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:
James Roland, Partner
Clementine Woodhouse, Associate