Treasury has released draft regulations and a draft declaration for public consultation. The regulations and declaration support the stay on enforcement of ipso facto clauses against relevant entities. Ipso facto clauses allow parties to enforce a right, and terminate or amend a contract, when their contractual counterparties have entered into formal insolvency, regardless of the counterparties continued performance of their obligations under the contract.
The exposure draft of the Corporations Amendment (Stay on Enforcing Certain Rights) Regulations 2018 and the Corporations (Stay on Enforcing Certain Rights) Declaration 2018 support the reforms in the Treasury Laws Amendment (2017 Enterprise Incentives No. 2) Act 2017 (the Act) which received Royal Assent on 18 September 2017.
The draft regulations and declaration recognise that in some circumstances it is necessary or desirable for ipso facto clauses to continue to operate, for example, where there is an established market mechanism already in place or where it would be a commercial nonsense for an ipso facto clause to be stayed. As a result the draft regulations and declaration include certain exemptions to the ipso facto stay.
The public’s views are sought on the regulations and declaration. Submissions are due by 11 May 2018. See Treasury’s website. See also Minister for Revenue and Financial Services, the Hon Kelly O’Dwyer’s media release.