IT suppliers may not be able to terminate on customer insolvency Under Section 233 of the Insolvency Act 1986, suppliers of "essential supplies" (gas, water, electricity and communications services) may not demand payment of pre-insolvency debt as a condition on further supply).
The Government is considering extending this protection to IT supplies on the basis that they are equally critical to the continued operation of an insolvent business. Section 92 in the Enterprise and Regulatory Reform Act 2013 gives the Government the power to extend the list of essential suppliers to include supplies: "for the purpose of enabling or facilitating anything to be done by electronic means". The Government will also have the power to render void any contractual terms that allow providers of essential supplies to withdraw supply or alter the terms of a supply contract on account of certain insolvency circumstances. Any extension will be undertaken by way of secondary legislation, following consultation by the Government.
Two potential issues. The first is what happens when the IT supplier is not situated within the UK (utility suppliers always are). The second is whether an IT supplier will be entitled to object to assignment of its contract to a third party as part of a pre-pack sale.
The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.
