The Compendium

If a person or a company acts intra vires, they do so within the law or their/its Memorandum of Association (company) and the act will be valid.

It is often used to contrast with the term 'ultra vires'.

[See 'Memorandum of Association' and 'Ultra Vires'.]

Ipso Facto Clause

Ipso Facto Clauses are usually contractual provisions which allow one party to terminate a contract if the other contracting party enters a formal insolvency (or other events listed in the contract occur).

Such clauses may be used to encourage 'ransom payments' from insolvent companies to pay debts owing prior to the formal insolvency as a condition of further supplies.

The Corporate Insolvency and Governance Act 2020 (CIGA) introduced new sections into the Insolvency Act 1986. One of them is section 233B of the Insolvency Act 1986, which generally prohibits the enforcement of 'termination clauses' in contracts for the supply of goods and services that engage upon an insolvency event.

This means suppliers must continue to fulfil their commitments under contract with the debtor company in the event of it entering a formal insolvency. It is more extensive than the existing provisions found in sections 233 and 233A Insolvency Act 1986 in terms of the types of contracts affected.

The suspension of ipso facto (termination) clauses had three primary policy objectives:

• To prevent companies in insolvency procedures from being held 'hostage' by suppliers either by withdrawing supply completely or that ask for additional 'ransom' payments.
• To provide a valuable tool to support company rescue and thereby provide better returns to creditors.
• To mitigate the transference of risk onto suppliers, via a statutory 'hardship provision' to protect suppliers that cannot (rather than will not) supply.

[See 'Corporate Insolvency and Governance Act 2020', 'CIGA', 'Insolvency Act', 'Termination Clause' and 'Ransom Payment'.]