Don't flip out! Government proposals on ipso facto clauses could void securitisation flip clauses

The Australian Government is proposing to constrain certain "ipso facto" clauses ‒ a move which could make flip clauses void. The closing date for submissions is Friday 27 May 2016.

How would changes to ipso facto clauses affect securitisation?

An "ipso facto" clause is a contractual provision that allows a party to terminate/vary the contract in specific circumstances. The Government is taking aim at ipso facto clauses that allow a party to terminate or amend any contract by reason only of an "insolvency event". The measures aim to facilitate an orderly restructure of a failing company and the concern is that those types of ipso facto provisions pull the rug out from under the troubled company.