Right to terminate contracts for insolvency

"Ipso facto" clauses are clauses which allow a party to terminate a contract if the other party suffers an insolvency event. These provisions are enforceable even if the insolvent party has otherwise continued to perform its obligations under the contract.

Some important reforms came into force on 1 July 2018 which restrict the operation of ipso facto clauses. The right to terminate (or to enforce security) is now not enforceable to the extent that it is triggered by a party suffering an insolvency event (such as entering into administration, appointing a receiver, or implementing a scheme of arrangement). The non-enforcement period lasts from the date of appointment of the receiver or administrator until the administration or receivership ends.