In our last 5 Minute Fix, we mentioned the 1 July commencement of amendments to the Corporations Act that will impose a statutory stay on a party's ability to exercise rights, including to terminate an agreement if a prescribed insolvency event occurs.
The regime has wide-ranging implications, particularly where innocent parties may be required to continue to perform significant obligations during the stay, for example under development agreements, construction contracts or agreements for lease.
Treasury has released the Exposure Draft of the Corporations Amendment (Stay on Enforcing Certain Rights) Regulations 2018 and the Corporations (Stay on Enforcing Certain Rights) Declaration 2018 setting out the types of contracts and rights which will be excluded from the statutory stay.
The proposed exemptions are broader than expected, and there may be further changes before the final Regulations are released. The types of contracts or rights currently proposed to be exempted from the stay include government licences or permits, the sale of a business, contracts with an SPV as a party, and the variation, assignment or novation after 1 July of a contract or agreement entered into before that date.
The SPV exemption (as an example) is intended to exclude "complex arrangements between sophisticated parties" and raises the prospect of parties structuring transactions through SPVs to fall within the exception.