How to Test Whether a Ban on Transferring Book Debts Is Ineffective

Test a restriction on transferring book debts by how far the words go, not by deleting the clause. Under the Business Contract Terms (Assignment of Receivables) Regulations 2018, a term has no effect only so far as it restricts assignment of a receivable. Check the date, name the debt, test the supplier on the transfer day, and check the exclusion list before you mark anything.

The blanket ban is ineffective only so far as it restricts assignment of the receivable. The rest of the clause stays on the page. If the date, the supplier at the moment of transfer, or the exclusion list fails, leave the limb unmarked.

Heulwen, in operations at Aeron Slate Ltd, has an English-law goods supply with Severn Pantry Ltd dated 4 March 2024. Clause 14 bars assignment, transfer, subcontracting, a charge, a trust, or any other dealing with a right or obligation without consent. Clause 18 bars disclosure of terms, pricing, invoices, and commercial information. Clause 11 lets the buyer set off sums under this agreement or any other contract between them. Unpaid INV-441, 12 September 2026, is 1,800 sets of SC-12 at £2.40, £4,320 excluding VAT, due 12 November 2026. On 14 October 2026 someone treats clause 14 as wholly void. The notice to Cleddau Invoice Finance Ltd is wanted on Friday 23 October 2026.

Disclaimer: Checkory provides AI support, not legal advice. Consult a qualified lawyer for binding decisions.

When does the contract date stop this test?

SI 2018/1254 was made on 23 November 2018 and came into force the next day. Commencement is not the application date. The Regulations apply to a term in a contract entered into on or after 31 December 2018. An earlier date means you stop.

The explanatory note, which is not part of the Regulations, mentions the law of Northern Ireland. Regulation 1 is the rule you record. A typical mistake is to treat 24 November 2018, the day after the instrument was made, as the day every older ban stopped applying.

What do you name as the receivable?

Name one right to be paid, and leave performance and subcontracting out of that name. A receivable is a right, whether or not earned by performance, to be paid any amount for goods, services, or intangible assets.

INV-441 is that right: 1,800 sets of SC-12 at £2.40, £4,320 excluding VAT, due 12 November 2026. Regulation 1 defines it. For example, clause 14’s subcontracting words are not this debt. Fieldfisher (26 February 2019) treats a ban that does not split payment from performance as still effective against assigning the work, and ineffective against assigning the receivable.

How do you test the supplier on the transfer day?

Test the supplier on the transfer day against the last accounts filed before that day. If the supplier is a large enterprise or a special purpose vehicle, regulation 2 does not apply and the term does have effect. If the draft has no accounts, write not shown, and the notice waits.

For a company, sections 381 to 384 or 465 to 467 are the tests, and it is outside a large group. Section 382 is met by two or more of turnover, balance sheet, and employees, at not more than £15 million, £7.5 million, and 50. Section 465 is two or more at not more than £54 million, £27 million, and 250. These are not this company’s figures. SI 2024/1303 applies the new ceilings to years beginning on or after 6 April 2025. The year to 31 March 2026 began on 1 April 2025, so they do not apply to that year. ICAEW says the first March year end on the new thresholds is 31 March 2027.

Thirteen people is not the filed average. Regulation 3 describes a special purpose vehicle that mainly holds non-trading assets or finances transactions, with a liability under an agreement of £10 million or more. Guarantees count in full. This supply is not one.

Which exclusion boxes belong on this goods supply?

Tick a regulation 4 box only when this contract matches the box. Financial services, land, petroleum, and a hire for rent are on the list. The evasion rule is a separate test, not an extra box.

Regulation 4 covers financial services, land, a non-business party, no UK business, national security, petroleum, a business transfer with a statement to that effect, specified derivatives, project companies, nuclear decommissioning, and a hire for rent (an operating lease in the note). A street address is not land. A national-security certificate from the Secretary of State is conclusive.

The law of Scotland is not on that list. One oil-and-gas note includes it. Regulation 1(4) is the separate test, and it matters only if that law, or a law outside the United Kingdom, was chosen wholly or mainly to evade the Regulations. This supply already chooses English law. Write none.

Which words do you mark, and which stay unmarked?

Mark only words that restrict assignment of the SC-12 receivable. Leave a charge and a trust unmarked. The effect goes only that far, including a receivable under another contract between the same parties.

Ashfords says the regulations do not nullify the contract or the whole clause. Fieldfisher reads assignment as undefined, possibly not a charge or a trust, and that reading is not a decision on this draft. Mayer Brown (September 2020) says that if the regulations do not apply, a ban on assignment, security, and a trust is a reason not to finance unless the clause changes.

A block on validity, value, or enforcement is itself a restriction. Regulation 2(3) includes description, quantity, unit price, rate of VAT, and amount payable excluding VAT. Clause 18 cannot withhold the £2.40 unit price.

Why do set-off, the glaze notes, and the rest of the ban stay?

Set-off, confidentiality outside the information list, and a ban on transferring the contract or its obligations stay on the page. Follow date → receivable → supplier on the transfer day → regulation 4 → marked limb → what stays → one writing.

The explanatory note says a set-off the debtor could have used before the assignment, or but for it, is not a restriction. Ashfords says the right remains, though later invoices are harder to net in practice. Leave clause 11. Do not calculate a figure for 23 October 2026. See set-off and payment netting.

The glaze recipe is not on the list. A shorter Ashfords note would keep pricing confidential, which goes further than regulation 2(3)(e). Release only the INV-441 particulars. For contract assignment and change of control, use the change-of-control checklist. Subcontracting stays.

What writing closes the log before a notice goes out?

Close on one writing: a receivables carve-out, or a file note that the ban is ineffective only to that extent, and only if the supplier test and the contract test are met. The notice waits until the log is filled. Wanting to notify on Friday 23 October 2026 does not void an untested clause.

Ashfords suggests a without-prejudice line: no effect to the extent a receivable cannot be assigned. Severn Pantry has not agreed it. Mayer Brown’s note treats a clear ban as still blocking the transfer where the regulations do not apply.