of ipso facto restrictions in Australia, the APLMA10 proposed suggested wording to be included in guarantee clauses to enable the lenders to claim under the guarantee and require the guarantor to pay the full amount of the loan despite the stay on enforcement in respect of the borrower. that you have to give new advances of money or credit. GPO Box 2924 There is no stay where the counterparty goes straight into liquidation (unless it follows voluntary administration).

Do these clauses allow you to make it clear if you want to terminate for reasons other than insolvency (e.g. 0000003209 00000 n Prior results do not guarantee a similar outcome. 0 It does not render the entire agreement or other clauses unenforceable. These are some simple steps that will assist your organisation to better address any risks posed by the new ipso facto provisions. 0000039887 00000 n

Does their credit report show they are subject to court action or otherwise indicate poor performance? The following example was provided during the second reading of the Insolvency, Restructuring and Dissolution Bill: a developer and a main contractor enter into a contract for the construction of a building, where the contract contains ipso facto clauses that permit termination of the contract either on (1) the commencement of restructuring proceedings or (2) the failure to meet construction milestones. startxref In order to assist distressed companies in preserving their critical business contracts with a view to facilitating a rescue of the company, section 440 of the IRDA restricts a party from: (a)    terminating, amending, or claiming an accelerated payment or forfeiture of a term under any agreement; or. The Ministry of Law reasoned that there are various safeguards in place (such as the ability to apply for relief on the basis of significant financial hardship under section 440(4) of the IRDA) and the ability to exercise contractual rights where the borrower breaches a separate contractual obligation, for example failure to repay loan obligations. In Singapore, the Ministry of Law had considered an exception for loan agreements, and ultimately decided such an exception would be too broad and unjustifiable. 3 See, e.g., Toronto-Dominion Bank v Ty (Canada) Inc 42 CBR (4th) 142, 2003 CanLII 43355.

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The ipso facto reforms also apply to any right that is enforceable for a reason that, in substance, is contrary to the legislation. Are they requesting payment plans or extensions?

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Attorney Advertising. 7 Section 440(3) of the IRDA. By staying the operation of ipso facto clauses, a genuine restructure is more likely to succeed.

We strongly encourage businesses of all types to familiarise themselves with the impact of the ipso facto law reform, review their contracts to see how they will be impacted by the new 0000214077 00000 n 6 "Debenture" is defined in the IRDA by reference to the definition in the Securities and Futures Act (Cap. 0000046506 00000 n

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The consolidation of all personal and corporate insolvency and debt restructuring legislation into a single statute, along with other legislative changes, seeks to further strengthen Singapore's position as an international debt restructuring hub. 0000008675 00000 n Melbourne VIC 3001 <<7C5D4E349C72B140BD4D916BC57170FC>]/Prev 976760/XRefStm 1791>> It may be worthwhile if you provide goods or services on credit to sign up to the free notification service provided by ASIC, which will notify you when winding up action is taken against a company and when various forms are lodged with ASIC on behalf of the company. This is the second edition of McCullough Robertson’s six part Commercial Law Masterclass series. that you cannot terminate a contract for other reasons (e.g. 0000003094 00000 n This means that, in addition to considering whether to amend your contracts, it is important for you to also consider what practical steps to take to manage your contracts. If a company's business relies on contracts that contain ipso facto clauses, that company will have difficulty commencing or entering into a restructuring process because of the risk that counterparties would by that reason alone be able to terminate those contracts. 9 Section 440(2) of the IRDA. 0000083092 00000 n The ipso facto stay is likely to come into operation on 1 July 2018 and will impact a very broad range of contracts with corporate counterparties that are entered into on or after that date.
Newcastle enquiryBrisbane enquiryCanberra enquiryMelbourne enquirySydney enquiry, Level 9, 2 Phillip Law Street Notably the definition of "debenture" is not sufficiently wide to cover a debenture in the loan context. 0000001791 00000 n As a result, the chances of the company continuing as a going concern can be undermined through the termination of key contracts with suppliers, service providers or financiers. Robustness of commercial supply chains of toilet paper was not headline news. Note however that the IRDA provides that the restriction does not require the lender to make further advances of money or credit (i.e.

We’ll wrap up the series with a Masterclass in Brisbane in early 2019 where you can ask our expert panel any questions. Level 11, 66 Eagle Street 0000008060 00000 n *��F@1)�e����C�4�d`�[ـ+���"��� U� �#X�4� �.1��\wX0�edb�u�oP�!Cc����j.

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However, note that if the guarantor is itself also subject to the proceedings or insolvent, the lender may also be restricted from enforcing against the guarantor. 0000207386 00000 n 0000009508 00000 n In addition, the ipso facto provisions do not explicitly prevent a lender from making a claim against a guarantor under a guarantee. the loan can be drawstopped).9. This publication is protected by copyright. 0000023573 00000 n 0000082972 00000 n New regulations for closing council meetings have commenced, The 2020 Queensland State Election: Misleading Electoral Advertising, Queensland duty exemption introduced for small business restructures. On 1 July 2018, the ‘ipso facto’ reforms to the Corporations Act 2001 (Cth) (Corporations Act) took effect. Ipso facto: I know the law has changed, but what does it mean for me?

5 Note that in Canada the equivalent exclusion applies to a margin loan in so far as it is in respect of a securities account or futures account maintained by a financial intermediary and in Australia the equivalent exclusion applies to a contract, agreement or arrangement that is, or is directly connected with, a margin lending facility (which has a specific definition under the Corporations Act 2001 (Cth)). separate clauses, to ensure termination for non-payment and any other defaults are not caught by the stay)? xref

In contrast, the protections offered in the UK and Australia are narrower – Australia provides an exception for syndicated loans while the UK restriction only applies in respect of contracts for the supply of goods and services. From when a receiver or managing controller is appointed, or exists, for the whole or substantially whole of the company’s property.

An expression more popular with comedians imitating lawyers than with lawyers themselves.

Under the terms of a typical guarantee clause, a lender may only claim for amounts that are due and payable. The restriction does not have retroactive effect. These reforms are intended to protect companies experiencing financial difficulties that are undergoing a genuine restructure. 0000001122 00000 n Also consider if your standard definition of ‘Insolvency Event’ needs to be updated. Our next article in this series will focus on duty and taxes and discuss some of the tips and traps to be mindful of during the initial stages of planning an acquisition. Whilst not entirely clear given the reference in section 440(3) to "[a]ny provision in an agreement that has the effect of providing for, or permitting, anything that, in substance, is contrary to this section is of no force or effect", the provisions do not explicitly preclude lenders from making a claim against a guarantor under a guarantee.

It is intended for information purposes only and should not be regarded as legal advice. In this article we discuss what the recent ipso facto reforms mean for you and provide some practical techniques that can be employed to manage your risk This is because once they enter into one of the trigger insolvency events mentioned above, it is too late to exercise a contractual right such as termination by reason of the counterparty entering into the insolvency process or its financial position. This note highlights the new restrictions on ipso facto provisions effected by the IRDA, which will be of particular interest to loan market participants.
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