Stay for ipso facto events – one year on

On 1 July 2018¹, provisions were introduced into the Corporations Act 2001 (Cth) (Act),² known as the 'Ipso Facto' reforms, which stop a party from exercising its contractual right to suspend or terminate a contract if the counter party is subject to certain insolvency regimes (including administration, receivership and schemes of arrangement but not liquidation). This stay extends to financiers accelerating their loans and terminating the loan agreement for reason of the relevant insolvency related trigger events unless a specific exemption applies.

In the twelve months following the introduction of these provisions, financiers, their advisors and industry groups have settled on generally accepted approaches to dealing with the stay for ipso facto events in certain finance documents. This article will take a look at three key ways in which finance documents and processes have been updated in response to this legislation. A separate article in relation to the safe