Termination clauses in supply contracts Section 14: Protection of supplies of goods and services Section 233B: Protection of supplies of goods and services
A new section 233B is inserted into the Insolvency Act 1986. It prohibits reliance on termination and other clauses in contracts for the supply of goods and services that would otherwise apply when a company enters the following ‘relevant insolvency procedure’:
	the company enters a (new-style) moratorium as set out in Part A1 of the Insolvency Act 1986
	the company enters administration;
	an administrative receiver is appointed, other than in succession to another administrative receiver;
	a CVA proposal is approved under Part I of Insolvency Act 1986;
	a company goes into liquidation;
	a provisional liquidator is appointed, other than in succession to another provisional liquidator; or
	a court order is made under section 901C(1) of the Companies Act 2006 (order summoning meeting in relation to compromise or arrangement)
	A provision of a contract for the supply of goods or services, which would entitle the supplier to terminate or do "any other thing" in respect of that contract because the company enters a relevant insolvency procedure, ceases to have effect. Where an event has occurred that would have allowed a supplier to terminate a supply contract before the company entered a relevant insolvency procedure but that right has not been exercised, it is suspended once the company enters the relevant insolvency procedure. If the supplier’s right to terminate arises after the insolvency procedure begins (for example, non-payment for goods supplied after that time) then this right is not prohibited.
	Where a provision of a contract ceases to have effect, or is suspended under this section the supplier may terminate the contract in the following circumstances:
	where the office-holder, as defined under this section, or company (as applicable) consents to the termination of the contract, or
	with the permission of the court, where the court is satisfied that the continuation of the contract would cause the supplier hardship.
	This provides safeguards for suppliers who may terminate the contract in these circumstances.
	A contract is only subject to section 233B if it is a contract for the supply of goods and services. Agreements such as licenses, property leases and agreements for the sale of land or property are not characterised as contracts for the supply of goods and services, therefore they are not covered by the provisions of 233B. A sophisticated lease/license/sale agreement may contain an element of provision for the supply of goods and services; this element would be covered by 233B. The remainder of the lease/license/sale agreement will not be affected.