Debt collection commentary by Darrin Mitchell, Senior Associate at Matthews Folbigg in the Insolvency, Restructuring and Debt Recovery Group.
Following on from our article on the Safe Harbour provisions recently introduced, Credit Managers should be also be aware of the proposed additions to the Corporations Act 2001 (“the Act”) that attempt to create a further reforms for companies in financial stress.
The reforms are known as the “ipso facto” provisions. Don’t let the Latin term confuse you as it simply means “by the mere fact”.
An ipso facto clause is commonly the phrase used for a term in a contract that should a certain event occur, then another act can follow. Credit Managers would be aware of their own terms of credit and goods/services supply which (should) include ipso facto clauses. These clauses can include allowing for cessation of the agreement, or at least some modification, should an insolvency event occur that affects the solvency of the customer, such as liquidity issues leading to administration and/or liquidation.