It has taken quite a while1 but the Business Contract Terms (Assignment of Receivables) Regulations 2018 (the Regulations)2 were made on 23 November 2018. The intention of the Regulations is to make it easier for small businesses to access invoice finance. The UK government has previously estimated that these new laws will provide a £1 billion long-term boost to the UK economy.

Invoice finance, often described or structured for example as receivables purchase or receivables discounting, supply chain finance, forfaiting, or factoring, typically involves the assignment of receivables and can be a useful financing tool for small businesses, particularly in sectors where such businesses have to wait a long time between issuing an invoice and receiving payment. Commercial contracts, however, often include a non-assignment of receivables clause and the concern is that smaller suppliers are unable to negotiate changes to such provisions.

The Regulations came into effect on 24 November 2018. They will apply to all contracts entered into on or after 31 December 2018. Essentially, the Regulations will nullify terms in business contracts that prohibit or restrict the assignment of receivables, unless the relevant contract is exempt.

Key points to note

  • The Regulations change the law.
  • Subject to certain exemptions, a term in a business contract that prohibits or imposes a condition or other restriction on the assignment of a receivable arising under that contract or another contract between the same parties will be void.
  • The definition of 'receivable' is very broad and covers payments for goods, services or intangible assets (including electricity and data in digital form).
  • The Regulations do not apply to contracts for prescribed financial services3 or to a number of other specific types of contracts, including those relating to land, petroleum licences, certain derivatives, project finance, energy and operating leases.
  • The Regulations do not apply where one or more of the parties is a consumer, or where none of the parties has entered into the contract in the course of carrying on a business in the UK.
  • The Regulations do not apply to contracts entered into in connection with the acquisition, disposal or transfer of an ownership interest in a firm or of a business or undertaking or part of a business or undertaking, provided the relevant contract includes a statement to that effect.
  • The Regulations apply to contracts governed by the laws of England, Wales and Northern Ireland but may also apply to contracts governed by other laws if it appears to the court or arbitrator that the governing law has been chosen to evade the Regulations.
  • Finally, the Regulations do not apply if, at the time of assignment, the assignor (i.e. the business owed the receivable) is a 'large enterprise' or a 'special purpose vehicle'.

An assignor will be a large enterprise unless, broadly, it is a sole trader, partnership or unincorporated association, or a company or LLP which qualified as small or medium-sized under UK law in the last financial year in which it filed accounts (or it is an equivalent body incorporated overseas). A special purpose vehicle is a firm with the primary purpose of holding assets or financing commercial transactions, which in either case involves it incurring a liability under an agreement of £10 million or more.

While over time, the Regulations should cause a reduction in agreements that contain restrictions or prohibitions on assigning receivables, it would be prudent to cite the relevant exemption in the Regulations that parties intend to rely on when preparing agreements that do have such prohibitions or restrictions.


  1. We commented on the second draft of the Regulations in 2017: "Assignment of receivables: a step forward for UK PLC and a step towards international harmonisation".
  2. The Regulations have been made under a power contained in section 1 of the Small Business, Enterprise and Employment Act 2015 (SBBE).
  3. These are regulated agreements under the Consumer Credit Act 1974 and any financial service set out in section 2 of SSBE, including insurance related services and banking and financial services.

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.