Some businesses can be notorious and take a long time to pay invoices – these are usually big companies.
Smaller companies therefore have trouble with cash flow, leaving them to suffer in silence because they may not want to kick a fuss for fear of losing a major client.
One remedy to this is through invoice financing – transferring rights to receive money owed to a bank or finance company in exchange for most of the value of the invoice upfront.
Some bigger companies however can choose to ban smaller companies from using this as an option of debt recovery when entering into trade agreements.
The good news is with effect from early 2016, the government has outlawed bans on clauses in terms and conditions which state companies cannot assign their outstanding invoices to banks or finance companies.
The government’s proposal to make ineffective bans on invoice assignment by debtors won’t apply where:
- the invoices relate to a business-to-consumer contract (rather than business-to-business)
- they relate to financial services contracts
- the contracts relate to interests in land. This is because there are already significant laws in place concerning these types of transactions
- assigning the debt might breach the debtor’s commercial confidentiality
- the transaction is between businesses not under English contract law, or if it is, neither business operates within the UK.
It possibly is about time to review existing contracts – we can assist you with this.
You can also call us on 01909512120 or email paul@loftusstowe.com