Ipso facto reforms: can I enforce my contractual rights?

16 November 2018
James Roland, Partner, Sydney

Ipso facto clauses are contractual provisions that allow a party to terminate or modify the operation of a contract on the occurrence of a specified event.

The Federal Government has introduced reforms which limit the rights of a party to enforce ipso facto clauses in certain insolvency scenarios. The reforms came into effect on 1 July 2018. The reforms are intended to assist in preserving the value of Australian businesses by limiting the ability of counterparties to exercise their ipso facto rights purely on the basis that a company has suffered an insolvency event.

We have prepared this flowchart to assist you in determining whether these reforms will impact upon the exercise of your contractual rights:

Authored by:
James Roland, Partner
Clementine Woodhouse, Associate

This update does not constitute legal advice and should not be relied upon as such. It is intended only to provide a summary and general overview on matters of interest and it is not intended to be comprehensive. You should seek legal or other professional advice before acting or relying on any of the content.

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