Regulation 2(3) of the Business Contract Terms (Assignment of Receivables) Regulations 2018

20 Mai Regulation 2(3) of the Business Contract Terms (Assignment of Receivables) Regulations 2018

Regulation 2(3) of the Business Contract Terms (Assignment of Receivables) Regulations 2018: What It Means for Businesses

The Business Contract Terms (Assignment of Receivables) Regulations 2018, which came into force on 31 December 2018, aim to make it easier for businesses to obtain finance by assigning their receivables to lenders. The regulations provide businesses with more certainty and protection in relation to the assignment of receivables, which are the amounts owed to them by their customers for goods or services provided.

One of the key provisions of the regulations is Regulation 2(3), which requires businesses to notify their customers of the assignment of receivables. This means that if a business assigns its receivables to a lender, it must inform its customers that their debts have been assigned to the lender and that they should make payments directly to the lender.

The purpose of this requirement is to ensure that customers are aware of the assignment and that they pay their debts to the correct party. This can help to avoid disputes between businesses and their customers, as customers may be unaware of the assignment and continue to make payments to the original business.

Regulation 2(3) also sets out the information that businesses must provide to their customers when notifying them of the assignment. This includes the name and address of the lender, the date of the assignment, and the amount of the debt assigned.

Businesses must provide this information in writing to their customers, either by post or by electronic means. If the business has a contractual relationship with its customer, it must also ensure that the assignment of receivables is allowed under the contract.

Failure to comply with Regulation 2(3) can result in a penalty of up to £5,000, and businesses could also face legal action from their customers if the assignment is not properly notified.

In summary, Regulation 2(3) of the Business Contract Terms (Assignment of Receivables) Regulations 2018 requires businesses to notify their customers when assigning their receivables to lenders. This helps to ensure that customers are aware of the assignment and that they pay their debts to the correct party. Businesses must provide certain information to their customers when notifying them of the assignment, and failure to comply can result in penalties and legal action. By complying with Regulation 2(3), businesses can benefit from the increased certainty and protection provided by the regulations when obtaining finance through the assignment of receivables.